Do a research on postal telecom mobile……………………………….


Table of content

1. INTRODUCTION …………………………………………………………….……3



1.3 OVERVIEW OF HUNGARY……………………………………………….3

2. HUMAN RESOURCE STRATEGIES……………..….…………………..………..5




3. FOREIGN EXCHANGE ISSUES…..……………………………………..…………12

4. RELOCATION RISKS….…………….………………………………………………13

4.1 FOREIGN CURRENCY RISKS……………………………………………13

4.2 HUMAN RESOURCE RISKS………………………………………………14

4.3 OTHER RELOCATION RISKS………..…………………………………..15

5. RISK MANAGEMENT………………………………………………………………..16


7. Summery and recommendations………………………………………………………21

8. REFERENCES………………………………………………………………………….22



1.1 About postal telecom mobile

Postal Telecom mobile Company is a UK based medium size manufacturer of mobile phone accessories with twelve years experience in East London. They have a labor force of 150 people with 110 in physical manufacture. Twenty of this are in management positions and the remaining twenty being clerical and support staff.

The company lease in East London is due to expire soon and they have been convinced by their oldest Hungarian clients to relocate their business to Hungary. The company has had two successful exhibitions in Budapest and is now convinced of high business potential in Hungary.

1.2 Background of postal telecom mobile

The PTM has been in operation for the last twelve years United Kingdom. It is located in East London where both manufacturing plant and administrative units are found. Most of its customers are located in Europe.

1.3 overview of Hungary

Hungary is located in central Europe within an easy reach from Western Europe. The country covers and area of 93,000 square kilometers with two thirds of its territory being relatively flat.

The country has a population of 10 million people and a population density of about 100 persons per square kilometer. The capital Budapest is estimated to have a population of 2 million people. The national language is Hungarian with English and Germany being other frequently spoken languages.

The country’s infrastructure is currently undergoing reconstruction. Hungary has extensive road network with highways extending in all directions from the capital Budapest. Railway system and airports are well developed in Hungary.

Telecommunication sector is highly developed with both fixed lines networks and broadband internet well established. Mobile phone penetration rate currently stands at 90% with 3 UMTS licenses having been granted to date.

The company boasts of highly skilled and educated labor in engineering and IT, pharmacy, physics, economics and mathematics that are available and ready to offer labor force to the PTM Company. The country is currently experiencing huge inflow of foreign investments which has brought in technical know–how and technology.

The country is politically stable with well developed legal system that enables business to thrive. Hungary is also a member of major international bodies including United Nations. It became a full member of European Union (EU) in 2004, and has harmonized most its laws including those relating to labor and foreign investments to be in line with the EU regulations and requirements.

Economically, Hungary is currently experiencing a booming and fast growing economy having undergone a successfully period of privatization to move from planned to free market economy and currently, private sector constitutes 80% of total GDP. Inflation rate has since been stabilized at below 4% currently.

Foreigners, individuals or legal entities are at liberty to establish new companies or acquire shares in Hungary with limitations. Wholly or partly owned foreign firma can operate in form of legal business in Hungary without restrictions.

There are no legal restrictions placed on the payment of investment returns to foreign shareholders. Any company or its branch which is established in Hungary is recognized as legal entity. The procedure for acquiring trade licenses is similar for both foreign and resident firms. Therefore setting up and operating in Hungary has been made easy for foreign firms.


A thorough analysis and evaluation of human resource issues is necessary to enable the management to make an infirmed decision before setting up any business firm. This comprises the analysis of labor laws of the country the business is to be located. In analyzing PTM Company, we shall evaluate the current human resource issues and compare with those of Hungary where the company is set to move to.

The pertinent issues to be addressed include laws and guidelines that relate to the recruitment company senior managers and operatives in both countries, staffing issues and differences in employment rights in British and Hungary.

2.1 Analyzing the current human resource strategies in PTM

The advent of globalization, growth of multi-nationals, increased competition and high mobility of labor, capita and technology has led to the emergency of HRM practices across the globe. The companies operates and strictly follows British labor laws most of which have been harmonized with those of European Union (EU).

The company does not discriminate against any employee at the work place and emphasizes equal treatment for all employees regardless of age, race, religion, belief, ethnicity, disability and sexual orientation in accordance with UK labor laws and legislations as contained in UKs employment equality regulation act of 2003, race relations act of 2003 and disability discrimination act. The company prohibits all forms of direct and indirect discrimination on any basis and emphasizes favorable and equal treatment for all workers, (employment/discrimination, n. p).

The company currently employs both men and women who are treated equally and applies equal pay policy to both sexes, male and female doing the same work. Same criteria is used to evaluate payments of workers regardless of gender in accordance with the British and EU directive of equal pay, (Industry, 2006).

In enforcing equal treatment directive of EU, the company offers both men and women employees equal recruitment and training opportunities in addition to equal working conditions. For instance, in line with UK laws for women and equality (n. p), PTM Company cannot dismiss women on condition of pregnancy and maternity.

Legislation relating to working hours by the employees in Uk have been implemented by the PTM company to the later. Company working hours are within those recommended by the British and EU labor laws and company workers have adequate leave days for resting and are adequately protected against disruptive working patterns, (, n. p).

In addition, the company is offering trainings and career development to its fixed-term employees in an effort to enhance their skills of work. Staffs of the company have enjoyed occupational mobility and are represented by workers bodies. This is in line with the British fixed-term employees regulations of 2002, (legislation/fixed-term-employees, n. p).

The company employs a sizable number of part time workers in the physical manufacturing who are assimilated into full time on request. They are treated in equal manner just like full time employees of the company.

Transfer from full to part time work is possible in PTM. Information relating to both part time and full time jobs is made available to employees in time. Workers representative have access to information regarding part time and full time employment for their scrutiny.

The Employment Rights Act 1996 requires that all workers must sign employment contracts containing terms and conditions of work before taking up the employment, (, n. p). All PTM workers, full time and part time employees have signed employment contract which states their terms and conditions of work, which meet the threshold of this act.

Maternity rights have been emphasized in the company. The company offers ordinary maternity of 26 weeks to women employees. They have rights to access ante-natal care and dismissal on ground of maternity is prohibited in the company.

Pregnant workers are not allowed to undertake duties that may put them at risk. For instance, working night shifts during pregnancy is not allowed in order to conform to the maternity and parental leave regulations act of 2002.

The company offers social security schemes for its workers without discrimination in accordance with the country’s statutory social security directive. This social scheme covers workers in cases of sicknesses, invalidity, old age, occupational accidents and unemployment. In PTM, there is no discrimination between men and women in respect to the benefits or access to pension schemes run by the company and there is equal treatment in access to occupational pension schemes.

The company protects fundamental rights of freedoms of its employees in accordance with UK laws, (, n. p) and does not reveal workers personal data to any third party. Employees’ personal data can only be collected within the legal framework and procedures of the land for legitimate purposes.

Processing of employees data relating to race and ethnic origin, political opinions, religious and philosophical beliefs and trade union alignment is prohibited in the company. The workers have every right to access to their personal data and have demand for the correction of their data, and can object to the processing of their data in line with data protection act of UK, 1998, (bsi n. p).

The PTM employees have the right to company information and are adequately informed of their employment situation. Crucial company decisions that may lead to changes in the work organization are made known to the employees.

The information affecting employees’ work is communicated to the workers representatives in appropriate manner to help them prepare for consultation with employers. Consultation between workers representatives and employer are common in the company.

The UK laws offer greater protection to employees in the event of collective redundancy of 20 or more workers. In such case, there must be adequate consultations between the employer and employee representatives. There are laid procedures for collective redundancy.




2.2 Human resource issues in Hungary

Hungary, being a member of European Union (EU), has implemented most of EU laws into its country laws. The fundamental element of employment contracts are regulated by Hungarian labor code established by Act XXII of 1992, (Hargittay, 2010). The Hungarian labor is largely similar to labor laws found in other members of European Union.

The labor code has established the minimum wage and minimum base of social security contribution by workers in Hungary. Both resident and non resident workers are subject to income tax on their income from Hungarian sources, (PKF, 2006).

Under Hungarian labor code, indefinite termination of employment contract can be done by mutual consent between the employer and employee or through normal summery dismissal. Although termination on mutual agreement can take place at any time, the two parties must agree on date of termination and payments and remuneration to be made.

Ordinary dismissal in Hungary can result from disability on the part of employee, indiscipline and bad behavior in relation to employment relationship. Redundancy falls under a special category of ordinary dismissal in Hungary.

Summery dismissal may occur if the employee breaches employment contract and if the worker engages in conduct that renders the existence of employment relationship impossible, for instance engaging in business competing with the employer’s business, (Szabolcs, et al, 2010).

The labor code lays down procedural rules to be followed incase of collective redundancy. The code also states that an employee is entitled to severance payment if his employment is terminated by ordinary and summery dismissal, and in case of dissolution of the company without legal succession.

Fixed term employment contract can only be terminated by mutual consent between the employee and employer or by summery dismissal or if trial period applies, with immediate effect. However, if terminated under different conditions then, employee shall be paid one year’s average salary, (Hargittay, 2010).

Labor code of Hungary stipulates conditions under which ordinary dismissal does not apply, as when an employee is incapacitated due to illness not exceeding one year after expiry sick leave and the whole period if the illness was occasioned by occupational disease or accident at the work place.

Employee cannot be dismissed during the period of sick leave taken to nurse or care for a sick child, during leave absence without pay to nurse or care for a close relative, during treatment for production related illness such as pregnancy, leave absence to care or nurse for her children and also during rehabilitation period. Furthermore, ordinary dismissal cannot apply to employee who is remaining with five years to attain the age limit for old age pension.

Dismissal due to redundancy should be issued in written form and the employee must be paid work wages and other emoluments, and given certificate of service detailing his job profile and job evaluation. Evaluation however can be provided only on the request by the employee.

Any wrongful and unfair dismissal shall attract litigation. Lawsuit has to be instituted within thirty days from the day of dismissal notice, and if the court determines that the employer unlawfully terminated an employment relationship, such employee, upon request, shall be reinstated back to his former position.

Incase of any request by either party to exonerate reinstatement, then the court upon weighing all relevant conditions, shall rule for the amount to be paid to the employee and employment relationship shall cease on the day of the ruling. In the unlawful dismissal, employee shall be reimbursed for lost wages and emoluments and compensated for the damages incurred due to his dismissal.

Foreign persons with valid visas to stay in Hungary can be employed in Hungary upon getting work permits. However, foreigners from EU member countries are not subject to this condition for they don’t require stay visa and work permit for them to stay and work in Hungary. Company chief executive officers are also not required to posses work permits.

In my view the workers are sufficiently protected by the Labor Code in Hungary including termination of the employment relationship. Laws laws are harmonized to the EU labor principles. If you are an employer and you want to dismiss an employee, you have to make sure that your letter of dismissal meets the formal requirements set out in the labor laws.




2.3 Comparing human resource strategies in UK and Hungary

Both countries are permanent, members of EU and most of their labor and occupational laws are similar because they have been harmonized in line with the EU regulations.

Discrimination in work place is prohibited in the two countries. All workers are treated on equal measure regardless of their gender, race, age, belief, ethnicity, disability and sexual orientation in accordance with EU regulations.

Labor laws in both nations adequately protect their employees against exploitation by their employers. The laws are strict on matters of employment termination. Workers in have every right to be represented by eligible workers union.

In Hungary, minimum wage and minimum social security base has been set in the labor laws unlike in UK labor laws where it is not stipulated. Any wrongful termination attracts heavy penalty in the two nations.


Business transaction currency is Hungarian Franc and Euro. However, majority of Hungarians prefer using the Hungarian Franc and this difference in transaction currencies between the two countries is likely to create exchange rate problems for the company, particularly between the mother company in East London and subsidiary in Budapest Hungary.

The company operates in international trade by importing raw materials and exporting its finished products making it prone to exchange rate fluctuation risks, (Madura, 2000).


The relocation of manufacturing plant to Hungary will face numerous risks and more particularly the exchange rate risks as well as political risks (Hall, 2010). These risks shall have harmful effect to the company operations given that they collaboratively synergize each other, adversely influencing the company’s operations. This therefore calls for the need to put up measures to mitigate these risks which are very dynamic and subject to changes from time to time.

Other possible relocation risks range from transportation of equipment, human resource issues and social, cultural, economic, legal and political challenges. In addition to these risks, underinvestment, financial risks and problems in accessing raw material are likely to occur.

4.1 foreign exchange risks

The exchange rate risk has been and will be one of the most risks for the PTM Company. The current global economic downtown being experienced is making exchange rates very prone to fluctuations (Brock and Magee, 1978). This state of affairs is currently affecting many companies.

The company is however currently not very exposed to exchange rate risk since most of its operations are conducted within the European countries using the Euro currency, which has not experienced severe foreign exchange problems resulting from terrific changes in the exchanges rates (Dixit, 1983).

Foreign exchange risk is inevitable as the company relocates its manufacturing plant to Hungary. Raw materials and labor force may be transacted in local currency. Besides, the nature of company business and its international operations also exposes it to the risk of exchange rate.

Company imports raw materials and exports its products to the global markets outside Euro zone hence the need for the strategy to mitigate the exchange rate risks, (Yarbrough and Yarbrough, 1997).

4.2 Human resource risks.

There are different staffing policies that can be adopted by the company.

Perlmutter (1969) identified 3 different international orientations as

Ethnocentric (staffing mostly from parent country), polycentric ( staffing from nationals), and geocentric ( appointing the best person) that determines MNC staffing policies.The table below classifies international staffing as used in most multi national companies.

Parent country
national (PCN)

Nationality of an employee is the same as that of the headquarters of the MNC firm e.g. a UK national employee
working at the Hungary

manufacturing plant

Host country
national (HCN)

Nationality of employee is the same
as that of the local subsidiary

e.g. a Hungarian employee
working at the Hungarian


Third country
national (TCN)

Nationality of employee is neither that of the headquarters nor the local subsidiary e.g. a Chinese employee
working at the Hungarian

subsidiary of PTM company

Table 1. Classification of international staffing

The company will have to employ new staff majority being Hungarians, (Hargittay, 2010) and this will mean incurring recruitment and training costs. The newly recruited staff in a new country will be employed under different labor laws which the company will have to comply with.

Hiring of new management staff will be a great risk to the company since this are required to be people of high integrity. The company will also have to source new universities which can provide internship programs; this may not be an easy task.

Expatriates and senior management who will be relocating to Hungary are likely to face social and cultural problems of moving away from their mother countries, (Callings, 2008).

Administration should be prepared to accommodate different employee values and expectations stemming from cultural and social differences. Cultural values influence compensation and benefits, (Ladislav, 2011).

Company will loose the services of specialized teams of local workers who had developed intelligent system for the company. In his study, Stopford (1998) stated that maintaining and strengthening human assets attracts investors.

Employee compensation and benefits will be affected by many factors. This include different standards of living in Hungary may require a different compensation strategy. Exchange rates differences, differences in taxation and inflation rates and currency may demand for adjustment in human resource strategies.

4.3 Other relocation risks

Underinvestment is common relocation risks especially in small and medium size firms that are not well established financially, (Gay, et al, 1998).

Legal issues relating to labor laws and foreign investment will be another challengeful task for the company. The company will have to conform to the new requirements which may be different from those of United Kingdom.

There are differences in labor laws and regulation between UK and Hungary despite both being members of EU. These legal differences will impact on remuneration of employees.

Relocation will bring in the problem of accessing raw material and other inputs required in the production of mobile accessories. Enterprises that supply crucial inputs are difficult to replicate elsewhere causing the company to source for new suppliers or meet transportation costs which may be costly for the company.


Thorough research and analysis of the security and political status of the Hungary must be conducted to ascertain viability of relocating manufacturing plant, (Froot, et al, 1993). The initial findings indicate that the country is more secure and politically stable (Cassing et al, 1985) and offers favorable environment for the operation of PTM company.

A proper research on the foreign investments regulations need to be thoroughly conducted to ensure that PTM Company makes the correct and informed decisions before relocating (Deardorff, 1980)

The ability of the firm to hedge the risk of fluctuations in exchange rates is very important to any company in international operations, (Allayannis, 2001). The use of foreign currency derivatives (FCD) is important among the multinationals to caution them against forex risks, (Crabb, 2011).

Furthermore, the theory of purchasing power parity (PPP) can be employed by the company to forecast the possibility of exchange-rate risks. Relative purchasing power parity will be used to explain variations in relative prices between countries that may lead to changes in the exchange rates over time (Hall, 2010).

Minimal buying of raw materials using foreign currency denominations at the time when domestic currency is depreciating will help reduce foreign exchange risks as this will make imports expensive (Madura, 2000). The company should strive to increase its exports and minimize imports during such times to maximize on the situation.

However, diversification of the company’s products and services, and expanding its operations to different countries shall make it easy for the company to manage exchange rate risks (Yarbrough and Yarbrough, 1997). This is because a decrease in demand for one product or services will be compensated with an increase in the demand for the other products.

Possible underinvestment is managed by external financial sourcing to mitigate any deficits in finance, (Gay, et al, 1998). With high business potential in Hungary, PTM must source enough funds to exploit this opportunity.

Problems of accessing raw material and other inputs may be reduced by using local raw materials available in Hungary. However, those raw materials to be imported should be transported directly to Hungary rather passing through UK and then redirected to Hungary.

High production costs resulting from high labor costs incurred through recruitment, training and wages (minimum wage requirements), inputs and operation costs need to be managed appropriately for the company to remain competitive in the global market, (Ladislav, 2011).

Cultural and social issues that affect employee performances and compensation must be adequately addressed by the human resource team of the company before relocating to the new country.

Recruitment of senior and technical managers for factory in Hungary should focus on skills of the person rather nationality. Verification of employment history is necessary to help avert frauds and reputation of the company.Evaluation of employee quality of experience is essential for the performance of the company in the new location.

Establishing internship programs with local universities can be a great way to evaluate potential entry-level candidates early on. Many juniors, seniors, and graduate students in universities have light course loads. Though their status as students prohibits them from taking formal positions, they can work full-time or nearly full-time as interns.

Assessing of brand recognition is necessary in attracting employees to the company. Recent college graduates and younger employees would prefer to work on companies which have an established brand name. Company should also promise new fields such as high tech, Internet start-ups, and private equity to attract many workers especially young employees. Companies without such brand recognition will have to focus more heavily on the other recruitment tools which may be costly.

Factors affecting employee Compensation and Benefits that need to addressed includes differences in standards and costs of living, multiple currencies and exchange rates, inflation/deflation rates, tax systems and tax rates. All this will affect employee compensation and benefits and management must address them adequately.


The exchange rate risks can be easily overcome by continued diversification of the company operations. This helps the company in spreading its coverage in terms of the products and services as well as the countries of operations (Yarbrough and Yarbrough, 1997). This is very crucial strategy to hedge out the risks.

To lower exchange rate risks, the company may also ask their customers to purchase products using Euro currency since majority of customers are in Europe. Business transaction in Hungary should also be transacted in Euro currency.

The use of purchasing power parity theory to forecast future exchange rate risks should be used to prepare the company for possible exchange rate fluctuations. The firm will be able to adjust accordingly and reduce its exposure to these risks

Proper financial analysis is likely to predict the future trend of the currency performance and this helps the company management to make informed financial decisions for the company.

The risks of underinvestment may be resolved by adequate financing of subsidiary in Budapest. Management should carry out an evaluation of the financial requirements for setting up this manufacturing plant and provide adequate funding.

The company should engage in research and innovation to reduce the cost of production. The use of low cost but effective facilities in the new location will minimize financial risks and lower cost of installation.

Hedging operations through the company bank is recommended to reduce the risk of fluctuating exchange rates, (Allayannis, 2001). The company will not be affected in that the current rate of exchange will be used in future transactions.

To lower production costs in the new location, I recommend for the mass production to achieve the benefits of economies of scale. This however must be coupled by aggressive marketing of the products into global markets.

Proper management of human resource is necessary for the success of company in new location. Company should look for sets of skills rather than whether the ideal employee would be a local citizen or a foreigner.

In order to effectively manage relocation and other risks of the company, the company must strictly adhere to the suggested recommendations in order to overcome the challenges posed by these risks. A proper research on the Hungary and its political and legal regulations is very necessary and essential in addressing the risks associated.

Summery and conclusions

The purpose of this research is to evaluate and analyses issues that relate to the relocation of Postal telecom mobile company from east London to Hungary. The company has just realized high business potential in Hungary and would like to relocate after the expiry of lease in east London.

However, several factors have to be considered to enable company managers make an informed decision prior to its relocation to Hungary. Several factors have identified as key factors influencing the relocation of PTM.

To start with, a thorough evaluation and analysis of Hungary labor laws, legal and political situation has been analyzed and found to be favorable for the operation of the company business. There are differences in social and cultural values between the two nations which will affect the operation of PTM business in Hungary.

Although the two nations are members of the European Union and most of their labor laws have been harmonized in line with EU regulations, there still exist differences in some laws relating to labor management and regulation of foreign investments which the management of the PTM Company have to accommodate.

Relocation risks of exchange rates and human resource management has been identified and the management should address the issues sufficiently and adhere to the recommendations.


ALBA, J, WANG, P, & PARK, D 2010, ‘THE IMPACT OF EXCHANGE RATE ON FDI AND THE INTERDEPENDENCE OF FDI OVER TIME’, Singapore Economic Review, 55, 4, pp. 733-747, Business Source Complete, EBSCOhost, viewed 3 April 2012.
Allayannis, George and Eli Ofek (2001), “Exchange Rate Exposure, Hedging, and the Use of Foreign Currency Derivatives,” Journal of International Money and Finance, 20, 273 – 296.
Brock, W. and Magee, S. (1978) The Economics of Special Interest Politics: The Case of Tariffs. American Economic Review. 68 (2), 246-250.
Cassing, J. and Hillman, A. (1985) Political Influence Motives and the Choice between Tariffs and Quotas. Journal of International Economics, 19(4), 279-290.
Collings, David G. (2008): Multinational Corporations and Industrial Relations Research: A Road Less Travelled. International Journal of Management Reviews, Vol. 10, Issue 2, pp. 173-193, June 2008. Available at SSRN:
Deardorff, A. V. (1999) the General Validity of the Law of Comparative Advantage. Journal of Political Economy. 88 (5), 941-57.
Dixit, A. (1983) International Trade Policy for Oligopolistic Industries. Economic Journal. 94(1), 1-16.
Froot, K. and D. Scharfstein and J. Stein (1993), “Risk Management: Coordinating Corporate
Investment and Financing Policies,” Journal of Finance, 48, 1629 – 1658.

Hargittay, S. & Fusthy, Z., (2010): Hot Issues in Hungarian labor Law, Budapest: s.n.
Industry, L. C. o. C. a. (2006). EU Employment Law, London: s.n. (accessed 4th march 2012). en.htm. (accessed 4th march 2012) (accessed 4th march 2012) (accessed 4th march 2012) (accessed 4th march 2012) (accessed 4th march 2012)
Madura, Jeff (2000). “Measuring Exposure to Exchange Rate Fluctuations” in International Financial Management , Sixth Edition, South-Western College Publishing, p.p. 275 – 304.
Peter R. Crabb. (2011): Risk Management by Multinational Corporations: A New Test of the Underinvestment Hypothesis. Journal of Risk and Diversification; ISSN 1986-4337 Issue 1 (2011) © EuroJournals Publishing, Inc. 2011. School of Business and Economics, Northwest Nazarene University
PKF, (2006). Doing Business in Hungry, Budapest: PKF.
Sebastian Reiche and Anne-Wil Harzing, (2009): international assignments; Version December 2009. Human Resource Management, London: Sage Publications
Stopford, John. (1998): Multinational corporations; Foreign Policy, winter 1998 i113 p12 (1). Copyright 1998 Carnegie Endowment for International Peace, London Business School.
Szabolcs Hargittay and Zsolt FüsthyHot. (2010): Issues in Hungarian Labor Law; International Society of Primerus Law Firms, Grand Rapids, Michigan. © October 2010
Gay, Gerald D. and Jouhan Nam (1998), “The Underinvestment Problem and Derivatives Usage by Corporations,” Financial Management, 27.
Yarbrough, B.V. and Yarbrough, R.M. (1997) The World Economy: Trade and Finance. New York: Dryden Press.
Ladislav Mura. (2011): performance of human resource management in an internationally operating company. J. Selye University in Komarno, Faculty of Economics, Bratislavska 3322, 945 01 Komarno, Slovakia

Place your order now……………………………