Croatia: Labor Law And Employment Compliance

Croatia is a Mediterranean country with strong institutional support for sustainable business development. Its high-income service-based economy suggests excellent incentives for foreign companies to expand their business operations in Europe. 

The presence of a competitive workforce helps global companies hire talent locally and save on business expansion costs. In doing so, companies shall abide by Croatian labor regulations. The employment law in Croatia guides employers to follow the statutory standards for working hours, leave schemes, payroll benefits, termination rules, and employee data privacy.

Some of the most significant provisions under labor regulations for employers to follow in Croatia include

• Setting up of maximum working hours in Croatia labor law at 50 hours per week, including overtime
• Ensuring job security and paid maternity leave for up to 98 days
• Granting at least four weeks of paid annual leave with transferral of unused holiday to the next year
• Assuring equal pay for all through transparency in salary calculations for employees performing similar tasks 
• Complying with the Right to disconnect per the labor code in Croatia

The following page gives a detailed overview of Croatia’s labor code, making it easier for companies to comply while hiring and managing employees per the employment rules.

Who is Covered by the Employment Act?

Croatian employment law applies to the following categories of employees where: 

• The job role is well-defined under a service agreement
• Job is performed on the employer’s premises
• under the employer’s instruction
• within a predetermined time frame
• in-premise or remotely using the employer’s tools and assets
• Receive proportionate remuneration for the work

Croatia’s employment rules do not apply to independent contractors or self-employed persons. Further, specific provisions of the employment law, like working hours, termination of employment, or severance, do not apply to the managerial class.  

Employment Contract

Croatian employment law allows employers to negotiate open-ended employment contracts for hiring and managing employees. However, the duration of fixed-term employment is fixed at most three years.

Employers must draft a written employment contract per the labor regulations in Croatia before the work commences. The contract may be bilingual (Croatian or English) and shall include the following information: 

• Name of the employer and employee
• Description of work
• Location of work
• Date of commencement
• Expected duration of the contract, in case of fixed-term employment contracts
• Working hours
• Duration of paid annual leave
• Termination clauses, including notice period and severance pay
• Base salary, parameters for work performance, compensation, increased pay, and other payments

Probation period: 

• An employer can include a probation period of a maximum of six months. 
• Both employer and employee can terminate the contract without reason but with at least a seven-day notice. 

Key Provisions of the Act

Croatian labor law is the product of the following statutory sources:

• The Constitution of the Republic of Croatia
• Applicable EU regulations on employment law
• Labor act rules in Croatia 
• The Act on the Minimum Wage
• The Act on Safety at Work
• The Anti-Discrimination Act
• The Protection of Whistleblowers Act 
• The Immigration Act

Here’s a detailed overview of how employers can comply with labor regulations in Croatia. 

Working hours 

• Employers may set working hours per Croatia labor law for three categories: 
• A full-time employee whose working time cannot exceed 40 hours per week
• A part-time employee whose working time is shorter than full-time 
• Part-time employees in special jobs where working time is reduced in proportion to the harmful effects of working conditions despite occupational safety measures
• Croatia’s employment law obliges employers to provide a weekly rest period of 24 consecutive hours. 
• Employers must also provide suitable time off from work to eligible employees for prenatal examinations or breastfeeding breaks. 
• However, working on Sundays is limited to three per month and a maximum of 16 per year. Employers must pay 50% more salary for work on Sunday. 

Public holidays 

• Employers must ensure paid time off on 14 public holidays in a year per the Croatian labor code. 
• Public holidays in Croatia include commemorations/memorials and festivals:

1. 1. 1 January (New Year’s Day)
   2. 6 January (Epiphany)
   3. April (Easter Sunday and Easter Monday, the date may vary each year)
   4. 1 May (Labour Day)
   5. 30 May (Statehood Day)
   6. June (Corpus Christi, the date may vary each year)
   7. 22 June (Anti-Fascist Struggle Day)
   8. 5 August (Victory Day).
   9. 15 August (Assumption of Mary)
   10. 1 November (All Saints’ Day)
   11. 18 November (Remembrance Day for the victims of the Homeland War and Remembrance Day for the victims of Vukovar and Škabrnja)
   12. 25 December (Christmas Day)
   13. 26 December (St. Stephen’s Day)

Leave schemes

The labor regulations in Croatia mandate employers to provide various leave schemes to their employees. This section covers all Croatian labor law paid and unpaid leave entitlements. 

Annual leave: 

• Employers must provide at least four weeks of paid annual leave every year to employees with more than six months of continuous service. 
• Employers may offer paid annual leaves in parts as negotiated in the employment agreement. 
• The labor act rules in Croatia on annual leave prescribe employers to transfer unused leaves, latest by the thirtieth day of June the following year. 
• Employers cannot offer cash compensation as a substitute for paid annual leaves.

Maternity leave:

• Female employees can avail of 98 days in Croatia as paid maternity leave. 
• Employers must treat 28 days before the due date and 70 days after the birth as paid maternity leave in Croatia for foreigners and citizens.
• Croatian employment rules oblige employers to extend an additional maternity leave of up to six months after the birth. 
• Employers must also make suitable provisions for shared paternity leave in Croatia during this period. 

Paternity leave:

• Croatian employment law prescribes ten days of paid paternity leave for one child and 15 working days in case of multiple births. 

Parental leave:

• The employment law in Croatia guides employers through a parental leave scheme that is applicable only till the child turns eight: 
• Each parent can take four months per child for the first two kids or 15 months for subsequent children or twins.
• 6 – 30 months if only one parent avails of it
• Employers may provide parental leave at once or partially, but not more than twice a year, with a minimum period of 30 days each time.
• Croatian Health Insurance Fund (“Hrvatski zavod za zdravstveno osiguranje or HZZO”) covers the pay compensation during the period. 

Adoption leave: 

• Employers must extend six months of paid leave to parents who have adopted or fostered a child. 
• Employers must also provide parental leave until the child turns eight years old. 

Sick leave: 

• Employers must cover sick pay for the first 42 days of sickness. HZZO will cover a minimum of 70% of salary payments beyond it for six months. 
• Employers may seek a medical certificate within three days of absence from work. 
• And, if the injury or illness occurred while working, they are entitled to a 100% paid leave. 

Personal leave:

• The labor act rules in Croatia mandate employers to extend at least seven business days per year of paid leave for personal events like marriage, severe illness of an immediate family member, or bereavement. 

Overtime compensation 

• According to Croatia’s working hours law, employers may ask their employees to work overtime for at most 50 hours a week. 
• The total overtime working hours in Croatian labor law cannot exceed 10 hours a day or 180 hours per year. Upon a favorable collective bargaining agreement, employers can extend the total overtime per employee to a maximum of 250 hours per year. 
• Employers must also ensure the overnight shift work lasts only one week.
• The labor act rules in Croatia have not defined overtime compensation. Thus, the collective bargaining agreement or employment contract determines overtime pay.

Payroll obligations

Croatia employment law stipulates employers calculate gross salary, including base salary and allowances negotiated in the employment contract,  withhold income tax, a surcharge on income tax, and deduct social security contributions at applicable rates. The labor act rules in Croatia oblige employers to pay salaries by the 15th of the following month. 

Social security contributions

• Croatian labor law mandates employers to calculate employer contributions from the base rate for up to five years as follows:

1. 1. Pension insurance contribution at a rate of 20% or 15% for insured pension insurance based on individual capitalized savings, and
   2. Contribution for pension insurance based on individual capitalized savings at a rate of 5%

• Employers may make voluntary contributions towards health insurance at 16.5% for up to five years. 

Withholding income tax 

• Employers must withhold income tax at proportional rates of 20.00% for employees earning up to 360,000.00 HRK/€47,780.21 and 30.00% for that earning above this amount.
• Further, employers must withhold the surcharge of 18% of total taxable income. 
• Employers must calculate the tax advance for tax-exempted employees in the same manner prescribed for all other employees. 

Minimum wage

• The minimum salary from January 1, 2023, is EUR 700 per month. 
• However, the average monthly gross salary per employee in legal entities in the Republic of Croatia was recorded at EUR 1,389.10 in 2022. 

Payslip 

• Croatian labor law stipulates employers maintain monthly records of salary payments, employee attendance for salary purposes, deductions made on salary, and other employee benefits linked to salary. 
• These records must be reflected in the payslip provided electronically after each salary disbursement. 

Termination rules

• Croatian employment law allows employers to terminate the employment contract based on justified reasons like 
• Dismissal due to business restructuring or economic reasons
• Dismissal grounds on employee capabilities 
• Dismissal due to dissatisfaction with probation work
• However, the Croatian employment law for termination mandates employers to serve a written notice before terminating the contract. 
• Employers could fix the mandatory termination period between: 

1. 1. Two weeks for employees who have worked for less than one year 
   2. Up to three months for employees who worked for 20 consecutive years

• The latest amendment in Croatia’s labor law allows employer decisions (other than the termination notice) to be electronically delivered to employees and retain the proof of delivery.

Further, the employment law in Croatia for termination stipulates certain employer obligations such as: 

• Not filling the same job position for up to six months after the dismissal of the previous employee on business grounds
• Must compensate suitably for any unused holidays
• Not treating sick leave as a notice period
• Employers could terminate the employment contract in exceptional circumstances within 15 days of receiving information about grounds for extraordinary dismissals, such as 
• A severe breach of employment conditions or other important facts
• Circumstances, and interests of both contracting parties

Severance pay

• Unless specified otherwise, the severance pay need not exceed six times the average monthly salary earned in the last three months before the termination of the employment contract.
• Employers can only extend severance to employees who have worked with the same employer for less than two years. 

Data protection and employee privacy

• Employers may collect, process and store employee data for various employment-related activities in compliance with European Union’s General Data Protection Rules (GDPR) and other statutory laws. 
• Employers must inform employees about workplace surveillance and IT system monitoring if any. 
• The labor code of Croatia obliges employers to ensure fair practices during background checks, like prohibiting third-party providers from raising unrelated questions (for example, information about personal life, religious beliefs, sexual orientation, political views, pregnancy, and other information)

Penalties 

Employers may take note of the following standard provisions under labor regulations in Croatia to avoid penalties:

• Written contracts: Employers must draft a written employment contract before the commencement of work. Otherwise, they can be fined up to EUR 13,300.
• Unjust dismissal: The court could order the employer to compensate the employee for wrongful termination and damages suffered therein.  
• Employers may be fined up to EUR 8,000 for hiring new employees in the same position within six months of dismissal on business grounds.
• Harassment at the workplace: The labor regulations in Croatia oblige employers to take appropriate measures to prevent sexual harassment in the workplace. Failure to do so will invite a fine of up to EUR 47,000. 
• Safety standards: Employers may be fined up to EUR 15,900 for not securing health and safety obligations at the workplace.
• Check on EOR: The new labor act rules in Croatia mandate companies to undertake periodic actions like requesting monthly delivery of pay slips, employee data, etc., if they are engaging a subcontractor or Employer Of Record (EOR) for managing employees. 
• Disabled employment quota: Employers with more than 20 employees must employ at least 3% or more disabled individuals in their workforce. Otherwise, the Croatian labor act rules oblige employers to pay a monthly health insurance fee amounting to 30% of the minimum salary for each shortfall in disabled individuals. 

Compliance Strategies for Employers

Here are some compliance strategies for entrepreneurs and global companies to ensure hassle-free onboarding and managing of employees.  

Hire through standard templates:

• Croatian labor law mandates employment contracts for establishing an employer-employee relationship. 
• Employers can follow readily available templates to draft employment documents like offer letters, service agreements, termination notices, and much more and stay compliant with Croatian labor regulations. 

Develop an in-house HR team:

• An in-house HR team specializing in Croatian labor act rules can hire local talents, draft legally compliant documents, manage payroll, extend employee benefits per the law, and more.
• A dedicated HR team facilitates employee training and appraisals. The HR manager enjoys management’s confidence to negotiate with employees on their behalf in business restructuring. 

Outsourcing to a third-party firm:

• New-age businesses are switching to SaaS-based HR solutions to ensure compliant global expansion. 
• Such third-party solutions offer pre-employment services like background checks, hiring services like assessment, evaluation, shortlisting of local talents, and post-hiring services like onboarding and managing payroll services.

How Can Multiplier Help?

Multiplier is the best alternative for companies looking to avoid the legal hassles of onboarding and managing talents in Croatia. We offer a Professional Employer Organization (PEO) or Employer of Record (EOR) remote platform for global HR solutions. 

Croatian employers can use our SaaS-based platform to automate employment contracts, draft employment documents like offer letters, service agreements, termination notices, etc., in Croatian or English, and manage payroll per Croatia employment rules at the click of a button. 

Multiplier helps businesses, from startups to enterprises, comply with the local regulations in 150+ countries for hiring and onboarding new talents.