An Employer of Record (EOR) or Professional Employer Organization (PEO) is a company or organization that is legally responsible for paying employees, including dealing with employee taxes, benefits & insurances. As the EOR/PEO of your European or Croatian employees, we provide you with tailored payroll, HR and compliance services. Through this construction, we decrease all the complications such as compliance issues, setting up a foreign establishment and setting up employment contracts in a different language.
Benefits of using a Croatian PEO & Employer of Record in Croatia
Expand without an entity
Flexible and cost-effective solution to outsource payroll and HR functions for international expansion
In compliance with foreign local laws & regulations
Minimizes employment liabilities and risks
Reduced risk, as the risks of being an employer fall almost completely on the employer of record
Let's you focus on your core business
You manage your employees
EoR takes care of registration and contact with local authorities
Employment Contracts Croatia
In Croatia, there are two types of employment contract: permanent employment without the agreed end date, and temporary employment. It's quite usual to have a defined probationary period for both types of contracts. The employer can renew the temporary contract several times, but the prolongment in total cannot last longer than three years. After three years of renewal, the employer must provide a permanent employment contract.
Croatian PEO and EOR service providers will support you with the set-up of a local employment contract.
Employment Termination Croatia - Notice Period Croatia
In Croatia, the provisions of the Labour Act stipulate that both the employer and worker may terminate the employment contract. The employer may terminate the employment contract based on the stipulated or agreed notice period if there is a justified reason to do so. This type of ordinary dismissal can happen in case of a:
- business-related dismissal (if the need for a specific job ceases due to some technical, economical or organizational reasons);
- dismissal on personal grounds (the employee is not able to perform properly due to some permanent abilities or characteristics);
- dismissal due to dissatisfaction with probation work (the employee simply did not perform well during the probationary period).
The employee can terminate the employment contract in line with the agreed notice period, without stating specific reasons.
The termination period can vary between two weeks for employees who have worked for less than one year; to three months for employees who have been employed for 20 consecutive years. The termination period starts on the date of delivering the notice of termination of the employment contract.
Social Security Tax Croatia
The official currency used in Croatia is Croatian Kuna (HRK). In Croatia, the gross salary of an employee includes compulsory social security contributions (pension and disability insurance, health insurance and contribution for unemployment insurance). Upon signing the employment contract, social security contributions are automatically calculated and paid for as a part of payrolling which provides further unemployment, health insurance and social coverage to employees and Croatian citizens.
What are the primary social security contributions in Croatia? And more importantly, what is the amount of the social security contribution that is accounted to the employer?
Every employee in Croatia has to pay the social security contributions, which are actually pension contributions levied at the rate of 20% (15% I. Pillar payments stipulated by the government for pensions of all currently retired citizens, and 5% II. Pillar payments for the future pension of the employee).
The basis for the payment of 20% is gross salary of the employee, also known as "gross I salary", capped at the following values:
- HRK 55,086 monthly cap, approx. $8,475 (applicable for both I. and II. Pillar payments in case of salary)
- HRK 661,032 annual cap, approx. $101,687.84 (applicable for I. Pillar payments irrespective of whether the payment is salary or other types of remuneration)
Additionally, the employer must pay contributions towards basic state health insurance and basic accident insurance which is 16.50% on the gross I salary. This is so called "gross II salary" or total cost for employer.
The employer is obliged to calculate, retain and pay these benefits on the behalf of the employee.
Average Salary Croatia & Average Employer Costs Croatia
In 2020, the average annual wage in Croatia was $16,981. This is much lower than the average annual wage in the United States: $71,456. As an employer, the actual employer costs are 16.50% higher than the gross annual salary as we have seen in the social contribution in Croatia. Based on $16,981 annual salary, the employment costs would be $19,782.87.
To learn more about the average salaries in Europe and the actual employment costs in Europe, we invite you to read this article on Costs of hiring European employees.
Working Hours Croatia
Standard working week in Croatia is 8 hours per day, 40 hours per week. In some cases, if an extraordinary increase in the scope of works happens where an employee has to work longer hours at the employer’s request, the total duration of hours can be extended up to 50 hours per week.
In total, the overtime work for the employee must not exceed 180 hours per year, unless an agreement has been made between the employer and employee in the form of a collective agreement. In that case, the total amount of working hours cannot exceed 250 hours per year. For every hour of performed overtime work, the employee is entitled to get an overtime compensation rate, as stipulated in the employment contract or collective agreement.
If an employee works at least 6 hours per day, he has the right to have a minimum break of 30 minutes during working hours, unless otherwise stipulated by special law.
Paid Vacation Leave Croatia
Every employee is entitled to annual holiday of minimum 4 working weeks per year (20 days), which can be used after 6 consecutive months of working for people employed for the first time. Paid vacation days can be used all at once, or distributed as per employee's preferences during the year. Apart from that, employee also has the right to use up to 7 days leave per year for important personal events (e.g. marriage, or death of a close family member).
To learn more about the average paid vacation days in Europe and how Croatia compares to the rest of Europe, we invite you to read our blog on paid vacation days Europe.
Public Holidays Croatia
In Croatia, there are 14 public holidays, considered non-working days:
- New Year's Day - 1 January
- Epiphany - 6 January
- Easter Sunday - 17 April
- Easter Monday - 18 April
- Labour Day - 1 May
- Statehood Day - 30 May
- Corpus Christi - 16 June
- Anti-Fascist Struggle Day - 22 June
- Victory and Homeland Thanksgiving Day - 5 August
- Assumption of Mary - 15 August
- All Saints Day - 1 November
- Remembrance Day - 18 November
- Christmas - 25 December
- St. Stephen's Day - 26 December
Maternity and Paternity Leave Croatia
In Croatia, every pregnant employee is entitled to 28 days of paid maternity leave (rodilji dopust) before the due date. That number can increase to 45 days in some special circumstances. After giving birth to a child, the employee has the right to take up to 70 additional days of mandatory paid maternity leave. After 70 days, there is an option for an employee to take additional unpaid maternity leave until the child is six months old. It's quite usual that employer pays for those additional days and offers that as an additional benefit to the employee.
A statutory paternity leave doesn't exist in Croatia. But, in some cases, if a mother is not able to take care of the child in the first 70 days of mandatory maternity leave, father can take over those days as a paternity leave. Mother can also, after the 70th day after birth, transfer the remain leave fully or partially to the father.
Each parent is entitled to parental leave (roditeljski dopust) of 8 months for first and second child, and up to 30 months for twins, third and every subsequent child. Parents may use the parental leave by the time the child turns eight. Usually, in Croatia, both parents are using the parental leave, and each of the parents can take 4 or 15 months (depending on the number of children born).
To read more about Paternity Leave in Europe, we invite you read this blog on Paternity Leave in Europe - A New Directive.
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Monique Ramondt Sanders
Executive Vice President | HR Outsourcing