Finding and hiring Hungarian workers is a priority

The Hungarian labour market is set for another busy year: even at the start of 2024, it is clear that employment issues will be shaped by new and often partly or fully contradictory trends and market effects. In addition to major changes, whether in the global economy or in the regulatory environment, intra-year dynamics do not seem to follow the usual seasonality, which will push HR decision-makers towards flexible and adaptive strategies. Innovation will still be needed in 2024, but the focus may not be on discovering new solutions, but on evaluating old resources from a new perspective.

In a storm of change

In the third week of February, the ifo Institute published the ifo index, an important measure of the German economy, with its overall reading improving from 88.2 to 88.5, following a slight increase from December to January. The positive change is overshadowed by the fact that the business climate perception in the manufacturing sector, which is of key importance for Hungary, has fallen - to levels not seen since September 2020. Due to the strong German bias, Hungarian expectations are also significantly affected by similar data.

Despite the German news, PwC Hungary CEO survey results released around the same time show that only 15% of top decision makers expect headcount to fall,with 49% of the nearly 300 companies surveyed expecting stagnation and 36% expecting an increase in the number of employees. However, growth plans are clouded by the fact that the second biggest exposure after inflation is a lack of skilled workers over the next 12 months, with 48% of the CEOs surveyed rating this factor as a serious risk.

This is despite the fact that the challenges facing the domestic economy were well captured by unemployment and employment trends. The three-month average number of people in employment fell to 4.7 million, the lowest since May 2023, but equally a long time line was brokenas unemployment rose to 4.7%, the highest level since May 2020.Industry statistics show that several segments have suffered a significant drop in output, but there is also evidence that the structural transformation of the economy has not yet accelerated, with (giant) investments in the energy and defence industries still in the construction or ramp-up phase and not putting major pressure on labour demand.

Risk and risk management

The market risks are therefore considerable, reflecting both the weaker performance of traditional industries and the expected near-term upturn in demand from newly emerging segments. Add to this the postponement of job changes due to a more difficult economic environment and we are on the threshold of another critical period. The new employment policy strategies seem to (also) address this new situation.

The officially announced target is to increase the current employment rate from 78% to 85%, with a particular focus on increasing the rates for the under-25s and the over-55s. This will also be supported by further mobilising the labour reserve, with a major training programme, among others, announced as a first step. It is clear that Hungarian workers, and especially Hungarian workers not yet in work, are a priority in the strategy.

The star has not been lost, however, for workers from third countries: after the OIF's temporary break, the possibility of employing them through qualified temporary employment agencies remains open, albeit under stricter conditions. Their market, however, is also affected by new regulations: minimum staffing levels, including the Hungarian-to-foreign ratio of existing staff and the framework for this applied to new staff, could pose a challenge for many businesses.

Innovation from the ground up

In a turbulent environment, the HR services market is also experiencing significant direct and indirect impacts. Chief among these is that the ability to find, recruit and integrate Hungarian employees (employee pools) is becoming a key factor. This, however, requires properly embedded operations, a local presence and a comprehensive service portfolio, as the remaining available workforce can only be provided from a variety of sources with specific skills.

Access to a low-skilled workforce in small communities lacking digital skills cannot be ensured even with the latest advances in technology. The inevitable, and often the only solution, is to ensure a personal presence and availability at national level, which can be trusted and credible, as the geographical distribution of reserves and needs will continue to show strong disparities, both now and after the ramp-up of the major investments underway: without a sufficient number of local centres with the necessary skills and capacity, it is inconceivable to ensure coverage.

Neither can we ignore the fact that in many cases it will be necessary to prepare again (or for the first time) people from the margins of society, from the marginalised regions, to become reliable workers in the long term. This presupposes professional processes. We have seen that integration services can be developed for third-country workers - similar solutions will be needed in such cases. Some Work Force partners have been able to integrate up to 30% of their staff from similar backgrounds, retain them on a permanent basis and integrate them fully.

There has also been a significant transformation in student employment, which is no longer just about summer jobs or exclusive internship programmes for multinational companies. Thanks to the convergence of the education system and labour market needs, they have become a year-round resource and a key source of supply. In our experience, however, conscious, well-structured student employment (whether physical or mental) is even less widespread below a certain company size, typically due to overestimation of the administrative burden.

It is already clear that, under the current arrangements, complex service-based collaborations will be the only viable option in 2024. Comprehensive recruitment without sufficient flexibility and the involvement of multiple sources of labour, regardless of location and segment, has become impossible. In addition, under the current legal framework, the relatively unrestricted recruitment of third-country workers in previous years is not allowed without a successful Hungarian operation: for every two third-country workers seconded, at least one Hungarian worker must be employed. This requirement poses a major challenge especially for service providers that have not built up domestic processes alongside the foreign recruitment routes of recent years, as the establishment of such processes and their staffing with appropriate experts can take many years to develop.

Gergely Gáspár (in the opening photo), Sales and Marketing Director of Work Force