Background information

Under the government decree 105/2020. (IV. 10.) the aim of the measure is to prevent layoffs in face of the COVID-19 crisis. This measure follows the German example of Kurzarbeit, but is on a much smaller scale with a lot of narrowing criteria the applicant must fulfill. The support can be extended from 1 May 2020 for three months. The amount of the income support will be transferred directly from the state to the employee while the reduced wage will be paid by the employer.

Content of measure

Businesses who are shedding 30-50% of working time of employees compared with their pre-covid situation who can prove that their orders have not fallen by more than 50% and are working towards the “interests of the national economy” were eligible. For every employee that is considered for layoff the state agrees to pay 70% of the part of the salary that was lost due to the worktime reduction. Only the part of salaries up to HUF 214,300 net (twice the minimum wage - €612 as of 15 Apr) per month receive the income supplement, earnings after that threshold are not subsidised. The government calculates that on average a monthly HUF 64,500 per employee will be paid out, so the total cost for three months could be HUF 193.6 billion (according to government calculations) or HUF 128 billion according to our (KOPINT-Tárki Institute) calculations. Additional criteria for eligibility-the employer must agree to keep headcount level until the end of the year in order to be considered for the subsidy:

• the shortened work contract may not drop below 4 hours per day of working time
• employers must organise a training for the employee in 30% of the hours that have been cut from working time and pay wages for this time as well.

Applications open on 16 April, 2020 The measure was financed from the ESF and co-financed from the state budget.

Use of measure

On 26 August 2020 the Ministry for Innovation and Technology (ITM) said that 226,000 employees had applied for the scheme and 198,000 workers were supported during the first wave of the pandemic. The total number of employed in Hungary was 4,023,600 in 2019. Data shows that around half of Hungary’s workforce is employed in jobs with high or medium vulnerability to being lost due to COVID-19. The government calculated that on average a monthly HUF 64,500 per employee would be paid out, so the total cost for 3 months could be HUF 193.6 billion, but in fact, only HUF 32 billion (€88.9 million) was spent. The central statistics office (KSH) said that by October 2020 the number of employees working reduced hours fell to 123,000 from 260,000 at the end of June, at the peak. Some 76,000 had their working hours reduced by 50% or more by October.

The proportions of the types of companies where supported workers were employed were as follows:

• 13.0% micro-enterprises
• 24.8% small companies
• 28.5% medium-sized companies
• 33.8% large companies

With regard to sectors, the composition is the following:

• Manufacturing: 50.2% (nearly 100,000 applications)
• Trade and machinery: 16.0%, nearly 32,000 applications
• Accommodation, hospitality: 9.2%, nearly 18,300 applications
• Administrative activities and supporting services administration: 4.9% nearly 10,000 applications

Critics noted that the employer has attractive alternatives: dismissal, unpaid leave, or even citing the COVID-19 situation as a vis maior to pay no wages for down-time. Critics also argue that the measure came much too late, 5 weeks after Hungary announced a 'state of danger' for the pandemic on 11 March 2020.

One analyst said that the measure is not enough to save ailing companies. The maximum amount of the subsidy is HUF 75,000 (€206) per month - this is the amount paid if working time is reduced by 4 hours a day – for a gross salary of HUF 322,000 (€883) or HUF 214,000 net (€587). In comparison, the average monthly gross salary was HUF 367,800 or €1,009 a month in 2019. By not firing an employee, the company saves only 2% on payroll costs, but since production declines and revenues fall, these savings disappear. The state, on the other hand, saves if employees are kept on, as the subsidy is less than the unemployment benefit it would have to pay if the employee was laid off. The state's share is about 30% at the average salary, the analysis published in G7 said.

A national poll by Závecz Research said that a tenth of employees suffered big income losses already, 8% were sent on unpaid leave, 3% were laid off. A quarter of employees polled feel they would be put on unpaid leave or fired in the coming months. Two-thirds of respondents feel COVID-19 will affect them financially and 80% of entrepreneurs said they would lose money in the pandemic. Some 2% of respondents started using up savings, and 40% postponed planned spending.

Target groups

Workers	Businesses	Citizens
Employees in standard employment	Does not apply to businesses	Does not apply to citizens

Actors and funding

Actors	Funding
National government Company / Companies	Employer European Funds National funds

Social partners

Social partners' role in designing the measure and form of involvement:

	Trade unions	Employers' organisations
Role	Consulted	Consulted
Form	Consultation through tripartite or bipartite social dialogue bodies	Consultation through tripartite or bipartite social dialogue bodies

Social partners' role in the implementation, monitoring and assessment phase:

• Unknown
• Main level of involvement: Unknown

Involvement

Although initially critical of the measure for not going far enough, the Hungarian employers' federation MGYOSZ, the National Association of Entrepreneurs and Employers (VOSZ) and the Hungarian Chamber of Commerce and Industry (MKIK) welcomed it and said most of their proposals as employers’ representatives had been heard. They were consulted before the measures were announced. Trade unions on the other hand were only informed of the measure, mainly at the tripartite VKF which meets weekly since the start of the crisis, but they were not consulted.

Views and reactions

In April the MKIK issued a statement proposing:

• Raising the wage support scheme across all affected sectors and for all companies forced to shut down due to COVID-19 (especially for companies with revenues falling by more than 50%)
• Longer unemployment benefit (currently at 3 months)
• Sick pay raised to 100% of wages (from current 70%)
• Support for starting new business
• Boosting the public works programme
• Support for robotisation in all industries
• Incentives to encourage industrial investment and home construction
• Preferential loans for exporting construction companies
• Developing transport, especially cross-border transport in neighbouring countries with Hungarian communities

The trade union confederation LIGA said the government should do more as it does not help the thousands who had already been laid off. It also called for an extension of the measure, which both employer and employee sides think would be necessary.

Trade union VDSZ: Measure was mainly used in the car industry, elsewhere raising working time banking was more popular. It was largely unsuccessful, it did not help protect jobs. They would propose to give an across-the-board subsidy to all workers in COVID-hit sectors. At a VKF meeting in early September 2020, employers put forward the proposal that the measure should be extended and should resemble more the German-type Kurzarbeit: The trade union Munkácstanácsok agrees with this proposal, that the government should pay 60% of the whole wage lost, rather than 70% of up to 50% lost as is the case now.

MZTSZ trade union for the music industry: the measure was not used typically.

Sources

• 07 April 2020: Employers' organisations welcome Orban plan (magyarnemzet.hu)
• 09 April 2020: Further crisis management measures needed (www.liganet.hu)
• 09 April 2020: Trade unions: thousands lose jobs daily while government stalls with measures (merce.hu)
• 10 April 2020: How will the Hungarian Kurzarbeit work? (www.portfolio.hu)
• 14 April 2020: Emergency state: deviating from Labour Code (ado.hu)
• 15 April 2020: Govt plan not enough to save companies - G7.hu
• 15 April 2020: Poll: 2/3rds of Hungarians expect to lose money due to Covid (index.hu)
• 20 April 2020: Expanding the Hungarian wage subsidy scheme (www.portfolio.hu)
• 30 April 2020: Csizmadia-Illessy (2020). The virus and work.
• 13 July 2020: Ministry: Funds left for economic support in second wave (www.vg.hu)
• 17 July 2020: Data on Kurzarbeit in July 2020 - Index.hu
• 30 October 2020: KSH: Working time reduction among employees (www.ksh.hu)