Government decree sets out strict conditions for working reduced hours

As part of its economic rescue package, the Hungarian government issued a government decree on 16 April laying down the conditions for granting wage subsidies to workers with reduced hours. Wage subsidies are available to businesses that will employ workers with reduced hours in the coming months as a result of the COVID-19 emergency. According to labour law experts at Réti, Várszegi & Partners Law Firm PwC Legal, employers should consider very carefully whether they wish to participate in this scheme.

Under the relevant regulations, working reduced hours means that the daily working time may not be less than 4 hours or more than 70% of the full daily working time, i.e. 5.6 hours. The wage subsidy will not be available for employees whose working time is defined in specific cycles instead of on a daily basis, so the reduced working time must be implemented in such a way that employees must report for work every working day and work reduced hours. Accordingly, employers may not set a work schedule under which employees work 8 hours every working day one week and have mandatory days off the next.

Wage subsidies are also not available for leased employees or for employees who temporarily work at another place of work, such as in home office.

Another condition for granting the subsidy is that the employer and the employee must agree on “individual development time,” which is 30% of the working time lost. As individual development time does not have to be allocated according to a daily schedule, it may be possible for an employee whose working hours have been reduced to 20 hours per week to spend his or her 6-hour weekly development time after one day’s work of 4 hours. Individual development time is not a labour law concept, and does not count towards the reduced working hours; the relevant regulations only stipulate that during this period the employee must remain available for the employer.

The latter rule can be interpreted as meaning that the net amount of the worker’s absentee pay as effective on 11 March, i.e. the day on which the state of emergency was declared, should be taken as the basis for the subsidy. The (net) subsidy must be deducted from this amount, and the employer must supplement the remaining amount during the subsidy period, such that the net total of the subsidy and the supplement may not be less than the net absentee pay as effective on 11 March.

The maximum subsidy is HUF 75,000 per employee per month, which is free of taxes and dues. Subsidies will be disbursed monthly by the competent government office directly to the employer. Based on the above, employers may apply for up to HUF 225,000 per employee for a maximum period of three months.

Labour law experts at Réti, Várszegi & Partners Law Firm PwC Legal warn that the regulations set out strict conditions for employers to participate in the subsidy scheme. Some of these conditions are rather straightforward. It is clear, for example, that the government wishes to support maintaining employment relationships that it has not previously supported, and that the subsidy scheme is aimed at businesses that are not subject to bankruptcy or liquidation proceedings. However, there are more complex conditions. For example, employers applying for the subsidy must be able to demonstrate that the business justification for reducing working hours is closely and directly linked to the current emergency, or they must provide evidence that retaining the employees is in the interest of both the employer’s continued business operation and the national economy.

It also follows from the regulations that employers may use the subsidy as a last resort. This means that the employer is obliged to grant annual leave at least on a pro rata basis, close the working time cycle still in progress, and to present to the relevant government office the measures it has taken or intends to take to avoid terminating employees.

Applications must be submitted electronically to the government office of the place of work, which will make a decision within eight days. The government office’s decision will be final and non-appealable; however, the application may be resubmitted one more time. The government decree also lays down the conditions under which the employer or the employee must repay the subsidies.

It is clear from the above that only those businesses will be able to claim the subsidy that can provide at least part-time employment in the next few months, are not planning redundancies, and have sufficient capital available to supplement employee wages to reach at least the 11 March 2020 levels.

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