Before hiring employees in Croatia, there are a few important things you’ll need to know. Firstly, it’s a legal obligation in Croatia to include details of any sick or vacation leave on a payslip. It’s important for employers to know that all time off must be recorded and approved.
As an employer in Croatia, there are also various tax free allowances available to be paid entirely at the employer's discretion. Employers should know what these are and how much is typically paid out for each.
Good To Know
Under Croatian law, an Employer of Record is able to engage in an indefinite employment contract but the assignment of the person to your company must be limited to a period of no more than three years. After three years of continuous working, the employee must take a break of at least two months before he can be registered to work for you again.
Employees must be registered for mandatory health insurance with the Croatian Health Insurance Fund (HZZO). This entitles them to sick pay or income replacement benefit, and sick leave as needed.
There are various tax free allowances available to be paid entirely at the employer's discretion. These include a 5,000 kuna bonus allowance, 3,000 Easter/Christmas Bonus and a 5,000 kuna tax free food allowance.
Employment in Croatia
Working Hours and Overtime
In Croatia, full-time employment cannot be more than 40 hours per week. An employee can work up to 48 hours in a week, but eight of these will be overtime.
Employees are entitled to a minimum of 12 hours break between two consecutive work days and at least 24 consecutive hours once a week.
It is a legal obligation in Croatia to include details of any leave on a payslip, so all time off must be recorded and approved.
Probationary Period
A probationary period in Croatia cannot exceed six months. During the agreed probationary period, the termination period must be at least seven days.
Notice Period
In Croatia, the notice period is defined by law and varies depending on the length of continuous employment, and potentially with age. It goes as follows:
Two weeks for more than one year
One a half months months for more than two years employment
Two months for more than five years employment
Two and a half months for more than 10 years employment
Three months for more than 20 years employment
Non Complete Agreement
Non-compete clauses can be included in the employment agreement provided it has been mutually agreed, and the employee is earning above the national average wage in Croatia.
A non-compete cannot last more than two years and will only be valid if it aims to protect legitimate business interests and does not disproportionately limit the ex-employee's work opportunities elsewhere.
Employer Tax
In Croatia, an employer’s social contributions total 16.5%. Health Insurance is paid at 16.5% of an employee’s gross salary, and is not capped.
Individual Tax
Employees in Croatia pay between 24% and 36% in taxes depending on their income bracket.
Employees also pay social security contributions of 20%. These are pension contributions (15% goes to Pillar I and 5% goes to Pillar II) Both contributions are capped at 52,452 HRK monthly.
In Croatia, employees also pay a municipality surtax of up to 18%.
Termination of Employment
All terminations must be notified to the employee in writing and there can be regular or exceptional terminations. The types of terminations are as follows:
Regular termination (with agreed notice)
Notice for business reasons: This can include redundancy of an employee’s role due to economic, technical, or organisational reasons. The employer must first check that they cannot engage the employee in another role and is not allowed to hire someone in the same role for at least six months.
Notice for personal reasons: This means the employee is unable to fulfil their contractual duties due to a permanent characteristic or capabilities. Again, the employer must check that they can't engage the employee in another suitable role first.
Notice for employee's misconduct: This refers to breach of contract. The employee should get a written warning with the possibility of termination in case of continuing breach of contract—unless circumstances mean it is reasonable not to give this warning.
Notice due to failing probationary period: This type of termination means that an employee does not perform to expectation during the probationary period.
Exceptional terminations can be executed with only 15 days' notice from learning about an issue where there is a serious breach in employment relationship or other highly important fact.
Start Hiring Employees in Croatia
Setting up a business entity everywhere you want to hire a new employee isn’t scalable—it takes too long and the legal fees are high. At the same time, understanding and adhering to the local labor laws and employee expectations can be complex and time consuming. And it’s hard to find reliable information on up-to-date employment information for all the countries where you’re considering hiring.
Not to mention tracking down invoices and managing employee contracts over email and spreadsheets—that gets messy fast.
We can’t afford to take risks when it comes to compliance—we need to make sure we follow the local guidelines, especially when it comes to taxes and legalities.
With ISHC, you can manage HR and recruiting in one platform!