Understanding Payroll in Slovenia

Slovenia is a high-income country strategically located in Central Europe. Bordered by Italy, Austria, Hungary, and Croatia, the country provides easy access to these markets and its customer base. As per the World Bank’s Ease of Doing Business Report 2020, Slovenia ranks 37th out of 190 economies in starting a business. Companies can use the country’s tax incentives and government support and set up a legal business entity here. 

The Republic of Slovenia has a growing employment market, with 73% of the population employed in January 2023. There is abundant availability of a highly skilled and highly educated workforce in Slovenia that successfully attracts investors from all over the world. Businesses can hire and prepare a payroll process in Slovenia by complying with the local rules and regulations. 

The key to expanding business in Slovenia is to have a thorough understanding of the payroll policies and procedures of Slovenia. Get a detailed Slovenia payroll guide from this article.

How Is Payroll Calculated in Slovenia?

The steps for estimating the payroll in Slovenia are mentioned below:

Calculation of the gross wages:

• Most business organizations in Slovenia make salary payments on an hourly basis as per the payroll policies and procedures of Slovenia. Such organizations must accurately track the hours each employee puts in to estimate the gross wage. Tracking hours also help calculate the overtime pay to be paid to the employers.

Estimation of the payroll deductions:

• Several business organizations in Slovenia offer employees additional benefits like retirement savings, healthcare, and other schemes on a pre-tax deduction basis. If the employee avails of such benefits, then the employer deducts the amount to calculate the final payroll in the form of payroll deductions in Slovenia.

Subtraction of taxes:

• Business organizations need to be well aware of the payroll tax rate of Slovenia to calculate the payroll for the employees. Payroll tax in Slovenia includes unemployment tax, social security and medical care tax. The employer has to deduct the tax amount from the payroll as per the payroll rules and regulations in Slovenia.

Salary payment to the employees

• The payroll process in Slovenia ends with making payments to the employees. As per the payroll policies and procedures in Slovenia, the employer has to execute the payroll to ensure that the employees receive their salaries on time.

Important Elements of Salary Structure in Slovenia

The payroll rules and regulations in Slovenia lay down a basic salary structure for the employees. The elements that constitute the payroll in Slovenia are listed below:

• Basic salary: According to the payroll rules and regulations in Slovenia, an employee’s monthly salary is the basic salary. It is a fixed amount and dependent on the designation of the employee and the industry of the employment.
• Gross pay: According to the payroll requirements of Slovenia, each employee’s gross pay includes a total basic salary and allowances. It is calculated before taxes and benefits, and payroll deductions are withheld from the salaries. In Slovenia, there was a rise in gross pay by almost 6.1% in 2021 to EUR 1,970.
• Net pay: It refers to the amount obtained after the deduction of tax payment and deductions from the gross pay. As per the payroll policies and procedures of Slovenia, net pay is the amount that the employees receive in their bank accounts. 
• Supplementary employee benefits: Slovenia payroll requirements make it mandatory for employers to provide employees with a host of benefits for compliance with social security measures. Employers offer supplementary benefits to employees through voluntary pensions, life insurance, and accident insurance. Apart from insurance benefits, employees also receive a handful of company perks, including academic stipends, meal subsidies, holiday bonuses, fuel coupon cards, and mobile phone recharge vouchers.

How to Set Up a Payroll in Slovenia?

In Slovenia, there are two registration requisites for payroll processing, as mentioned below:

Registration for withholding the income tax: 

• The employer must enter the national tax register by applying to the Republic of Slovenia Financial Administration. 
• The employer obtains a Tax Identification Number after successful registration with the authority.

Registration of the new employees: 

• It is obligatory for the employer in Slovenia to register the newly recruited staff with various insurance funds, including disability, health, pension, and unemployment. 
• For registration with insurance funds, the employer must submit an M1 form and a copy of the employment agreement to the Institute of Pension and Disability Insurance of Slovenia. 
• The filing of the documents can be done online at the online portal. 
• The last day for registering new employees with the insurance funds is the employee’s first working day.
•  Furthermore, the employer also has to register the new employee with an occupational accident insurance fund.

In addition, companies also need to prepare payroll policies discussing payroll schedules, payment calculations, work weeks, time attendance and other details. 

A Step-by-step Process of Payroll Processing in Slovenia

Here is a step-by-step guide on how to do payroll in Slovenia

Step 1: Collecting employee tax information

• The payroll process begins with collecting the requisite tax information from the employees. 
• The employee must submit their official identification documents to the employer at this stage of the payroll process.

Step 2: Know employee benefits

• The employer has to maintain a checklist of the employees’ benefits to make sufficient payroll deductions in Slovenia. 
• For this, employers must keep documents like employment contracts, training forms, employee handbooks, and tax forms ready for compliance with regulatory authorities. 
• Create an employee record for easy management of the documents and accurate information on payment rates and payroll deductions.
• Employers in Slovenia use paper files, onsite servers, and cloud-based document databases to store employee records.

Step 3: Payroll schedule

• At this step, the employer decides upon the payment schedule for the workforce. 
• Most business organizations operate monthly, semi-monthly, or bi-weekly payment cycles. 
• The employee should have the payroll schedule via employment contract or payroll policy. 

Step 4: Maintaining the timesheet

• Maintenance of a timesheet is the pillar of payroll in Slovenia. 
• Components such as the number of hours of work put in by the employee determine the paycheck. 

Step 5: Calculating payroll

• The next step is to calculate payroll and deduct contributions from the salary. 
• There are different types of payroll deductions in Slovenia, as listed below:
  • Tax deductions: The employer calculates the amount of payroll tax in Slovenia to be withheld from the employee’s paycheck. Next, the employer sends the deducted amount to the appropriate government body. Tax deductions include federal taxes.
  • Pre-tax deductions: Such payroll deductions include employee retirement contributions, health insurance, and employer retirement contributions.
  • Post-tax deductions: Such payroll deductions in Slovenia include insurance premiums and others.

Step 6: Salary disbursal

• After calculating the payroll deductions in Slovenia, it is time to make the salary paid to the employees. 
• The payroll process is set off at this step. The employer must ensure that the employee receives a paycheck of the accurate amount to their specified bank accounts. 
• The employer also has to take the holidays and paid leaves into account while paying the employee’s salary.

Step 7: Submitting deductions to authorities

• The employer has to submit the tax filings and payments to the governmental agencies after the payroll process in Slovenia to pay the employer payroll taxes. 
• Moreover, the employer must also pay the payroll tax in Slovenia by submitting Form 941 to governmental agencies. 
• If there has been any withholding of federal unemployment taxes, the employer has to file Form 940 along with Form 941.

Payroll Contributions

According to the payroll rules and regulations in Slovenia, the employer and the employee need to contribute to the payroll policies. 

Employer contribution to the payroll in Slovenia

Employee contribution to the payroll in Slovenia

Payroll Cycle 

The cycle of payroll operates every month in compliance with the payroll policies and procedures in Slovenia. The government and private companies of Slovenia employees receive their salaries on the last working day of the month. 

Slovenia Payroll Options for Companies

Companies in Slovenia can choose from multiple options for processing the payroll for the employees according to payroll rules and regulations in Slovenia, as listed below:

• Remote payroll: In remote payroll, the subsidiary company in Slovenia pays the employees through the payroll of the parent company. However, employers need to be well aware of the different laws of Slovenia payroll tax rates of different companies while processing a remote payroll in Slovenia.
• Internal payroll: Maintenance of an internal payroll in Slovenia is recommended for larger companies that operate with a huge staff headed by an HR. The HR discusses with the company’s financial heads to ensure sufficient time and capital for internal payroll processing.
• Outsourced payroll: Companies in Slovenia may choose to outsource the payroll processing system with the help of payroll processing companies like Multiplier. Multiplier can conduct payroll processing sincerely, adhering to the company’s financial policies. Slovenian companies can also outsource the payroll processing work to local companies.

Entitlement and Termination Terms

The labor law in Slovenia prohibits employers from hiring and firing employees at will. It is mandatory for every employer in Slovenia to treat an employee with the utmost fairness in the event of termination of employment. According to the payroll rules and regulations in Slovenia, companies have two kinds of dismissal policies: regular and extraordinary dismissal.

Notice period

The notice period in Slovenia depends on the seniority of the employee:

Severance pay

• According to the payroll rules and regulations in Slovenia, an employer has to offer severance pay to the employee after the employee’s termination on the grounds of regular dismissal. 
• If the ground of regular dismissal is misconduct, then the employee is not entitled to severance pay. 
• The employer does not have to make a severance payment if the termination is on the grounds of extraordinary dismissal as per the payroll policies and procedures in Slovenia.
• The amount of severance pay is directly proportional to the mean monthly salary of the employee over the last three months of employment. However, the maximum severance pay is ten times the basic salary of an employee. 

Slovenia Payroll Processing Company

While setting up a payroll processing company in Slovenia, companies should focus on payroll requirements and taxation rules. You must dedicate specific hours and costs to establish a business entity in the country. To simplify things, you can set up a guide on payroll policy and taxation laws. Global EOR platforms like Multiplier can help you easily set up Slovenia’s payroll policy. 

How Multiplier Can Help With Global Payroll

Efficient management of the payroll requirements in Slovenia adds value to the company. However, managing the payroll process in Slovenia with thousands of employees requires compliance strategies. Business owners seeking to establish a business in Slovenia can resort to Multiplier to outsource their payroll processing responsibilities. 

Multiplier collaborates with several business organizations worldwide to aid in efficient payroll management. Acquire a thorough understanding of the payroll policies and procedures with the help of Multiplier to operate an overseas business.