2013. December 21.

The so-called payroll period is coming

The new labour law legal instrument, aimed to reduce costs, the so-called payroll period indicates a longer period of time beginning with the concerned working week determined by the employer during which employees fulfil the working week. It has been introduced by the Act No. I of 2012 on the new Labour Code (hereinafter referred to as the "LC"), however, much of the companies had not even received this information. Given that this new form of work schedule is able to reduce employment costs of employers without the need on termination of employment relationships, it may be beneficial for both of the parties, accordingly we consider it important to present the essence of this legal instrument, and provide you with a brief description on practical benefits.

In the Hungarian labour law the payroll period is considered to be a new legal instrument, but not without any example on international level and is a well-established time-schedule method in the event of companies using unequal work schedule. The root of this legal instrument can be found in the U.S. ("working time bank" or "working time account"), but it has in both Germany and Austria a long tradition ("Arbeitszeitkonto") and is a flexible system that really works well in practice. Compatibility of this legal instrument with Community law – with special regard to the Directive No. 2003/88/EC of the European Parliament and the Council on concerning certain aspects of the organisation of working time – is debatable, in a profit-oriented approach; however, employers consider it as an opportunity for a technical solution in practice, which will greatly facilitate their operation.

Work schedule shall be laid down by the employer. As a general rule, employers lay down the working time of their employees according to the general working arrangement, from Monday till Friday that is to say equal for 5 working days. However, the economic conditions often require a different work schedule, as there are “busy seasons” when tight schedule shall be kept, and at other times there is less work, but eventually working time of the employees would be equalized in average.

In the event of unequal work schedules employers may decide in the future to use either (i) working time frame, or (ii) payroll period.

The legislator aimed by introducing the payroll period the facilitation of the effective operation of economic operators. According to the reasoning of the LC „in the course of determining the conditions of the duration of the length of the working time frame the same applies, however this time-schedule method is radically different from those on the time-frame. While the application of the time-frame is particularly the determination of the amount of working hours on the basis of longer period, the solution of this § is purely a schedule rule. With its application the employer has the opportunity to define for all working hours of a working week a longer period."

Rules of the duration of the time-frame, as well as the payroll of the absence, further the procedure to be followed upon the termination of employment relationship before the expiry of the payroll period shall apply regarding the payroll period accordingly.

The choice of the payroll period means the application of a time-schedule rule. The main difference compared to the working time-frame is that there is always only 1 frame, but the payroll period is multi-threaded. It may offer an optimal solution for those employers planning on introducing working-time frame, used working time-frame previously, or need even more space for scheduling their employees working time.

At the working time schedule in a payroll period it can be seen that the employer always schedules the working week, which is determined by the daily working hours and general work schedule on the basis of a longer period of time always beginning in a given week and does so every week. The amount of the working time shall always be averaged in relation to the given payroll period. Accordingly, in the event of a payroll period, these periods restart every week and are running next to each other side by side, therefore this new system requires a precise and continuous administration as precise payroll can only come true this way in connection with the fulfilled working time. In lack of a precise administration the system would get impossible to follow.

The employer has above the unequal working time schedule the opportunity to schedule the days of rest unequal as well. After 6 performed days of work, however, 1 day of rest must be issued even in the event of application of payroll period. The rule also applies for the protection of workers that 1 day of rest per month should fall on a Sunday. However, working time on Sundays as regular working time can be scheduled –if further legal conditions are met - if the employer schedules the working time in a payroll period.

Experiences from other countries show that after overcoming initial difficulties associated with the introduction of the payroll period it may facilitates a more economical operation for the companies.

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