Home / National Industrial Relations / Countries / Hungary / Financial Participation / Basic Data on Employee Share Ownership / Profit-Sharing

Financial Participation

According to international surveys the incidence of workers’ participation schemes in Hungary is extremely low today. This applies to both employee share ownership and profit-sharing.

Between 1990 and 1992 employee ownership programmes on preferential terms were started in 540 companies.1 Following the 1992 creation of the legal framework for ESOP, 287 firms were privatized this way. The ESOP heyday was in 1993 – 1994. In about 47% of these companies ESOP was a full or majority owner, in 24% it was owner with controlling rights (with an ownership stake of 25% to 50%). By 1998, the final year of privatization, the situation had changed completely. Only 1% of all companies’ assets (excluding financial companies) were under employee ownership management. Also only 1.2% of all employees were employed in ESOP companies. By September 2000 only around one third of companies had repaid their loans and ceased to exist as ESOP companies. As employee ownership was converted into individual “small” ownership and the employees could dispose freely and individually of their shares, there is no difference between these companies and companies where employees are individual owners.

The number of companies in Hungary offering share ownership schemes has remained little changed over the years, with the same 5 – 6 multinational companies and their national subsidiaries on the list. The schemes they offer generally provide for employees purchasing shares at a favourable price, as well as being given a fixed number of bonus shares. The schemes are comprehensive, available to the whole workforce yet with restrictions for manager participation. The exact number of employee shareholders is not known. It can however be assumed that numbers are higher in the manufacturing industry, where employees generally hold shares with a value ranging from 20,000 to 40,000 HUF (ca. 70-150 Euro). Amounts invested are higher in the financial sector, ranging on average from 300,000 to 500,000 HUF (ca. 1,100-1,800 Euro).2


 

1994

1995

2000

2005

2009

2010*

Companies with employee share ownership

269

303

263

138

107

84

Total companies

1.059.849

1.115.3561

1.175.480

1.298.989

1.686.351

1.562.750

*January-November.

Source: According to information from László Neumann und Dorottya Boda, Institute of Social Policy and Labour, February 2011.


The results of the fifth European Working Conditions Survey (EWCS) 2010 rank Hungary as one of the EU Member States in which employee share ownership schemes in private-sector companies are least prevalent (approx. 0.6%). According to the EWCS, the prevalence of profit-sharing schemes in private-sector companies is (approx. 7.7%) is below the European average of around 12.5%.3 The findings of the “European Company Survey“ (ECS), a survey of more than 27,000 HR managers in Europe conducted in 2009, show that 4% of private-sector Hungarian companies with 10 or more employees offer their employees share ownership schemes. Profit-sharing schemes are more widespread, with the ECS finding that 13% of companies with 10 or more employees offer such, basically in line with the European average. Prevalence varies according to company size. 13% of companies with 10-49 employees, 11% with 50-199 employees, and 17% of companies with more than 200 employees have a profit-sharing scheme.4

The Cranet study of 2011 came to the conclusion that in Hungary there were profit-sharing schemes in only 4% of the companies (with 100 or more employees) examined.5 This is the lowest value among the 27 countries examined. For the study HR managers in 29 countries were questioned about the incidence of financial participation schemes in their company.

According to an employment survey carried out by the Hungary Central Statistics Agency, a mere 0.4% of employees hold shares in the company they work for. Of these few shareholders, 34% work in manufacturing and 44% in the service sector; 47% work in private and 19% in state-owned companies. 27% work in large companies, 32% in middle-sized companies and 22% in small and micro companies.6

2010 saw the first comprehensive survey on working conditions also putting a focus on the prevalence of employee financial participation.7 Management incentive schemes are the most prevalent schemes. Employees who are now shareholders in the companies they work for are most frequent in large foreign companies with more than 250 employees. Such schemes are also prevalent in companies with union representation.

Profit-sharing schemes exist, according to the survey on working conditions from 2010 in 20% of companies with more 10 employees. 15% of the companies concerned offer both profit-sharing and share ownership schemes. Large foreign-owned companies in particular use profit-sharing as a short-term incentive system. In most cases (54% of the companies), it is just managers who receive such bonus payments (dependent on the company’s business success). Only 14% of profit-sharing schemes apply to the whole workforce. In 48% of cases, participation rules are set within the company and in 38% there are no rules at all. In only 7% of companies is participation governed by a collective agreement.8

The wage survey of the Hungarian Employment Bureau

Cooperatives play only a minor role in the Hungarian economy at present. On 31st December 2004 there were 5,219 registered cooperatives in operation (out of a total of 416,000 active incorporated companies in the whole economy). Of these, 2,607 cooperatives employed no workers and the remaining 2,612 active cooperatives employed only about 0.2% of the total workforce.

Wilke, Maack and Partner (2014) Country reports on Financial Participation in Europe. Prepared for www.worker-participation.eu. Reports first published in 2007 and fully updated in 2014.