April 26, 2013

4 key benefits of new Hungarian labour code

The goal of new Hungarian Labour Code is to increase the level of flexibility in labor contracts, improve business environment and at the end of the day to increase employment in the country.

We can identify 4 key positive changes for businesses in the new act (valid from 1st January 2013):
source: http://ucslabordaily.com
#1: More simple termination of employement contract
The employment contract can either be terminated or terminated with immediate effect. Objective protection from termination are reduced, e.g: employees retiring within 5 years and employees having children under the age of 3 have less protection; incapacity for work no longer means protection from termination.
In contrast to the older rules, under certain circumstances definite-term employment relationships may be also terminated before their natural expiry, by giving notice.

#2: More flexible rules for compulsory minimum salaries
In contrast to the old minimum salary regime, the new Labor Code includes the government’s right to determine a varying level of minimum salary for different types of employees (e.g. employees working at different levels or in different geographical areas). Practicly it provides more moderate minimum salaries in regions with high unemployement, e.g: Eastern Hungary.

#3: More flexible working time
Multi-shift and uninterrupted work are no longer related to the work schedule of the employee but to the activity of the employer. The definition of multi-shift activity was modified: we can talk about multi-shift work schedule if the operation of the employer reaches 80 hours a week. It's easier to schedule working tasks to Sunday and to national holidays.

#4: More overtime
Although the average annual hours worked in Hungary was 1980 in 2011 (vs: 1787 hours in the US and 1413 hours in Germany), the annual overtime of 250 hours are allowed in the new Labor Code, up from 200 at older regulation.

See also: 
RSM DTM Hungary: Most important changes of the Labour Code
Law.com: New Labor Code in Hungary

April 11, 2013

Required reading: the future of manufacturing by McKinsey

In November 2012, McKinsey and Co. published a report about the future of manufacturing. If you have not read it yet, do it as soon as possible!

McKinsey has 3 key findings about the future of manufacturing, and we try to add some conclusions and tips about its impact to Hungarian manufacturing sector:

1. Manufacturing’s role is changing: 
'The way it contributes to the economy shifts as nations mature: in today’s advanced economies, manufacturing promotes innovation, productivity, and trade more than growth and employment. In these countries, manufacturing also has begun to consume more services and to rely more heavily on them to operate.'
Tip #1: The Hungarian manufacturing will step forward on value chain.
There are always cheaper locations. In the future, manufacturing companies will choose Hungary because its developed infrastructure, flexible labour market and advanced business service industry. Hungary belongs to the low-cost Eastern part of the European Union, however the future of Hungarian manufacturing is about the complex, innovative and service-rich business environment.

2. Manufacturing is not monolithic:
'It is a diverse sector with five distinct groups of industries, each with specific drivers of success'
Segments of manufacturing. Source: mckinsey.com

Tip #2: The Hungarian light industry is over. Long live the Hungarian automotive/electronics/pharma industry!
The Visegrad Countries (Poland, Slovakia, Czech Republic and Hungary) are not low-cost locations any more - they are between somewhere East and West. The Hungarian business environment, including labour market, regulations, infrastructure, governmental programs, supplier's background industries etc are, lets say, not supporting the old school Eastern European, labour intensive industries. The future is about automotive and vehicle industries, elecrtronics, pharma and medical devices.

3. Manufacturing is entering a dynamic new phase: 
'As a new global consuming class emerges in developing nations, and innovations spark additional demand, global manufacturers will have substantial new opportunities—but in a much more uncertain environment'
Tip #3: Start to think about emerging countries as emerging markets.
Classically, international companies manufacture in Eastern Europe and sell in the West. We guess it will dramatically change in the near future: they will manufacture and sell in Eastern Europe. The Eastern part of EU became the nr.1 manufacturing location of the Union, and it's generate robust demand for suppliers, but also on B2C markets.

What do you think about these conclusions? Share your opinion!