Croatia Employment Contracts
Foreign companies planning a move into the Croatian economy by hiring employees and operating their payroll have the option of opening a legal entity subsidiary. The typical choice is to set up a subsidiary as a private limited company, in Croatian a Drustvo s Ogranicenom Odgovornoscu or DOO. The subsidiary, like any local Croatian company, is regulated by the Companies Act and must register according to the entry procedures laid down by the Court Registry Act.
Their employees will be governed by the Labor Act and supplementary legislation dealing with benefits, entitlements, and compensation.
These issues are a major consideration during the process of hiring, onboarding, and drawing up contracts with your new staff.
Employment Contracts in Croatia
The Labor Act stipulates that employment contracts must be in writing, and if they are in a language other than Croatian the agreement must have a Croatian translation. Employers must provide a written contract, indefinite, or fixed term before the employee begins work. Failure to do so means the agreement becomes permanent and open-ended by default. The State Inspectorate is the supervisory body ensuring compliance with regulations. The main types of employment contracts are:
- Open-ended Employment Contracts: Unless otherwise specified, an employment contract is considered open-ended, permanent, and indefinite. Employment continues until terminated mutually or by complying with relevant procedures.
- Fixed-term Employment Contracts: These ‘temporary’ contracts apply where there is a defined duration for the contract, or it relates to a specific project or to temporarily replace a permanent member of staff. Under the Labor Act fixed-term contracts, either singly or consecutively, cannot exceed three years. A gap of up to two months between contracts does not break the three-year rule.
- Probationary Periods: The contract cannot stipulate a probationary period exceeding six months. The employer must give at least seven days’ notice to terminate the trial period.
- Collective Bargaining Agreements: These operate at industry and company level in conjunction with tripartite agreements between government, trade unions and employers. The Labor Act rules that where different agreements refer to the same workers or sectors, the most beneficial agreement for employees always applies.