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Published: 3 week

Foreign guest workers: turbulent legal environment, faltering employer confidence?

After a stuttering 2024, 2025 has started with encouraging signs - that's how the new year was assessed by the recruitment agencies we interviewed, who say that the ongoing changes in legislation have not been good for employment from third countries. However, while the mood has calmed down, changes to tax credits could see a significant drop in guest workers' incomes in 2025, which could discourage them from coming to Hungary.

vendégmunkás, 2025, változások-

"The year 2025 is basically not off to a bad start, which means that companies have some demand for staff, compared to the weaker autumn of 2024, when staffing needs were really quite weak," Viktor Göltl, CEO of WHC, told HR Portal. According to another temporary employment agency, Man at Work, the economic slowdown has mainly affected their area of operation, namely Central and West Hungary and Pest County, which they have felt on their temporary staffing and the needs of their partners. The trend was downward and stagnant in the last quarter, Gábor Berta, managing director, told HR Portal. "The sudden changes in legislation during the holidays and at the beginning of the year were a bit scary for the industry, but things seem to have settled down, which should put the employment of guest workers on a more relaxed course," added Viktor Götl.



It is not all the same what rules apply to workers in the Philippines, a country of 119 million people, a big emitter where workers go to work all over the world under organised conditions. The current legislation allows workers to be brought in from Armenia and Georgia by default, which are geographically closer to Hungary, but have a much smaller population, so experts say that they certainly cannot meet the labour needs of Hungary in the long term, or even in the medium term. Later on, the Filipinos were also given the green light. Not coincidentally: much earlier, company managers thought of recruiting from the Philippines, Vietnam or Indonesia. "And guest workers are needed, because if a company can't find a stable pool of workers to hire within a 40-50 km radius, it may think about trying to hire workers from third countries, regardless of the sector and industry in which the company operates", adds the WHC CEO.



According to publicly available figures from the National Directorate General of Aliens, it can be seen that in January, around 19,000 Vietnamese were issued permits and around 10,000 Filipinos, while the number of Ukrainian guest workers has now dropped from 55,000 a few years earlier to less than 20,000. So overall, there has been no increase in the number of foreign workers in Hungary in recent years at all, but rather a turnover of staff. The Filipino worker is a hit because they are a Christian nation, they speak English, they are very smiling people, they are hard working, they fit in very easily. By the way, experience has shown that Philippine workers also like being in Hungary.



Continuously changing



In addition, from a legislative point of view, the past two years have already been quite turbulent as far as the employment of guest workers and third-country workers in Hungary is concerned.Until 31 December 2023, third-country workers could come under one type of legislation, and then from 1 January 2024, this changed to a different legal structure. "From 1 January 2025, there is a transitional legal period, and the fate of guest workers will be resolved depending on the period and the legal structure under which they arrived in Hungary," said Viktor Göltl.) Under the change, guest workers will not have to leave the country just because someone is, for example, Indonesian, only if their original residence and work permit expires and they are not given an extra year to extend the original permit or a new permit.



Viktor Göltl, WHC

Göltl Viktor



The change on 1 January has narrowed the options for importing new workers very substantially, as new workers can now only come from Armenia, Georgia and the Philippines. According to Gábor Berta, the dense and rapid changes in the legislative background are not conducive to employers' confidence in employing 3rd country nationals. "How much the changes in the law have shaken the confidence of employers remains to be seen. We have seen and felt that one of our partners did not place an order for a significant number of guest workers at the end of the year because they did not know what the legislative changes would entail. We have already seen in 2024 that some of our partners are more cautious in their extensions, not taking advantage of the maximum extension opportunity.



And on the employer side, the tax law changes that also came out at the end of the year and are already in force, such as the loss of the tax credit for under-25s, or the family tax credit for noncontiguous 3rd country workers, will have a bearing on the extension. This will result in a significant net income loss for many. Even allowing for the weakening of the forint, the net income of guest workers that they can spend in their own country will fall significantly in 2025, which may not be compensated by the expected wage increases. They may also mean that certain nationalities or groups will no longer renew their contracts because they see no development potential in their employment in Hungary," he added.



In their experience, there is still demand for guest workers from both existing partners and new partners. In our country, the demand is now typically from warehousing, logistics and mainly commercial partners. They are mainly dealing with Ukrainian (national card), Kyrgyz, Mongolian, Georgian and Filipino workers, as he said, these nationalities were among the first to be brought into the country. According to the manager, there is currently demand from companies for Ukrainian, Mongolian (not currently possible) and Filipino workers.



Are guest workers in trouble?



Viktor Göltl stressed that "2024 was not an economically strong year for industry, but not for other sectors. As a result, unemployment rates have obviously increased, but I disagree with the conclusion that this means sending guest workers away. Business leaders have assessed that if we drive all the guest workers out of Hungary and then industrial production starts up, who will come to work here if there are not enough Hungarians? No one, because we are antagonizing the nations. They are workers and they do not forget. They can go to work in Croatia, Slovakia, Poland, Germany, Austria and they will not be interested in Hungary. If they have a good thing here, we will have workers, if they don't have a good thing here, Hungarian industry will be in trouble in the long run" said the WHC CEO.



Some of the poorer results have also led to the departure of guest workers. "But a sensible company doesn't downsize by saying I'm downsizing the Hungarian now and the guest worker now, but always wants to keep the best workers, regardless of colour, gender or nationality, and the worst performing workers are the surplus in these companies. Obviously, a third country worker costs much more than a Hungarian worker and this is the argument to be considered when making redundancies, which works against keeping a third country worker here. If the company is really hurt by the extra cost of guest workers, it may send them away, but again, basically companies want to keep competence, regardless of the country it comes from, so they are considering whether that competence is worth the extra money that a third-country worker costs," adds Viktor Göltl. And at Man at Work, many partners have found that they have allowed their staff or temporary staffing levels to fall during the year to match natural turnover. "Of course, in the case of redundancies, we always try to find new jobs for our temporary workers," adds Gábor Berta.



\"Berta

Berta Gábor



What are the prospects?



"We expect moderate growth in 2025, more so from the last quarter, but this could be affected by global economic events," the CEO said. Looking ahead to 2025, Viktor Göltl said he is confident that the US presidential inauguration on 20 January and the period after will move the economy, and that the German election at the end of February is likely to do the same. "We see that the European Union is suffering from a competitiveness disease. Unfortunately, because Hungary is closely tied to the European Union, it will affect us, but if things go better there, Hungary will do better. What is very fortunate is that in recent years there have been investments coming into the eastern part of the country, which will start to pick up in 2025-2026, so we expect these investments to pull up the numbers in Hungary," he adds. According to Gábor Berta, a big problem is that "an engineer, a manager is minimally mobile, which of course depends on the benefits package. It's hard to expect someone to sell his house in Salgótarján and start a new life in Budapest for the price. You can put industry in areas that have been agricultural for 50 years because there is a workforce there, the question is how appropriate that workforce is for an industry that is now well developed," he adds.



Both executives say the big question is whether the 2-300 thousand currently inactive labour force, which the government has also mentioned, will be activated in the future. If so, and if they are skilled and motivated enough to work, they can replace the foreign workforce, but until then, third-country workers will continue to be needed in the future.



Caption: Pixabay


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