Non-compete agreements in Hungary: what does the Labour Code allow after employment ends?

Once employment ends, a former employee in Hungary is, as a rule, free to take up new work — including with a competitor of the former employer — or to start a business in the same field. An employer can restrict this only by a non-compete agreement, within the limits set by section 228 of Act I of 2012 on the Labour Code (the “Labour Code”). This article summarises, from the point of view of both employees and employers, what the Labour Code allows and what it requires.

What can the restriction cover, and for how long?

Under section 228(1) of the Labour Code, on the basis of an agreement between the parties, the employee may not, “for a maximum period of two years following the termination of the employment relationship”, engage in conduct that would infringe or jeopardise the legitimate economic interests of the employer.

The Labour Code therefore sets an upper time limit: a restriction longer than two years cannot be agreed. The content of the restriction — for example the activities covered, the geographical area or the clients concerned — is best defined precisely in the agreement, so that there is no later dispute about what is and is not prohibited.

What compensation is the employee entitled to?

The restriction is not free of charge. Under section 228(2), the employer pays appropriate consideration; in setting the amount, particular regard must be had to the extent to which the agreement prevents the employee — primarily in view of his or her qualifications and experience — from entering into a new employment relationship.

The Labour Code also sets a floor: for the term of the agreement, the consideration may not be less than one third of the basic wage payable for the same period. Example: with a monthly basic wage of HUF 900,000 and a two-year restriction, the total consideration must be at least HUF 7,200,000 (HUF 900,000 × 24 months ÷ 3). This is the statutory minimum; depending on the factors above, “appropriate” consideration may be higher.

Does it have to be in writing?

Yes. A non-compete agreement must be made in writing (section 228(3)). Beyond this, section 228 lays down no further formal requirement.

When can the employee withdraw?

Under section 228(4), the employee may withdraw from the agreement if he or she terminates the employment relationship without notice under section 78(1) of the Labour Code. This is possible where the employer wilfully or with gross negligence commits a grave violation of any substantive obligation arising from the employment relationship, or otherwise engages in conduct that makes the employment relationship impossible to maintain. In that case the employee is not bound by the restriction.

What happens if the employer changes?

Where there is a change in the person of the employer, the rights and obligations arising from the agreement pass to the transferee employer (section 228(5)). The agreement therefore does not lapse merely because the business has been taken over.

Can a contractual penalty be agreed?

Yes. The parties may agree on a contractual penalty for breach of the restriction; under section 228(6), sections 6:186 to 6:189 of the Hungarian Civil Code apply to it.

Checklist before signing

• Term: no more than two years from the end of employment.
• Scope: exactly which activities, in which area, and in respect of which clients or competitors are prohibited.
• Consideration: in total at least one third of the basic wage for the same period; the payment schedule is also worth setting out in the agreement.
• Written form: an oral agreement does not meet the statutory requirement.
• Contractual penalty: its amount and when it becomes payable.

Different rules may apply to executive employees and to employers in public ownership; this article does not cover them.

You can find more about employment matters on the Employment law page; to have a specific non-compete agreement drafted or reviewed, you can request an appointment via the contact form.

This article provides general information and does not constitute legal advice. Legal position as at October 2026. This English version is provided for information; in the event of any discrepancy, the Hungarian version prevails.