Taking up odd jobs in Hungary may only be done legally by obtaining a “temporary employment booklet” (alkalmi munkavállalói könyv), also known informally as a “blue book” (kék könyv), on account of its color. This system was introduced back in 1997 with a view to seasonal jobs in agriculture and in particular to legalize casual jobs – mainly in the service industries – like housekeeping, day care and gardening, which Hungarians are typically reluctant to report to the authorities in order to avoid paying taxes. Booklets for temporary employment can be obtained by any Hungarian citizen from the age of 16, (or 15 for students), as well as non-citizens who are enrolled full-time as students at secondary schools, universities or elementary art schools. No restrictions (except age) apply to agricultural seasonal work for either Hungarians or non-Hungarians.
By law, temporary employment in a single job cannot last more than five days in a row, or exceed 15 days a month or 90 days in a calendar year. For two or more jobs, the maximum is 120 days a year, but if somebody is hired privately by an individual person (known in Hungarian law as a “natural person,” or természetes személy) or by an “outstanding non-profit organization” (kiemelten közhasznú társaság) this can be up to 200 days.
This form of employment has become increasingly popular among both employers and employees because of the lower tax obligations and no red tape for both sides. Employees are not liable to pay health care taxes for their wages (though in return they are entitled only to accident-related benefits), while employees can pay contributions easily by sticking duty stamps (közteherjegy) in the booklet depending on the wage rate. Duty stamps can be obtained at any postal office.
Wages for temporary work must be paid on a daily basis and can be no less than Ft 1,800 but not exceed Ft 4,800. In the case of temporary employees who are registered job seekers, this is Ft 1,000 and Ft 4,000 respectively. Contributions payable on wages range between Ft 400 and Ft 1,100, or in the case of a registered job seeker, Ft 200 and Ft 800.
Employees must always keep the booklet with them during work so that the employer can enter data concerning the details of their work every day, including the employee’s personal and tax data, the type and date of employment, and wages paid for that day. The booklets are then signed by both the employer and employee.
Income from temporary employment is liable to annual income tax unless it amounts to less than the minimum wage, in which case it’s tax-free. Individuals hiring temporary employees are entitled to write off up to 75% of their contribution liabilities.
Booklets are issued by labor offices or some municipalities free of charge, and are usually valid for a calendar year. They can be applied for as early as December 15 of the previous year.
The booklets must be returned to the issuing office by January 15 of the following year. Concurrently employees must notify the authority if they have taken out a private pension plan during the time of their temporary employment
Temporary employment has increased sharply over the previous years with a total of 419,000 booklets issued in 2006 and over 500,000 last year, compared to some 20,000 in the year of its introduction in 1997. Its appeal rose sharply in 2002, when related tax obligations were reduced by half for job holders and by three-quarters for job seekers.
In 2006 nearly two-thirds of the booklets were taken out by registered job seekers, while the rate of applicants holding permanent jobs rose significantly over the past few years, accounting for 20% of the total in that year. In addition to that, over 10,000 booklets were issued to non-citizens.
Népszabadság has recently reported that because of lower tax liabilities, temporary employment is also becoming increasingly abused by businesses and the authorities are now planning to tighten the rules.
A growing number of companies in the building sector are getting into the habit of hiring temporary staff for permanent employment in order to pay less taxes. Last year, over 5,500 cases of illegal employment were uncovered in western Hungary alone, 80% of which were related to temporary employee books.