5 Tips For Cost-Effective Salary Structures In Hungary

Author:Dr. Anita Vereb
Profession:SMARTLEGAL Schmidt&Partners

Wage costs represent significant part of the corporate expenditures. While employers are interested in decreasing these amounts, it is hardly reconcilable with employees' interests to achieve higher salary. Given that salary is one of the most important motivating force, besides complying with the Labour Code, employers should avoid demotivating their workforce. In this short summary we gathered 5 tips how you can reduce your company's labour costs without demotivating your employees and violating the Labour Code.

Pay for performance You can establish the salaries on a performance basis or by the combination of time and performance basis. In this case the employer shall determine performance requirements based on preliminary and objective surveys and calculations and the amount of the salary depends on the fulfilment of these requirements.

In case the employee's salary is paid only on the basis of performance, the employer shall determine a guaranteed salary in an amount at least half of the base wage.

Other type of the performance pay is the premium or bonus: in that case a base salary is established, in addition the employer may determine premium tasks (e.g. the success of a project) and the employee will be entitled to the premium if the premium task has been fulfilled.

Time-off, flexible working hours In case of overtime work the employee is entitled to overtime pay, which is hourly 50 % of the base salary determined for one hour: that means that for overtime work the employer pays 150% salary.

However based on the parties' agreement in writing the employee may be entitled to time-off instead of overtime pay. The duration of the time off may not be less than the ordered overtime-work and the employee is entitled to base salary for the period of the time-off. The time-off shall be allocated during the month following the month when the overtime work was performed or upon the parties' agreement at latest by the 31th December of the following year.

Another way to avoid overtime pay can be the determination of flexible working arrangements, since in this case the employer shall not keep records about the overtime work.

Reduce wage supplements Upon agreement of the parties' in writing the base salary may include the wage supplements for working on Sunday, on public holidays...

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