Could Hungary become the next big market for international recruiters?
Hungary has announced that it will cut its corporate income tax rate to the lowest in the European Union. Prime Minister, Viktor Orban made the announcement in an important to boost growth and foreign direct investment in the country.
From January of 2017, the central European country will use a single corporate tax rate of 9 per cent to replace the current two tier system.
The move will undercut the 12.5 per cent corporate tax rate currently offered by the Republic of Ireland, and is expected to be of benefit to companies that are mid-sized or foreign owned.
Labour Market - Bordered by Austria, Slovakia, Romania, Serbia, Croatia, Slovenia and the Ukraine, Hungary’s central European location is both an advantage and a hindrance.
It is estimated that from a population of 10 million, over 400,000 have left the country to work in neighbouring Austria and other EU nations Germany & the UK since 2008.
At present, Hungary is in the depths of a labour crisis, with over 57% of employers saying that they are having difficulty filling roles. Employers state that this is due to a lack of applicants and candidates lacking the necessary skillset.
The current labour shortages are across the Engineering, Financial, IT & Healthcare sectors.
Wages & Income Tax - Historically low compared to other European countries, the wages available have been one of the main barriers to the recruitment of the right candidates. However, this situation is changing and wages on offer are now on the rise. According to official statistics, average gross wages rose by 6.9 percent in August.
As part of an additional an effort to attract skilled labour into the country, the government is now looking toward reducing the level of personal income tax from its current flat rate of 15% and providing incentives to employers to raise pay.
What Companies Are There ? - Many large multinationals have facilities in Hungary already – Audi, BP, Huawei, Bosch, Deloitte, Ericcson, Pfizer, EDF, Samsung, TATA, LG and Novartis to name a few. A quick glance at the vacancy sections on these companies websites show that large amounts of vacancies are there.
Conclusion - Hungary is a country on the rise, hoping to revive itself. The capital city of Budapest, often cited as one of the most beautiful cities in Europe, has also just announced itself as a candidate city for the 2024 summer Olympics.
Here we have a government stimulus package, a central European location, low cost of living, rising wages, a reduction in wage taxes and a labour market shortage.
A savvy international recruiter could do worse than look to establish a niche in the Hungarian market over the coming months in both permanent & contract recruitment – the potential is there.
As with any international placement, it is advisable that you and your candidate find out the tax implications before accepting a position in Hungary.