Hiring Talent And Managing Payroll In Croatia

Agreements

• Collective agreements: Collective agreements in Croatia are contracts negotiated between employers or employer associations and trade unions to establish the terms and conditions of employment, including wages, working hours, and other benefits.
• Employment contracts: Employment contracts must be in Croatian and signed by both the employer and the employee. Employers must also provide employees with a copy of the agreement.
• Trade unions: Trade unions may exist for certain trades in Croatia, which can only be formed with the participation of 40% of the employees. In such cases, the trade union may negotiate the terms of the contracts.
• It is required that the employee works solely for the employer and maintains confidentiality regarding all trade secrets during and after their employment.

Onboarding Process

• Mandatory documents: Employers in Croatia are required to collect and submit certain documents from new employees during the onboarding process. These documents include the following:

  • employee's identification card
  • proof of citizenship or work permi
  • proof of health insurance
• Orientation and training: It is common for employers in Croatia to provide direction and training to new employees, which can include:

  • an introduction to the company's policies and procedures
  • safety and health training
  • job-specific training
• Best practices for employee onboarding include providing a warm welcome to new employees, offering clear communication and feedback, and creating a structured training program.

Minimum Wage

Payroll Cycle

Annual Bonus

Health Benefits

• Supplementary health insurance can provide additional coverage for medical services not covered by mandatory health insurance.
• Paid sick leave and paid time off for medical appointments.
• Access to company-sponsored health and wellness programs like gym memberships or wellness classes.
• Mental health support, including counseling or therapy services.

Working Hours and Overtime

• Work hours: the standard workweek is 40 hours, typically with an eight-hour workday
• Break: Employees are entitled to a break of at least 30 minutes after six hours of continuous work.
• Overtime: Employees who work beyond the maximum daily or weekly hours are entitled to overtime compensation. However, the amount of compensation is not specified by law and should be determined through employment or collective agreement.

Social Security

Taxes for Employees

• Income Tax: Income tax is calculated based on the income earned in a given year.

  • The threshold for income tax is 360,000 HRK per year (up to 30,000 per month).
  • Income earned above this threshold is taxed at a rate of 20%, while income earned below this threshold is taxed at 30%.
• Capital Gains Tax: Capital gains are taxed at a rate of 10%. Capital losses can only be deducted from capital gains realized in the same tax year.
• Personal Allowances: Employees are entitled to a monthly allowance, which by 1,750 HRK for one child, 2,500 HRK for two children, and 3,500 HRK for three children.
• Municipal Tax: Certain cities and municipalities in Croatia may levy a municipal tax of up to 18%.
• Generation Solidarity: 15% of the employee's salary. This is a part of the social security contribution
• Individual Capital: 5% of the employee's salary. This is a part of the social security contribution

Termination

• By mutual agreement
• Due to the expiry of a fixed-term contract
• Due to employee resignation
• Due to employee misconduct or violation of work obligations
• Due to employee incapacity to perform work tasks
• Due to redundancy or organizational changes.

Severance Pay

Employees or Contractors

• The Labor Act defines an employee as an individual who works under an employment contract with an employer. A contractor is defined as a legal or natural person who is engaged by another person or entity to provide services or perform work for remuneration.
• Misclassifying an employee as a contractor can result in penalties for the employer, including payment of unpaid taxes, social security contributions, and other benefits.
• On the other hand, misclassifying a contractor as an employee can lead to claims for unpaid wages, taxes, benefits, and penalties for the employer.

Final Words