Am I obligated to pay for my employee’s commute expenses?

When it comes to Hungarian labor rights, we talk about “commuting” when an employee goes to work from a different city. When that happens, the employee is eligible for the reimbursement of their commute expenses. Read on to learn the most important terms and rules.

Commuting in Hungary

Employees, if they do not work remotely full-time, must get to the workplace to work. If they live in the same city where the workplace is, they should be able to take care of it on their own. However, if they live in a different city (or town, or village), it becomes the responsibility of the employer to provide the means for that, at least in part.

For an employee to be eligible, either their permanent address or their temporary address must be in a different town. For third-country national employees, this means their registered address indicated on their accommodation slip.

Financing commute expenses

Since the employer is required by law to reimburse the commute expenses of their employees, this could discourage the employment of people living farther away from the workplace. To counter that, a tax exemption is available for this purpose, so employers only have to pay for the costs themselves, without the addition of the usual employment tax (or social contribution tax).

Reimbursement of commute expenses is not automatic: the employee must ask for it if they are eligible. It is good practice to offer them when they join your business, however; being generous may even boost recruitment by making your business more attractive to the right talent, which is great value for your money.

Commuting can be done either by public transport or by car. The rules pertaining to reimbursement for each are slightly different. Let’s see how they work.

1. Public transport

When the employee uses public transport for their commute, at least 86% of their expenses should be reimbursed to them. However, the law allows for a 100% reimbursement of commute expenses still under tax exemption. The relevant tickets or passes must be used between the employee’s home and the workplace, and they can be full price or discounted too (discounts are typically available to students and to people with disabilities).

In Hungary, it is typical to purchase a monthly general pass for public transport valid for all types of vehicles in a given territory. While each city might have their own monthly pass, there are also county passes which fit the definition we have for commuting very well. For example, if your office is in Budapest but your employee lives somewhere around, such as in Budaörs, Biatorbágy, or Üröm, they will probably use a county pass valid for Pest County.

There is also a Hungary pass, which enables the use of public transport all over Hungary. Your employee will be eligible for this if they live in a different county and commute from there. This is also the case if they live near your office during the week, but go home to see their family over the weekend. Your employee is also eligible if they live in the same county, but the route to work takes them through another county and they have to change trains or buses there.

If your employee uses a Hungary pass but they do not live in a different county, they may still be reimbursed tax free up to the price of the county pass. You as an employer may decide to reimburse them full, but in that case the amount above the price of the county pass will be taxed like salary.

For comparison, the monthly county pass in 2024 costs ca. EUR 24, while the Hungary pass costs ca. EUR 50.

Passes for those who do not commute

Please note: a pass may also be reimbursed if it is not used for commute but for the daily work of your employee. For example, couriers, caregivers, or other professions may require transportation in relation to their jobs. For eligibility, this must be clearly indicated in their job description.

Invoices and reimbursement

Until recently, employees using passes in their commute were required to get their passes invoiced to the Hungarian company they work for. These days, and in part thanks to the spread of electronic tickets, the passes used in commute can only be invoiced to the employee (and the passes also have to contain the ID or passport number of the user). While this means some additional tasks for the accountants, it is nothing an expert accountant like Helpers Finance could not handle.

2. Commuting by car

If your employee is commuting by their own car, reimbursement of the commute expenses is based on the driving distance between their home and the workplace. Reimbursement in 2024 should be at least HUF 18 (ca. EUR 0.045) / km, but you can offer up to HUF 30 (ca. EUR 0.075) / km tax free. You are allowed to offer even more, of course, but that will be taxed like salary.

Please note: carpooling is not eligible for reimbursement under these rules.

As a benefit, you may also offer your employee to use a company car. That scenario, however, has its own specific set of rules not listed here. Feel free to ask our experts!

Which to choose: public transport or commuting by car?

In a healthy employment relationship, the employee and the employer can agree to choose the option that fits both of them most. However, public transport may seem cheaper in many cases, which could make the employer try and push the employee in that direction. To protect the employee’s rights against this, the employer is required to finance the employee’s commute by car under specific conditions.

The employer cannot require their employee to use public transport if:

• There is no public transport between the employee’s home and the workplace
• The employee cannot use public transport because of a disability
• The commute by public transport would be disproportionately long (e.g. 90 minutes by public transport vs. 20 minutes by car)
• The employee has a child below the age of 10 attending nursery school, kindergarten, or primary school

Accountancy for financing your employees’ commute expenses

Since the reimbursement of commute expenses is a company expense, it must be booked properly. Whether your employee uses public transport or their own car to commute, the relevant expenses must be reported and paid regularly, in accordance with the laws pertaining to it.

While this might seem an extra nuisance to you, a good accountant like Helpers Finance can take care of it without issues, while being open about this topic from the first phases of recruitment (and offering a generous benefit package) can strengthen your employer brand significantly.

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The post Am I obligated to pay for my employee’s commute expenses? appeared first on Helpers Finance.