Croatia PEO & Employer of Record

WeHG provides an International PEO and global Employer of Record service in Croatia to companies aiming to enter the Croatian market or hire local/expat employees in this country.

Traditional approach requires establishing a subsidiary in Croatia.  However our solution allows you to start the operations in Croatia within days thereby saving time and money.  WeHG would hire candidates on your behalf while you maintain full operational control of their work. So legally they would be our employees, on our local payroll, 100% compliant but will work on your behalf. 

Croatia fast facts

Population, million: 4,05 m 

Land area, sq. km: 56,594 km² 

Capital: Zagreb

Local currency: Kuna (HRK)

Hiring, Negotiating and Doing Business in Croatia

Necessity of written employment contract

Generally, to govern the employment relationship between the employer and employee it’s necessary for them to sign an individual employment contract. However, contractual regulations cannot modify regulations of statutory law, collective bargaining agreements, employment bye-laws and work agreements to the detriment of the employee.

It is required for an employment agreement must to be concluded in writing. In case parties fail to enter into a written contract it will not affect the existence and validity of the employment but the employer must issue a written document of the employment contract before the work initiation, otherwise the parties will be considered to have agreed an indefinite term employment contract. In this case employer can be fined up to EUR13,300.

Below is the list of what each employment contract must contain:

Instead of data on annual paid leave, notice periods and the duration of working day or week, the employment agreement can also refer to the laws applied, collective labour agreement or company’s bye-laws. Additional requirements can apply if an employee performs work from a remote place of work, for those who provide seasonal work and expatriate workers.

Different forms of engagement: employment, contracting, work with private entrepreneur

Employee/worker. The Labour Act defines an employee as an employed natural person performing certain works for an employer. An employer is defined as a natural or legal person hiring an employee who performs certain works.

In addition to ordinary employees, the Civil Servants Act recognizes two additional types of employees:

Later employees are divided into employed for a definite or indefenite period and full-time and part-time employees. 

Independent contractor/self-employed. Three main criteria indicating the existence of an employment relationship are, in summary:

• Superior–subordinate relationship.
• Remuneration for the performed work.
• Personal performance of a job.

Croatia Employment Contract

Types of employment agreements

Employment agreements are signed for an uncertain period.

Exceptional circumstances allowing to sign the contract for a certain time period are: employment lasting for a season, replacement of an employee who is unavaliable for some time period, or a limited time project.

Croatia working hours

Full-time work is a standard practice in Croatia. 40 hours is considered to be basic working time a week. Part-time work is any work shorter than 40 hours a week. If there are any harmful effects on the employee’s health that can occur due to the working conditions working hours can be reduced. The same rule is applied when despite the using of safety and health measures, the harmful effect on employee’s health can not be excluded.
The employer and the employee can come to an agreement in relation of the flexible working hours. Usually it happens in cases when the employee  works remotely (for example, at home).

Vacation leave in Croatia

• Annual paid leave does not include public holidays and periods of temporary inability to work.
• The period of annual leave for term longer than the minimum term may be governed by the employment agreement, employment bye-law or collective labour agreement.
• An agreement whereby an employee waives the right to annual paid leave or accepts payment of compensation in lieu of the annual paid leave is considered null and void.
• An employee who is hired for the first time, or an employee whose work break between two consecutive jobs exceeds eight days, is entitled to annual paid leave after six months of continuous work.

Croatia Maternity Leave

• Depending on the family circumstances (such as a need for intensified care) or some special reason (for example, need of nurturing), parents have the right  to additional leave, beneficial conditions of work such as reduced working hours, a nursing break and so on.
• Certain employees (for example pregnant women) who face potentially harmful working conditions receive the protection from the harmful effects of such work, including the possibility of being transferred to a more appropriate workplace. If the employer cannot provide a suitable job, the employee has the right to paid leave.

Croatian Severance Laws

The period of notice depends on the duration of employee’s work with the employer, as follows:

• According to the employee’s age additional extensions to the notice period can be applied. The notice period cannot last longer than four months.                                  
• The employer and the employee may agree on employee quitting performing work tasks before the notice period expires. In this case the employee has the right to salary and all other rights from work as if he / she had worked until the notice period expires.

Severance payments

Severance pay can be paid according to the provisions of the Employment Act, employment agreement, collective labour agreement, secondary legislation or employment by-law, as follows:

• If the employee is fired after two years of continuous work with the same employer the employee is entitled to statutory severance pay. The amount of severance pay in this case depends on the service duration.
• The severance pay for each year of work for the same employer cannot exceed one third of the average monthly wage received by the employee three months prior to dismissal.
• Unless otherwise provided by law, collective agreement, labor regulation or employment contract, the employer is obliged to pay severance pay in an amount equal to an amount equal to six average monthly salaries received by the employee during the last three months prior to dismissal.

Croatia Tax

According to the person’s social security system status and other relevant circumstances social security contributions are payable on realised income or on an estimated basis. Employees must pay pension insurance contributions while employers are required to calculate and withhold employees’ contributions from their gross salaries.

Pension insurance consists of:

• Pillar 1: compulsory pension insurance for old age based on the generation solidarity which is 15% of the gross salary.
• Pillar 2: compulsory pension insurance for old age based on capitalised savings which is 5% of the gross salary.
• Pillar 3: voluntary pension insurance based on individual capitalized savings.

Employers’ contributions:

• Basic health insurance: 16.5%.

The basic personal deduction which is non-taxable for income tax purposes is EUR 535.

Starting from 1 January 2020 the following tax rates are applied to individual taxpayers:

• Income up to EUR4,000 taxed at 24%.
• Income over EUR4,000 taxed at 36%.

Cities and municipalities of Croatia can charge an additional tax which is called surtax. The surtax rate is decided by the city or municipality and is charged in accordance to the place of residence of an individual in Croatia.

Health Insurance Benefits in Croatia

Entitlement to paid time off

Employees have the right to receive sick leave and full regular compensation from their employer for a certain period in case of illness or injury, unless specific cases are applied (as when the employee intentionally disabled himself/herself or if inability is a result of the gross negligence of an employee).

The maximum compensation period, including the amount of remuneration in the event of illness or injury, depends on the length of service with the employer and the reason for the disability. The remuneration is paid for the entire period of the employee’s disability.

In accordance with the sickness/injury reasons, sick pay must be paid:

• During the first 42 days of sick leave at the employer’s own expense.
• After the 42nd day, after the advance payment, the employer has the right to collect the payment from the Croatian Government or Croatian Health Insurance.

Entitlement to unpaid time off

If an employee requests unpaid leave, the employer may grant it, in which case, unless otherwise provided by law, work-related rights and obligations will be suspended. 

Additional Benefits in Croatia

Croatians workers often recieve the following benefits:

• company cars
• mobile phones
• performance-related bonuses
• occasional gifts at Christmas and Easter, given either as cash, company products or shopping coupons

Croatia Holidays

Croatia has 14 public holidays in a calendar year, which are taken in addition to agreed/required leave.

Why Choose WeHireGlobally

WeHG takes care of all the onboarding hurdles, payroll, compensation and benefits, tax filing, and termination of employment. Our Employer of Record solution allows you to manage your overseas teams efficiently while minimizing cost and risk.