Complete Guide to Payroll Processing in Serbia

Serbia, a country of the Balkans, is a famous country for business expansions. Its diverse population makes it ideal for different companies that serve a diverse set of audiences. 

The country is categorized as an upper-middle income economy with the GNI per capita of  $6,390. Business sectors like energy, automotive, machinery, mining, and agriculture contribute primarily to Serbia’s economy. 

Setting up a new business in Serbia is relatively easy. As per the World Bank Ease of Doing Business 2020 report,  the country ranks 44th. The rank has improved by four points in recent years as the government wants more inflow of foreign investments in the country. Setting up a business has become even more straightforward for new companies coming to Serbia.

When you incorporate a new business in Serbia, you must set up a robust payroll system. Establishing a  payroll system in Serbia is mandatory as it not only smoothens the operations smooth but also regularizes employee payments. Employers must comply with all the local laws that govern the compensation and  payroll system in Serbia

Get in touch with a Global PEO like Multiplier to know more about the payroll system in Serbia. Our seasoned experts will help you establish an efficient and compliant payroll system.

How Is Payroll Calculated in Serbia?

You must set up a payroll system in Serbia before onboarding employees to your company. 

The general payroll system includes calculating gross pay, net pay, tax deductions, and other elements based on the company’s policy. Gross pay is the aggregate amount that the company spends on an employee. It includes all the salary components like basic pay, allowances, taxes, etc. On the other hand, net pay is the amount the employee receives in his bank account once all the relevant deductions are made.

The payroll policy for all the employees, be they ex-pats or local employees, remains the same in Serbia. When you decide on a Serbia payroll process, you should factor in all the laws governing minimum wages, bonus payments, payroll cycles, etc. Once the payroll is processed, you should record all the transactions in a payroll register.

Important Elements of Salary Structure in Serbia

Different elements make up the salary structure in Serbia. Some of these elements include – 

• CTC
  The Cost to Company (CTC) is a company’s total cost when it hires an employee. It includes all the salary components like gross pay, net pay, allowances, etc. However, the CTC represents the company’s expense for hiring the employee, not what the employee gets as their salary.
• Gross salary
  Gross salary is the employee’s total salary that represents their earning potential. It includes all the elements like basic pay, allowances, taxes, variable pay, etc.
• Net Salary
  Net salary is the employee’s salary after all the deductions are made. It is also called the employees’ take-home pay.
• Basic salary
  The basic salary is the primary component of the payroll. All other salary components are decided based on the basic salary. Ideally, the basic salary constitutes 30-40% of the employee’s total pay. An employee’s basic pay is decided on different parameters like the designation of the employees, prevailing industry standards for the role, etc.
• Allowances
  In Serbia, employees are entitled to various kinds of allowances. These allowances help them cover some basic expenses they incur while at work. Some standard allowances include:

1. 1. Food allowance
   2. Fuel allowance
   3. Travel allowance

• Bonuses
  In Serbia, paying an annual bonus or a 13th-month salary is not mandatory. However, if the employer promises the payment of any such bonuses, it should be made to the employee on or before the end of the financial year.

How to Set Up a Payroll in Serbia?

Companies must have an established Serbia payroll process to remit salaries, reimbursements, and other compensations. Some necessary steps that you must follow are – 

1. The company must collect the Certificate of Incorporation and the company number from the Business Registers Agency.
2. The company must open a bank account in Serbia to help with all kinds of transactions done on behalf of the company.
3. Post the setting up the bank account, companies must get a tax identification number (TIN). Register the company with the federal and state tax authorities. Discuss with the authorities and decide on a timeline for regular tax payments.
4. Check the hourly schedules of the employees and calculate their gross pay. Include all the components, like allowances, overtime payments, bonuses, etc., to estimate the gross pay.
5. Calculate the net pay for all employees—factor in all the deductions like social contributions, taxes, etc.
6. Finalise a payroll structure in Serbia for your company.
7. Fix your payroll cycle and timeline for paying salaries and allowances. You must also decide a timeframe for payment of bonuses if your company has a bonus policy.

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

Setting up payroll in Serbia can be challenging and time-consuming. Companies must adhere to federal laws while drafting payroll policies, irrespective of the time. Some steps involved in Serbia payroll processing are – 

Step 1: Decide a payroll system

Choose a payroll system that meets your organizational goals and suits your budget. You can go for a manual or an outsourced payroll based on the size of the company and the involvement you want.

• Manual payroll: In the case of a manual payroll, the process is carried out manually by HR professionals. In this case, you will have to onboard employees with experience handling payroll.
• Outsourced payroll: Here, you hire an external team to manage the entire payroll. The external company or the team manages to process in exchange for a fee.
• Payroll software: Payroll software provides payroll assistance and performs all the activities related to the company’s payroll.

Step 2: Payroll policy

A payroll policy describes the payroll process, which covers salaries’ administration, payroll schedule, timekeeping, and payment methods. You must draft a policy and make it readily available for all your employees. The policy informs employees of the payday. 

Step 3: Add employees to the system

Once you decide on a payroll system, you must add all the employees to that system. Add the basic details of the employees along with their CTCs. The system will store all the information used during employee payroll processing. You need to add several aggregate figures about the organization in the system:

• The total number of employees working in the organization
• The payroll software used in the company
• Payroll cycle

Step 4: Open bank accounts

Once you have onboarded employees, you should help them open a new bank account in any Serbian bank. All kinds of employee payments will be made through these bank accounts. 

Step 5: Calculation of salaries and verification of timesheets

You must calculate all the important salary components before coming to an aggregate figure. The standard weekly working hours for Serbia is 40 hours. If an employee has worked beyond the working hours, you need to calculate the overtime payments for the employee. 

Post the overtime payment calculation, calculate the net salaries you have to pay the employees. Ensure that you make all the necessary deductions to come to a final amount. You must also include any reimbursements you need to make to your employees. 

• Reconciliation
  Before you pay the salaries to your employees, you must cross-check all the information that is important for payroll processing. Also, reconcile your payroll documents by cross-verifying all the tax receipts and payment ledgers. Double-check the employees’ pay slips and fix the errors if you find any.
• Pay slips
  In Serbia, all employers must provide pay slips to their employees. You can choose to give digital or printed copies of the pay slips based on the company’s policy. The pay slip must contain the employer’s name, address, payroll breakup, etc. It should also contain the basic details of the employee.
• Maintenance of payroll records
  You should maintain a payroll register to record all payroll transactions. The record acts as proof of all the payments. Therefore, you must try to keep the payroll records for at least ten years.

Payroll Contributions

In Serbia, there are different kinds of payroll contributions. Some of these payroll contributions include:

Minimum wage

• Employers in Serbia have to pay their employees a minimum wage based on the number of working hours.
• The minimum pay for an employee that puts in 160 hours a month is RSD 39,370.61 to RSD 43,174.32.
• Employees are entitled to a minimum compensation of RDS 41,469.67 to RSD 45,470.70 if they work 168 hours monthly. 
• If they work 176 hours per month, the amount rises from RSD 43,568.73 to RSD 47,767.08.
• The minimum salary for a worker with 184 hours per month should be RSD 45,667.79 to RSD 50,063.45

Therefore, employers must check the employees’ working hours before categorizing them into a minimum wage bracket.

Overtime

• An employee should put in 40 hours per week to deliver their share of work. 
• Employees are eligible for overtime pay if they work past their regular hours.
• It is not permitted to work more than 12 hours daily, including four hours of overtime. 
• Along with their usual pay, the employees also receive a 26% bonus for working overtime.

Employer Contribution

All employers in Serbia must contribute toward health insurance, pension, and disability insurance. These contributions are made directly to the institutions that are managing these accounts.

Hence, the employer makes a total contribution of 16.65% for all employees.

Employee Contribution

The employees in Serbia, too, have to make some mandatory contributions. These contributions are deducted from the employee’s gross pay and paid directly to the contribution accounts authorities.

Therefore, the employee contributes 19.90% towards different social security accounts in Serbia.

Taxes

You must regularly pay taxes on your income if you work in Serbia. These taxes are deducted from employees’ gross pay and are paid directly to Serbia’s tax authorities. The tax slabs in Serbia are:

Payroll Cycle

The payroll cycle decides the frequency of salary payments in the company. The financial year runs from 1st January to 31st December in Serbia, and all the companies follow a monthly payroll cycle. Therefore, the salary payouts are made to the employee after the month ends. Post the salary payments, the employees also receive their payslips from their employers.

Serbia Payroll Options for Companies

In Serbia, companies can avail of various payroll options. You can compare all options and choose based on the system’s suitability and your budget. Some of the payroll options for companies in Serbia include

• Internal payroll: In the case of internal payroll, the company manages the entire payroll internally. Generally, large organizations opt for internal payroll and have the resources to onboard employees who can take care of the payroll system. These employees should have an in-depth knowledge of Serbia’s Labor Laws.

• Remote payroll: If you are a subsidiary company, you can use the payroll system of your parent company. You must register all the subsidiary employees to the parent company’s payroll system. However, the payroll processing should comply with all the local Serbia laws.

• Payroll processing company: You can outsource the payroll function to a payroll processing company. However, if you choose this option, you must look after compliance-related issues.

• PEO Company: You can contact a PEO company to hand over your entire payroll. PEO companies like Multiplier will take care of the entire payroll system while you can focus on the primary operations of your business.

Entitlement and Termination Terms

Before having a payroll system in Serbia, you must establish the terms of entitlement and termination for all your employees. You must let the employee know the reasons for their termination if you terminate them from the company. Any of the following reasons are considered valid for termination:

• Mutual agreement between the company and the employee
• Any violation of the clauses stated in the employment contract
• Restructuring the company’s workforce

The company must provide a termination letter to the employee and get their signature. The company must pay their severance if the employee is fired from the organization.

Serbia Payroll Processing Company

Expanding in Serbia can be difficult if you are unaware of payroll policies and procedures in Serbia. It might be prudent to seek guidance from businesses with experience setting up payroll in Serbia or organizations familiar with local laws.

There are several companies out there that can help you with the process. You might work with a sizable PEO business like Multiplier. Consider all your options, select the one that best suits your business requirements, and streamline the payroll setting process in Serbia.

How Can Multiplier Help With Global Payroll?

Setting up a payroll system in Serbia can be difficult. Companies must comply with labor acts and local rules while starting the payroll process in Serbia. 

Get in touch with a large PEO like Multiplier to assist you with your payroll needs. Our professionals are knowledgeable about all Serbian labor regulations and can assist you in setting up a payroll system that complies with them.

We make sure everything runs smoothly and complies with all applicable labor regulations.