Hungary’s new Guest Workers Act: Adapting to demand or inviting discontent?
What are the implications of the newly adopted Guest Workers Act, and is the country ready? We discuss the regulatory, infrastructural, and societal challenges the upcoming influx of guest workers poses to the country.
On June 13, 2023, the Hungarian Parliament adopted an act that introduces a set of new simplified rules for the employment of third-country nationals (referred to with the umbrella term of “guest workers”). The law is supposed to go into effect on November 1, 2023.
Let’s first review what changes the law introduces and who stands to benefit from it before diving into its implications.
A brief summary of the new law
The 2023 Act on the Employment of Guest Workers in Hungary removes some of the red tape currently applied to employers seeking to hire workers from outside the European Economic Area. For example, it eliminates the need for an expert opinion from the labor authority on the application.
The simplified procedure comes with a set of limitations:
- Guest workers will receive their combined residence and work permit for two years – the same as those with a regular permit. However, they can only extend it once for one additional year, while those with a regular work permit can renew it periodically, each time for a period of two years.
- They will not be able to use their status to apply for family unification and bring their family members.
- Their residency will not count toward permanent residency – a route that’s available to regular permit holders.
- In order to apply for Hungarian residency for a different purpose, guest workers will have to travel and start the process from their home country.
Employers will be liable if a guest worker fails to leave the country upon the expiration of their permit. “The employer must do everything possible to ensure that the guest worker can leave the territory of the member states of the European Union no later than the last day of validity of their residence permit” and must “reimburse the cost of expulsion, deportation, and immigration detention,” the act stipulates.
Who stands to benefit from the act on guest workers
Two types of companies will be able to take advantage of the new law on guest workers:
- Qualified temporary-work agencies
- Special status (or privileged) employers – these are companies that have a strategic partnership with the Government, those that implement priority investments of national economic importance, and employers who have agreements under the Key Exporter Partnership Program.
Is Hungary ready for the influx of guest workers?
In his address at the year-opening event of the Hungarian Chamber of Commerce (MKIK) back in March, Prime Minister Viktor Orbán announced that Hungary will need 500,000 new workers in the next 1-2 years in order to meet the growing labor demand. Experts argue that based on the potential labor reserve available domestically, it will require 200,000-300,000 additional guest workers to meet the targeted number that the Prime Minister has set.
Already, 25 rental companies received their certification allowing them to bring guest workers using the simplified procedure of the new law, according to Zoltán Karácsony, HR Portal’s job market expert. These companies are heavily recruiting workers from countries like the Philippines, Vietnam, Indonesia, Mongolia, and Kyrgyzstan.
However, is the country ready for such an influx of guest workers?
Probably not.
While the Government argues that the recruitment of guest workers can commence only when a company exhausts its search for labor on the domestic market, there will not be enough enforcement mechanisms to ensure that businesses recruit accordingly.
The ability to recruit from developing countries provides employers with an opportunity to cut costs by offering guest workers lower salaries than they otherwise would’ve to the Hungarian workers – a strong incentive for companies to sidestep the domestic market and go straight to the recruitment of foreign workers.
Zoltán László, the vice president of the Vasas Trade Unions Association, explains another incentive for employers to go directly the guest workers route. “There are automotive plants where a staffing freeze has been announced and new Hungarian workers are no longer being hired, while it is known that hundreds of guest workers will soon arrive at the factory.” According to him, that’s mainly due to the large turnover rate among the Hungarian workers who have more flexibility to change jobs than guest workers.
And what about infrastructure? The upcoming arrival of hundreds of thousands of guest workers poses numerous challenges – accommodation, for one. Already, various local governments oppose the idea of the construction of worker hostels. For example, the mayor of Hajdúszoboszló – a town of about 24,000 people – wrote: “We will take all measures that can prevent the establishment of a workers’ hostel in our city. If it becomes justified, I will make public the names of the individuals who keep foreign guest workers in Hajdúszoboszló.”
Accommodation is just a small part of the infrastructural challenge of receiving such an influx of workers. What about the pressure this will put on the already understaffed offices of the immigration authorities? What about the healthcare system and the ability of hospitals and clinics in smaller towns to cater to the needs of a drastically increased population?
There are a lot of infrastructure-related questions that have yet to be addressed by the Government.
Finally, after all the anti-immigration rhetoric and billions spent on anti-immigration campaigns over the years (e.g., Fidesz spent HUF 1.4 billion on billboard ads alone in the last election cycle), is Hungarian society ready to accept such a large volume of guest workers? A survey by Pulzus revealed that 53% of men and 69% of women in Hungary are against hiring foreign workers. There have already been reports of local populations voicing concern and anger over the unfolding situation and the arrival of guest workers in the local communities.
A policy flip-flop or course correction?
Viktor Orbán made his strong anti-immigration stance abundantly clear – both domestically and on the international arena. For example, he called himself an “anti-immigration” politician at a meeting last year with Austrian Chancellor Karl Nehammer. He regularly pushes back against Brussels and EU’s policies on migration.
“We have never invited anyone here as a guest worker or for any other reason to live with us,” said the Prime Minister in an interview with Kossuth Radio in 2017.
In his statement following a summit on migration with the Chancellor of Austria and the President of Serbia in July this year, the Prime Minister said: “We shall not accept the mandatory quota. Nor shall we accept the obligation to build migrant ghettos and camps. We shall find a legal and political way to ensure that Hungary does not implement the latest decision from Brussels.”
There are countless examples of similar rhetoric from the Prime Minister – it has been one of the main pillars of the political campaign of his party in recent years.
Yet, to appease foreign investors and reassure them that the country has the manpower to meet the labor demands, Viktor Orbán has passed the Guest Workers Act, which opens doors to hundreds of thousands of labor immigrants over the next couple of years.
And, while he and his allies can draw a distinction between illegal immigrants and guest workers who are brought in the country legally and for economic purposes, the fact remains: a large portion of foreigners will be settled in the very towns where people have been overwhelmingly supporting Viktor Orbán’s Fidesz party – in part, because of his vehement anti-immigration stance.
In Debrecen alone, several large-scale investments have already been announced, which include the construction of a BMW factory and battery factories for CATL and Eve Power – both Chinese businesses. Given the scale of these projects, they will require a significant number of guest workers to accommodate the labor needs.
At the moment, it doesn’t seem like the Government is going to backtrack on the Guest Workers Act. Therefore, it remains to be seen how the country will respond in the next 12-24 months when the number of guest workers increases exponentially.
