Croatia

Croatia PEO & Employer of Record

WeHG provides an International PEO and global Employer of Record service in Croatia to companies willing 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 hence save 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

Individual employment contracts are considered the primary authority for governing the employment relationship. However, contractual provisions cannot alter provisions of statutory law, collective bargaining agreements, employment bye-laws and works agreements to the detriment of the employee.

An employment contract must be made in writing. Failure by the parties to conclude a written contract will not affect the existence and validity of the employment but the employer must issue a written record of the concluded employment contract before commencement of the work, otherwise the parties will be deemed to have agreed an indefinite term employment contract and the employer can be fined up to EUR13,300.

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

  • Name and address of the parties.
  • Place of work.
  • Name and type of work or a description of tasks.
  • Date of commencement of employment.
  • Duration of work.
  • Annual paid leave or the criteria for its determination.
  • Notice period or the criteria for its determination.
  • Basic salary, additional payments and periods of payment.
  • Duration of the working day or week.

Instead of data on annual paid leave, notice periods and duration of working day/week, the employment contract can refer to the applicable laws, collective bargaining agreement or company’s bye-laws. Additional requirements can apply if the employee provides work from a remote place of work, for seasonal workers 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 employing an employee who performs certain works.

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

  • Civil servants (državni službenici). Civil servants are defined as natural persons who perform as a regular job tasks for state bodies that are determined by the Croatian Constitution, law and ordinances. Persons who perform IT, general and administrative tasks, planning, financial accounting and similar tasks in state bodies are also considered to be civil servants. Civil servants are primarily subject to the Civil Servants Act and the provisions of the Labour Act will apply to the extent that certain issues have not been regulated in the Civil Servants Act.
  • Salaried personnel (namještenici). Salaried personnel in state bodies perform ancillary technical tasks. Salaried personnel are subject to the provisions of the Labour Act.

Employees can be further divided into those employed for a definite (fixed-term contract) or indefinite period (indefinite-term contract) and full-time and part-time employees.

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

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

Croatia Employment Contract

Types of employment agreements

The general rule in Croatia is that employment contracts are executed for an indefinite duration. Under exceptional circumstances, the contract may be made for a definite period if it is for seasonal work, replacement of a temporarily absent employee, or a temporary project.

Croatia working hours

Full-time employment is standard practice in Croatia. Regular working hours are considered to be 40 hours a week. Part-time work is any working time that is shorter than 40 hours a week. Working hours are reduced in proportion to the harmful effects of working conditions on the employee’s health and working ability in respect of such jobs where, despite the application of occupational safety and health measures, it is impossible to protect the employee from harmful effects.

The employer and the employee are entitled to agree flexible working hours. This is usually agreed in cases when the employee performs work remotely (for example, at home).

Vacation leave in Croatia

  • An employee is entitled to four weeks’ minimum annual paid leave every year.
  • Minor employees and employees who are subject to harmful impacts are entitled to annual paid leave of five weeks.
  • The duration of annual leave for a period that is longer than the minimum period can be regulated by the employment contract, employment bye-law or collective bargaining agreement.
  • National holidays and a period of temporary inability to work are not included in annual paid leave.
  • An agreement by which 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.
  • A first-time employee or an employee whose interruption of work between two consecutive employments is longer than eight days, acquires the right to annual paid leave after six months of uninterrupted work.

Croatia Maternity Leave

  • A pregnant employee must take compulsory maternity leave for 28 days before the expected birth and up to 70 days after the childbirth.
  • After the compulsory maternity leave expires, the mother is entitled to additional maternity leave (which she can transfer to the child’s father) until the child is six months old.
  • After the expiry of additional maternity leave, the parents are entitled to take parental leave from six months (for the firstborn and second child) to 30 months (for twins, third or any subsequent child) until the child reaches eight years old.
  • Exceptionally, if the parental leave is used by both parents instead of six months it will be eight months. Depending on the family circumstances (such as a need for intensified care) or some special reason (for example, need of nurturing), parents can be entitled 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 (like night work) enjoy protection from the harmful effects of such work, including the possibility of being transferred to a more appropriate workplace. If the employer fails to secure an adequate workplace, the employee is entitled to paid leave.

Croatian Severance Laws

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

  • The minimum notice period is two weeks where the employee has completed less than one year of interrupted service with the same employer.
  • The notice period in respect of employees who have completed uninterrupted service of one year is one month. The notice period of one month and two weeks applies to employees who have been with the employer for an uninterrupted period of two years. The notice period of two months applies to employees with uninterrupted service of five years while for uninterrupted service of ten years the notice period is two months and two weeks.
  • The notice period applying in the case of uninterrupted service of 20 years or more with the same employer amounts to three months.
  • Additional extensions to the notice period are possible depending on the age of the employee, although the maximum notice period cannot exceed four months. In the case of ordinary termination of employment due to the employee’s misconduct, the notice period must be reduced to half of the relevant statutory notice period.
  • The employer and the employee can agree that the employee will cease to perform work tasks before the expiry of the notice period, in which case the employee is entitled to salary and all other rights from employment as if he/she had worked until the expiry of the notice period.

Severance payments

Severance pay can be paid in accordance with the provisions of the Employment Act, employment contract, collective bargaining agreement, works agreement or employment by-law, as follows:

  • If the employee is dismissed after two years of continuous service with the same employer, unless the dismissal is related to the employee’s misconduct, the employee is entitled to statutory severance pay of an amount dependent on the length of service.
  • The amount of severance pay for each year of employment with the same employer cannot be lower than one-third of the average monthly salary earned by the employee in the three months before the termination of employment.
  • Unless otherwise specified by the law, collective bargaining agreement, employment by-law or employment contract, the employer’s liability to pay severance pay is limited to the amount that equals six average monthly salaries earned by the employee within the last three months before termination of employment.

Croatia Tax

Social security contributions are payable on realised income or on an estimated basis, depending on the status that an individual has in the social security system as well as other relevant circumstances. Employees are required to pay contributions for pension insurance while employers must 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 capitalised savings.

Employers’ contributions:

  • Basic health insurance: 16.5%.

The basic personal deduction which is non-taxable for the purposes of income tax is EUR535.

The following tax rates and tax brackets apply to individual taxpayers from 1 January 2020:

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

Cities and municipalities in Croatia can levy an additional tax, called surtax. The surtax rate is decided by the city or municipality and is levied according to an individual’s place of residence in Croatia.

Health Insurance Benefits in Croatia

Entitlement to paid time off

In the case of illness or injury, employees are entitled to sick leave and to receive full regular compensation from their employer for a specified period, unless certain specific cases apply (such as in the case where employee intentionally disabled himself/herself or if inability is a result of the employee’s gross negligence).

The maximum period of compensation including the amount of remuneration in the case of illness or injury is dependent on the years of service with the employer and on the cause of the inability to work. The remuneration is paid during the entire term of employee’s inability to work.

Depending on the reasons for sickness/injury, sick pay is paid:

  • During the first 42 days of sick leave, from the employer’s own funds.
  • After the 42nd day, after advancing the funds the employer is entitled to recover payment from the Croatian Government or the Croatian Health Insurance.

Entitlement to unpaid time off

At the employee’s request, the employer can grant the employee unpaid leave in which case unless otherwise specified by the law, the rights and obligations from employment or related to employment will be suspended.

Additional Benefits in Croatia

Croatians workers are often given 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.

  • New Year’s Day
  • Epiphany
  • Easter
  • Easter Monday
  • Labor Day
  • Corpus Christi
  • Anti-Fascist Struggle Day
  • Statehood Day
  • Victory Day
  • Assumption Day
  • Independence Day
  • All Saints’ Day
  • Christmas Day
  • Stephen’s Day

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.

 

FAQ Croatia

  • Croatia working hours

    Full-time employment is standard practice in Croatia. Regular working hours are considered to be 40 hours a week. Part-time work is any working time that is shorter than 40 hours a week.

  • Croatia Holidays

    • New Year’s Day
    • Epiphany
    • Easter
    • Easter Monday
    • Labor Day
    • Corpus Christi
    • Anti-Fascist Struggle Day
    • Statehood Day
    • Victory Day
    • Assumption Day
    • Independence Day
    • All Saints’ Day
    • Christmas Day
    • Stephen’s Day
  • Croatia Tax

    Social security contributions are payable on realised income or on an estimated basis, depending on the status that an individual has in the social security system as well as other relevant circumstances. Employees are required to pay contributions for pension insurance while employers must 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 capitalised savings.
  • Hannah Kohl
    Author:
    Hannah Kohl. Head of Customer Success. Has extensive experience in the HR and IT industries. Helped 100+ international clients to achieve their global goals.

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