Definitive Guide to Hiring in Croatia

Hiring in Croatia

Hiring employees compliantly in Croatia means doing it yourself or using an Employer of Record like Global Expansion. You should be careful using independent contractor agreements in Croatia so that you don’t run afoul of employment laws. To hire an employee compliantly and offer them mandatory benefits and compliant agreements, you can:

(a) Establish your own new legal entity, banking, accounting and payroll service in Croatia; or

(b) use an Employer of Record like Global Expansion who can handle all of the details for you.

Labor Laws in Croatia

Employee Probation Period

• According to Article 53 of the EA, a probationary period may be agreed upon by the employment contract and its length may not exceed six months.

Annual Leave in Croatia

• Employees in Croatia are entitled to a 18 working days of paid annual leave

Holidays in Croatia

• Croatia celebrates 14 public holidays for which employees are given the day off, including

Maternity Leave Croatia

• Pregnant employees are entitled to:
  • 28 days of maternity leave prior to the expected delivery date or 45 days before the delivery date under special circumstances, based on a medical assessment.
  • After the birth of a child, female employees are entitled to at least 70 days of maternity leave or until the child turns 6 months of age.
  • After the 70-day period expires, the father has the right to use the remaining period of maternity leave, with the mother’s consent.

Paternity Leave Croatia

• There is no statutory requirement for paid paternity leave but the employee has the option of using their personal leave.

Sick Leave in Croatia

• Employees are entitled to a maximum of 42 days of paid sick leave per year.
• The amount that is paid during sick leave depends on the employment agreement, however, it cannot be less than 70% of the average daily wage in the 6 months preceding the sick leave.

Working Hours in Croatia

• The standard work week in Croatia consists of up to 40 hours per week spread out over 5 or 6 days.

Overtime in Croatia

• Employees can work overtime, not to exceed 8 hours per week if the employer submits a written request for overtime work.
• Overtime must be paid at a rate of 50% over the employee’s standard salary.

Termination of Employment in Croatia

Ordinary termination. The parties to an employment contract can terminate the employment subject to a prescribed or agreed notice period. The employer can give notice due to:

• Business reasons (if the need to perform a certain work ceases due to economic, technological or organizational reasons).
• Some of the common business reasons recognized by the courts are: -
  • cancellation of departments in the company or a decrease in a number of employees due to unprofitability (economic reason);
  • redundancy due to automation of the business operations/tasks (technical reason) or reorganization of the business;
  • elimination of business units in the company (organizational reason).
• Notice due to business reasons is deemed valid if the need for a certain employee to perform working tasks ceases to exist. There is no obligation to eliminate the entire job position. It is suffcient to reduce the number of employees working in the same job.
• The winding-up of a company is another typical example of a legitimate termination of employment due to business reasons.
• Personal reasons (if the employee is not capable of fulfilling duties because of some permanent characteristics or abilities).
• Employee's misconduct (if the employee violates his/her employment obligation).
• Failure of the employee to perform the work to the required standard during the probation period.

Notice Period in Croatia

• According to Article 122 of the EA, a notice period depends on the length of tenure with the same employer.
• It is a minimum of two weeks (for less than one year) and a maximum of three months (for 20 years).
• In case of an employee who has continuously worked for the same employer for 20 years, the notice period is extended by two weeks if the employee has reached 50 years of age, and by one month if the employee has reached 55 years of age.
• In case of dismissal because of an employee's misconduct, the notice period is halved.
• The employer is obliged to pay compensation and recognize all other rights to the employee released from the obligation to work during the notice period, as if the employee had worked until the expiry of the notice period.

Severance in Croatia

• Article 126 of the EA prescribes that when an employer dismisses an employee following two years of tenure, unless dismissal is given as a result of an employee's misconduct, the employee is entitled to severance pay for each year of tenure with the employer.
• It may not be lower than one-third of the average monthly salary earned by the employee in the period of three months prior to dismissal and, unless otherwise provided for by the law, collective agreement, working regulations or employment contract, it may not exceed six average monthly salaries earned by the employee during three months prior to dismissal.

Croatia Salary and Wages

13th / 14th Month Pay

• Yes
• There is no statutory requirement to pay the 13th or the 14th month.
• However, it is customary to pay a Christmas or holiday bonus.

• Croatian Social Security contributions consist of pension contribution calculated and deducted from the gross salary and a health and employment contribution calculated and paid on top of the gross salary.
• In the case of dependently employed individuals, social security charges are borne by the employee and employer.
• Employee's social security contributions are pension contributions levied at the rate of 20% (15% I. Pillar payments, 5% II. Pillar payments). The basis for their payment is gross salary, which is capped at the following values for 2020:
  • HRK 52,452 monthly cap (applicable for both I. and II. Pillar payments in case of salary).
  • HRK 629,424 annual cap (applicable for I. Pillar payments irrespective of whether the payment is salary or other types of remuneration).
• Additionally, employers make social contributions for the following social security benefits:
• Health insurance: 16.5%
• The basis for payment of employer’s social security contributions is gross salary, which is not capped.
• Employers have certain additional obligations with respect to disabled individuals.
• The following rates are valid from 01.01.2019

Immigration Croatia

Value Added Tax (VAT) in Croatia

• The Croatian VAT system is in line with the provisions of the European Union (EU) VAT Directive.
• VAT is payable on sales of goods and supply of services, import of goods, and intra-Community acquisition of goods.
• Croatia has not introduced any VAT grouping rules.
• The general VAT rate is 25%.
• A reduced rate of 13% is applicable for certain items such as organized stays, Edible oils and fat of animal and vegetable origin, child seats for cars, children’s diapers etc.

Mandatory Benefits in Croatia

• These are mandatory benefits as prescribed by law
• These include annual leave, public holidays, maternity leave, sick leave, notice period, severance pay etc.
• Moreover, it also includes social security benefits pension fund, health insurance and unemployment benefits.

Payroll Accrual in Croatia

Country Accruals Additional Information

Description

If an expatriate has a contractual arrangement with a Croatian legal entity and performs services in Croatia, the Croatian entity needs to withhold and pay compulsory social security contributions (pension fund and health insurance). A Croatian entity refers to all legal entities incorporated in Croatia, branch offices, and representative offices.

Payroll Accruals Additional Information

Accrued Benefits in Croatia

Why use Global Expansion to hire in Croatia

Establishing a branch office or subsidiary in Croatia can be time-consuming, expensive and complex. With such a robust labor market in place, one must pay great attention to detail when structuring employment because Croatia labor laws are complex.

The company also has a responsibility to comply with specific employment practices dictated by Croatia law to maintain its good standing as an equal opportunity employer.

Global Expansion makes it easy for you to expand into Croatia. We'll help you hire your candidate of choice, handle HR matters and payroll, and ensure that you comply with local laws without the burden of setting up a foreign branch office or subsidiary. In addition, you'll have complete control and direction over your employees.

We enable you to stay in control of everything. Our Croatia Global Professional Employer Organization (PEO) and Employer of Record (EOR) solution provides you with peace of mind to focus on running your company and the security to enter new markets.