Hiring in Serbia: A Comprehensive Guide for US-Based Companies

Serbia is rapidly emerging as a prime destination for international hiring, especially for US-based companies seeking to expand their global footprint. 

With a well-educated workforce, competitive labor costs, and a business-friendly regulatory environment, Serbia offers a compelling package for foreign employers. The country’s strong investment in education, below-average personal and corporate tax rates, and strategic location in Europe make it an attractive hub for talent acquisition and business operations.

Foreign companies hiring in Serbia benefit from access to a skilled and youthful talent pool, a stable and growing economy, and streamlined processes for onboarding employees or contractors. 

Whether you’re looking for full-time staff or project-based support, Serbia’s legal framework and infrastructure support efficient, compliant, and cost-effective hiring.

How to Hire Employees in Serbia

Assess Your Hiring Needs

Before you start hiring in Serbia, it’s crucial to clarify your workforce requirements:

• Full-time vs. project-based support: Decide if you need permanent employees for ongoing operations or contractors for specific projects. This will influence your legal obligations and the type of employment contracts you use.

• Local compliance requirements: Serbian labor laws require written contracts, adherence to minimum wage regulations, and proper worker classification. Understanding these requirements is essential to avoid compliance risks.

• Onboarding speed vs. long-term control: If you need to hire quickly and with minimal local infrastructure, consider solutions that speed up onboarding, such as working with an Employer of Record (EOR). If you want full control over HR processes and long-term presence, setting up a legal entity may be preferable.

Hiring Options in Serbia

You have two primary options for hiring employees in Serbia:

• Set Up a Legal Entity: Establish a branch or subsidiary in Serbia. This option gives you maximum control but requires significant investment, time, and ongoing compliance with local laws.
• Partner with an Employer of Record (EOR): An EOR acts as the legal employer on your behalf, managing payroll, taxes, and compliance. This is ideal for rapid hiring or when you want to avoid the complexity of setting up a local entity.

EOR vs. Setting Up a Legal Entity: Side-by-Side Comparison

Feature	Employer of Record (EOR)	Setting Up a Legal Entity
Setup Time	Days to weeks	Months
Cost	Lower upfront, ongoing service fee	High upfront, ongoing admin costs
Compliance	Managed by EOR	Your responsibility
Control	Moderate (some processes managed by EOR)	Full
Speed of Onboarding	Fast	Slower
Best For	Quick entry, testing market, small teams	Long-term presence, large-scale hiring
Payroll & Tax Management	Handled by EOR	Must be managed in-house
Brand Presence	Limited (EOR is legal employer)	Full (your entity is employer)

Ready to simplify your global hiring? Explore our complete guide to Employer of Record services.

Understanding Worker Classification

Employees vs. Contractors in Serbia

Proper worker classification is critical in Serbia, as misclassification can lead to significant penalties. Here’s how employees and contractors differ:

Feature	Employees	Contractors
Legal Relationship	Direct, ongoing	Project-based, independent
Benefits & Taxes	Employer provides and withholds	Contractor handles own taxes
Work Control	High (employer sets schedule/tasks)	Low (contractor controls work)
Suitability	Long-term roles	Short-term/specialized projects

Legal Implications and Risks of Misclassification

Misclassifying employees as contractors can result in:

• Fines and back payments for unpaid taxes, social security, and benefits
• Legal action from workers or authorities
• Reputational damage and increased scrutiny from regulators

Serbian law is strict about proper classification, so ensure contracts, job duties, and working arrangements align with the chosen worker status. For more details on global worker classification, see this helpful resource.

Hiring Costs and Payroll

Hiring Costs Overview

• Minimum wage: RSD 64,474 per month for 176 working hours.
• Mandatory employer contributions: Pension (12.8%), healthcare (9.5%), unemployment (1.5%), and disability insurance (1%).
• Additional costs: Consider health insurance, bonuses, and training to attract and retain top talent.

For a deeper dive into cost calculations, check out our guide to understanding total cost of employees.

Payroll Setup Steps

1. Register with Serbian authorities: For legal entities, register your business and employees with tax and employment offices.
2. Set up payroll system: Ensure accurate calculation of wages, taxes, and benefits.
3. Monthly/annual reporting: Submit required tax and social security reports on time.
4. Onboarding via EOR: If using an EOR, they handle all payroll setup and compliance.

Income Tax Rates

• Personal income tax: Withheld by employer from employee salaries.
• Corporate income tax: 15% on company profits (for local entities).
• Social security contributions: Both employer and employee contribute, with rates as listed above.

Payment Methods

• Local bank transfer (RSD): Most common, requires a Serbian bank account.
• International wire transfer: Possible, but incurs exchange fees.
• EOR payroll: Simplifies payments and can pay in preferred currency (often EUR).

For best practices on paying international employees, see this article.

Using Global Payroll Services

Leveraging global payroll platforms or EOR services ensures:

• Compliance with local tax and labor laws
• Timely and accurate payments
• Reduced administrative burden

Learn more about the benefits of payroll automation in this guide.

How to Properly Hire and Pay Contractors

• Written contract: Specify project scope, deliverables, and payment terms.
• Tax compliance: Contractors are responsible for their own taxes, but you must ensure proper classification.
• Payment methods: Use secure bank transfers or contractor management platforms.

For more on contractor management, see our best practices here.

Compliance Risks

Incorrect Payroll Contributions

Miscalculating or missing payroll contributions can lead to:

• Fines and penalties from Serbian authorities
• Interest on unpaid amounts
• Legal disputes with employees

Automated payroll systems help reduce these risks.

Permanent Establishment Risk

If you manage employees in Serbia without a legal entity or EOR, you may trigger “permanent establishment” status, leading to unexpected corporate tax liabilities and complex reporting requirements. For more on this, see how to avoid permanent establishment risk.

Statutory Benefits

Employers must provide:

• Minimum wage
• Social security (pension, health, unemployment, disability)
• Paid leave (annual, parental, sick)
• Overtime pay

Failing to provide statutory benefits can result in back payments and penalties.

Misclassification Risks

Improperly classifying employees as contractors can lead to:

• Back taxes and benefits
• Legal action
• Reputational harm

See more about compliance in our employment compliance guide.

Provincial/Regional Law Variances

Serbian labor law is largely national, with minimal regional variation. Always check for any local regulations that may apply to your specific business sector.

Intellectual Property Rights Overview

Employers should address:

• Ownership of employee-created IP: Include clear clauses in employment contracts.
• Confidentiality and NDAs: Protect trade secrets and sensitive information.
• Types of IP: Copyright, patents, trademarks, and trade secrets relevant to your business.

For more on managing IP through EOR, see our insights.

Onboarding Process

Before Their First Day

• Draft and sign a compliant employment contract.
• Register the new hire with tax and employment authorities.
• Set up payroll and benefits enrollment.

On Day 1

• Welcome orientation covering company policies and Serbian labor law basics.
• Introduce the new hire to their team and manager.
• Provide necessary equipment and system access.
• Review health and safety procedures.

During Their First 90 Days

• Deliver job-specific training and performance expectations.
• Schedule regular feedback sessions and progress reviews.
• Encourage integration with team through meetings and mentorship.

Offer Letter Essentials

• Job title and description
• Salary and payment frequency
• Benefits and leave entitlements
• Probation period (usually 3-6 months)
• Notice period and termination conditions

NDAs and Confidentiality

• Include confidentiality clauses in contracts.
• Use standalone NDAs for sensitive roles or projects.

Running Background Checks

• Obtain candidate consent.
• Verify employment history, education, and references.
• Comply with Serbian data protection regulations.

For more onboarding tips, see our global onboarding best practices.

Remote Employee Management

Managing remote employees in Serbia requires attention to:

• Computer and app access: Provide secure devices and access to necessary software.
• IP protection: Use contracts to clarify IP ownership and confidentiality. Implement secure data storage and transfer protocols.
• Types of IP rights: Address copyright, trademarks, and patents in employment agreements.

Actionable tips:

• Set up regular video check-ins.
• Use project management tools for collaboration.
• Train staff on cybersecurity and data privacy.

For more strategies, read how to manage employees remotely and globally.

Get expert support for your global hiring journey. Talk to Tarmack about Employer of Record solutions in Serbia.

Labor Law Compliance

Key Working Condition Requirements

• Standard workweek: 40 hours (Monday to Friday).
• Overtime: Max 8 hours per week, paid at 126% of regular wage.
• Annual leave: At least 20 working days.
• Rest periods: 12 hours daily, 24 hours weekly.

Working Conditions by Employment Type

• Full-time employees: Entitled to all statutory benefits.
• Contractors: No statutory benefits; governed by contract terms.

No At-Will Employment

Serbia does not recognize at-will employment. Termination must follow legal grounds and notice periods.

Trade Unions and Collective Bargaining

• Multiple unions operate in Serbia, representing various sectors.
• Collective bargaining agreements may set additional standards for pay, benefits, and working conditions.

Termination Guidelines

Acceptable Termination Reasons

• Redundancy (economic reasons)
• Poor performance (with documented warnings)
• Misconduct or breach of contract
• Mutual agreement

Termination must comply with Serbian labor law, including providing written notice and, where applicable, severance pay.

Notice Periods and Legal Protections

• Probation period: 5 days’ notice for termination.
• Permanent employees: Notice period specified in contract (typically 15-30 days).
• Severance: One-third of annual salary per year of service for redundancy.
• Legal protections: Employees are protected against unfair dismissal, and employers must document and justify terminations.

For more on severance, see our global severance regulations guide.

Benefits of Hiring in Serbia

• Skilled Talent Pool: High-quality, well-educated workforce, especially in tech and engineering.
• Cost Efficiency: Competitive wages and lower employer contributions compared to Western Europe.
• Time Zone Benefits: Overlaps with both US and European business hours.
• Business-Friendly Environment: Ranked highly for ease of doing business.
• Modern Infrastructure: Reliable internet, office space, and support services.
• Flexible Hiring Models: EOR and contractor options for rapid market entry.

Start Hiring in Serbia Today

Hiring in Serbia offers US-based companies a strategic advantage: access to a skilled, cost-effective workforce in a stable, business-friendly environment. 

By understanding local labor laws, choosing the right hiring model, and leveraging global payroll solutions, you can build and manage teams in Serbia efficiently and compliantly. With the right approach, Serbia can become a cornerstone of your international expansion strategy.

Ready to hire in Serbia? See how Tarmack streamlines international market entry with Employer of Record solutions.