Tens of thousands of foreign workers may arrive in Hungary every year

Difficult to integrate the labour reserve

"It was time to amend the Aliens Act, because it was written 16 years ago and time was running out. The current law is not bad, but it introduces quite a lot of new things that can be interpreted as a tightening," said Dávid Maier, CEO of Terendo, when contacted by Portfolio. The head of the company, which mediates workers from Asia, said that they stopped mediating Hungarian workers in Hungary after a while because it is extremely difficult to find workers among the long-term unemployed in the country.

"Out of 2-300 people in a general placement for an unskilled job, finding 2-3 people is considered a success. But for a manufacturing company that needs 50 new employees in two months, this is not a feasible way to go because of the high turnover. Especially in North-Eastern and Eastern Hungary, some of the workforce migrates and many people only work for a few days and then move on or do not work for a while," said Dávid Maier, explaining the problems with the domestic labour pool.

Róbert Zlati, president of the Hungarian Trade Union Confederation, said that this trend has been going on for years, and on top of that there is also emigration. "The labour reserve of a few hundred thousand people is very difficult to integrate into the labour market, and it would take a serious government programme and high costs to bring them up to speed over a long time.

The labour market situation is closely linked to the wage situation and the quality of education. Migration can only be stopped by catching up on wages,

Róbert Zlati highlighted.

Without quality education and vocational training, young people who are in principle employable will not acquire the skills the labour market needs, the union leader said. "Much more emphasis should be placed on adult education to integrate the labour reserve. A complex government programme is needed to get more inactive people back into the labour market. This could include the development of adult education, individual mentoring and mediation", said the president of the Hungarian Trade Union Confederation.

Melinda Mészáros, president of the League of Trade Unions, also believes that there is not enough labour reserve on the domestic market to replace the 30-40 thousand workers who are losing their jobs every year.

"In the public sector, the problem may be even bigger, because there is already a serious shortage of civil servants, which may be somehow managed by redeployment or by digitising certain administrative processes. However, it is not even entirely possible to attract foreign staff in this area, as complying with legislation in the ever-changing environment is a challenge even for a native Hungarian speaker," said Melinda Mészáros, explaining the difficulties of organising staff in this vulnerable area. The president of the League of Trade Unions said that in the private sector, many companies prefer to increase their efficiency through automation and robotisation.

"Another problem in the labour market is that young people are not interested in physical work. This is why manufacturing companies and construction companies are in a difficult situation.

In fact, although the army promises young people a starting salary of HUF 737,000 gross, although many of them apply, only 1-2% stay because they are not used to hierarchical work.

But the special technical equipment could make the job attractive," said Melinda Mészáros. The trade union leader cited the example of the army, even though she believes that high inflation is once again making wages the main motivating factor for workers.

According to Ferenc Rolek, vice-president of the National Association of Employers and Industrialists (MGYOSZ), it has been clear for quite some time that there is a significant labour shortage in Hungary, both in terms of quantity and quality. "Large companies can increase their productivity through automation and robotisation, and can replace human labour over a 10-year horizon. This is less the case for medium-sized companies and not at all for smaller firms.

Foreign labour will definitely be needed,

says Ferenc Rolek. The vice president of the employers' organisation also noted, however, that there are fears that the new law on foreigners is too strict.

"Practice will decide what the law will be, but what is certain is that as the economy grows, more workers will be needed.

A major limitation is the fact that the number of foreign workers that can be brought in is capped at the number of vacancies from the previous year, even though many jobs are not advertised at all, making it difficult to respond to the changing, dynamic needs of the economy within a year,

Ferenc Rolek said, expressing his concerns.

Experience with the Indian workforce is good

According to Terendo's CEO Dávid Maier, the best experience with foreign workers is clearly with Far Eastern and Asian workers.

Although there has been a recent perception that Filipino workers are the most reliable, we also have good feedback from Indian workers placed in companies,

he stressed. For example, his company brings workers from South India for manual labour. The skilled workers can also find jobs in Hungary as operators, production line workers, weaving factory workers and forklift drivers, among others.

"With cheaper airfares, often prepaid by the workers themselves, and lower administrative costs, a company can hire an Indian for a third less than a Filipino worker. Moreover, for Filipino workers, the host party is obliged to pay the airfare in advance.

Importing Indian workers costs between HUF 350,000 and 500,000, while Filipino workers cost the employing company between HUF 1.2 million and 1.5 million,

Dávid Maier stressed. Terendo's CEO also mentioned that in their experience, with the right recruitment and working conditions, they can expect a 10-15% turnover rate for Indian workers.

There could be as many as 240,000 vacancies

According to experts, the number of vacancies could be 2-3 times higher than the 70-80,000 positions that are officially vacant today. In other words, 240,000 people may already be needed in the domestic labour market.

The manufacturing industry association considers it a serious problem that if a foreign worker's work contract and residence permit have expired, the employer is obliged by law to make him or her leave Hungary. "The employer can buy the flight ticket, they can even take their former employee to the airport, but the employer company is not an authority, it cannot force anyone to board the plane. However, if the foreign worker does not leave the country, the administrative and all other costs of deportation can be charged to the former employer," stressed the MGYOSZ vice president.

Róbert Zlati said it was realistic to expect more and more foreign workers in Hungary.

"What is important for us is that Hungarian workers are not dismissed because of the use of cheaper foreign labour, while we must also ensure that foreigners are not exploited by Hungarian employers. A positive change with the new Aliens Act is that it will no longer be sufficient for companies to simply declare that they were unable to fill the position with a Hungarian worker, but there will also be a mandatory fast-track mediation," he argued in favour of the new legislation.

The trade union leader, however, believes that foreign labour seems to be a simple answer, and that companies should be encouraged by government measures such as tax breaks and subsidies to employ the inactive, and to provide them with various in-house training courses.

An important rule for workers' hostels

Clearly, the new law will be stricter on the employment of foreigners. A positive aspect of the new legislation is that employers will have to provide at least 50% of their accommodation for Hungarian workers,

Melinda Mészáros said. According to the president of the League of Trade Unions, the retention of some of the hostel places will create an opportunity to employ workers who are not resident in the hostel. Regardless of this, she believes that the demographic situation will only increase the demand for foreign labour in the Hungarian labour market.

Imre Palkovics, president of the National Association of Workers' Councils (MOSZ), believes that the tightening of the law regulating the import of foreign workers is noticeable, and not only because it will not be possible to "jump" between the different categories, i.e. those who came for an investment job will not be allowed to work at the site of an existing company, and vice versa.

An important part of the law is that no more than 25% of all foreigners working in Hungary can be from one country.

We also understand that if economic growth takes place and technological development cannot compensate for the labour force, foreign workers will be needed," said Imre Palkovics.

MOSZ proposes amendments

During the debate on the draft law, MOSZ made suggestions for changes, which were sent to the Ministry of Economic Development. The trade union federation proposed that the State Secretary for Employment Policy, representing the Government, undertake to consult regularly with workers' and employers' organisations on regulatory issues relating to the employment of third-country nationals in the framework of the Permanent Consultative Forum of the Business Sector and the Government.

MOSZ also considers it necessary to amend the Labour Code on the following points:

• the employer must consult the workers' council at least 15 days before deciding to employ third-country workers.
• The authority should refuse to issue a permit if the employer planning to recruit foreign staff has made collective redundancies in the previous 12 months.
• Foreigners should not be allowed to be employed if the average salary for the jobs they want to fill is at least 20% lower than the average salary for similar jobs published by the Central Statistical Office (KSH).
• Foreign workers should not be employed if the company has been found to have serious health and safety irregularities within 12 months.

Cover photo: Getty Images