Employee Benefits and Compensation in Croatia: A Comprehensive Guide

Employee benefits are additional perks and incentives offered by their employers in addition to the regular salary. The company decides on these benefits based on company policy and current industry standards. Some commonly offered employee benefits are leaves, childcare, health insurance, car allowance, etc. 

Employee benefits include all the perks to help the employee cover the additional expenses while delivering their day-to-day responsibilities efficiently. They are comprehensive and designed for the welfare of the employees. If a company provides excellent employee benefits, employee turnover reduces significantly. The company also can attract skilled personnel from the industry while retaining the existing employees. 

While creating a benefits plan in Croatia, companies must stick to all the labor laws and collective agreements. Companies also offer supplemental benefits to their employees in addition to mandatory benefits. These benefits vary from company to company. 

Compensation Laws in Croatia

The benefits and compensation policy in Croatia comes under the purview of different labor laws and policies that the government lays down. Some of these laws include the following:

• The Constitution of the Republic of Croatia, the international conventions and treaties ratified under the constitution, and the collective agreements are the primary sources of employment law in Croatia.
• The Croatian Employment law protects all employed in Croatia irrespective of nationality. 
• All employment contracts must be in writing. If the parties mutually decide to avoid an employment contract, the employer must provide a letter of engagement. 
• As per Croatian law, the employees can work a maximum of 40 hours a week, and the overtime work may not go beyond 50 hours a week unless specified in a collective bargaining agreement. 
• A trade union can be in Croatia if at least ten people with legal power come together. These unions are established to protect the rights and interests of the employees in Croatia.

How to Develop an Employee Benefits Program for Employees in Croatia

You must follow a few simple steps to create a compensation and benefits policy in Croatia.

Step 1: Decide on a budget and the goals

• Before you begin creating a benefits plan for your company, you must decide on the budget for this activity. 
• You can define the objectives you want to meet with the benefits plan while staying within the specified budget. 
• Ensure that employee compensation and benefits in Croatia adhere to the local rules and regulations specified by the government. 

Step 2: Research and try to find out the existing industry standards and the employees’ expectations

• Before you decide on the benefits you will offer your employees, conduct thorough research to understand the benefits other companies offer as employee benefits in Croatia. 
• Once you understand the industry standards, find out what the company employees expect from the benefits plan. You can conduct an internal survey to understand the employees’ expectations clearly.

Step 3: Add flexibility to the plan

• Every employee in the working environment has diverse needs that you need to address with a compensation package in Croatia. 
• You need to add flexibility to your compensation structure to ensure that you accommodate the employees’ diverse needs. You must define the flexibility criteria and calculate the gross and net earnings of the employees. 
• As an employer, you must also communicate to all the employees how they can avail of these benefits.

Step 4: Communicate the plan to all the stakeholders

• Once the benefits plan is ready, you must communicate the same to all the essential stakeholders. 
• You must also tell them how they can use these benefits and the terms and conditions around them. 
• Try to collect feedback on all the benefits that are a part of the benefits plan. 
• Once you have the feedback, you can analyze it and incorporate it if you find something useful. If the feedback suggests that a particular benefit will go unused, you can remove that benefit from the plan. 

Step 5: Analyze the plan

• Before you release workers’ compensation in Croatia, you must check all its aspects. 
• Businesses operate in a dynamic environment, and hence, it is essential for a benefits plan to stay relevant in all cases. 
• You should test the benefits plan in different business situations and try to understand how effective the plan is. 

You must also check the plan for errors and make the changes in real-time. Try to come up with a few metrics that help you understand the effectiveness of the benefits plan. 

Types of Guaranteed Benefits in Croatia

A few mandatory benefits in Croatia are given to all employees. Some of these mandatory benefits include the following:

Minimum wage

• The minimum wage is an essential part of worker’s compensation in Croatia. All employees must be paid at least an amount equivalent to the minimum wage for their work. 
• The minimum wage for Croatia stands at HRK 5,274.15 per month. 
• Croatia adopted the Euro as its currency on January 1, 2023. Hence, the minimum wage stands at EUR 700.

Working hours and overtime

• The employees must work at most 40 hours a week. These hours are equally divided among five working days in a week. 
• If the employer wants the employee to work additional hours, they need to seek written permission from the employee. 
• An employee can work for 10 hours a week or 180 hours annually. 
• The overtime payment depends either on the employment contract clause or the collective bargaining agreements. 

Paid leaves

• The paid leave benefits in Croatia depend on an employee’s employment years.
• Paid leaves in Croatia range from 15 to 20 days. If the employee fails to avail of these leaves, they are compensated for them.

Public holidays

• There are 14 public holidays in Croatia. The employees who work on a public holiday are entitled to overtime pay. 

Sick leaves

• An employee in Croatia can take sick leaves up to 42 days a year, depending on the health condition. 
• The employer pays the employee 70% of the regular salary for these sick leaves.
• If the number of sick leaves goes beyond 42 days, the salary paid by the employer is reimbursed by Croatia’s health insurance fund. 

Maternity leaves

• Pregnant employees can take a 28-days paid leave before the due date as maternity benefits in Croatia. 
• Post-delivery, the employee can take a maternity leave of 70 days. The employee receives a regular salary for these 70 days. 
• The employee can extend the maternity leave period by six months. However, these leaves will not be paid by the employer. 

Paternity leaves

• There are provisions for paternity leave in Croatia. 
• However, in particular circumstances, a father can take a share of the 70-day maternity leave period if the child needs additional care or if the mother cannot look after the child. 

Parental leaves

• All employees with a child can avail of parental leave in Croatia. 
• Every parent can take 120 leaves for each child till the child reaches the age of eight. 

Bonus

• There is no statutory requirement for an annual bonus in Croatia. However, companies must pay bonuses to the employees if they have mutually agreed on it. 

Employee Benefits for Expatriates

Expats who work in Croatia are entitled to the same benefits as the local people employed across different organizations. Expats can use medical benefits for employees in Croatia and get their travel expenses reimbursed. In addition to the mandatory benefits, ex-pats have access to several other benefits like free or subsidized accommodation, traveling costs, food coupons, etc. 

Expats can also avail themselves of all the perks agreed upon by the employer when signing the employment contract. To ensure future clarity between the parties, employers should include a list of benefits in the employment contract.

How are Employee Benefits Taxed in Croatia?

Croatia follows a progressive tax system where employees who earn up to EUR 47,780.21 are taxed at the rate of 20%, and employees earning above EUR 47,780.21 are taxed at the rate of 30%. Here, the income includes the taxable value of the benefits provided to the employees. 

Personal allowances are parts of income that are not subject to tax. Employees are eligible for a monthly stipend of EUR 530, which rises to EUR 232 for parents of one kid, EUR 332 for parents of two children, and EUR 465 for parents of three children. There are several other benefits like the commute to work benefits, international trips up to EUR 26, personal car reimbursements, etc., that are not taxed in Croatia. 

Restrictions for Croatia Benefits and Compensation

Most perks and employee benefits in Croatia are taxable. You need to know how much these perks are worth to calculate the employee’s tax burden. The employer oversees the timely remittance of all tax payments to the relevant federal agencies and the organizations in charge of employee social security and taxation.

Ensure that your company has adequately incorporated and has the necessary business authorizations before developing compensation and benefits in Croatia. Employers must pay their employees the statutory minimum wage. When creating a compensation package in Croatia, you must consider the country’s labor laws carefully. Furthermore, even though they are uncommon in Croatia, collective bargaining agreements must be followed if they specify any component of employee compensation.

Supplemental Benefits for Employees in Croatia

Apart from the mandatory compensation and benefits in Croatia, employees can also avail themselves of several supplemental benefits. Some of these benefits include the following:

Holiday bonuses

Several companies in Croatia make periodic cash payments to their employees on holidays like Christmas, Easter, etc. These cash payments are either given annually or once in two years. 

Personal car

Employees in Croatia have access to a personal car that they can use for business purposes. If the employer cannot provide a car, they reimburse the fuel cost to all the employees.

Disability benefits

Employees working in Croatia are entitled to a disability benefit if they suffer some injuries while at work. These benefits are tax-free, up to EUR 332. 

Education Expenses

Most employers in Croatia bear the preschool education expenses of their employees’ children. 

How Multiplier Can Help with Benefits Management in Croatia

When launching a business online, you need to hire skilled people who can expand the firm and contribute fully to the organization. Employers must adhere to local rules and ordinances when creating employment contracts and offering employee benefits. Using a global PEO platform like Multiplier can help you implement this plan.

You get access to qualified experts familiar with various business-related challenges through Multiplier. We assist you in complying with Croatia’s labor laws. You won’t need to create a nationwide subsidiary with the help of our skilled personnel to manage the workforce properly. You can increase your market reach and lower your labor expenses with our help.