Employee Benefits in Croatia
In Croatia employee benefits, entitlement and compensation are described in the Labour Act, supplemented by legislation such as the Obligations Act, the Labour Protection Act, the Anti-Discrimination Act, the Minimum Wage Act and Foreign Persons Act.
Foreign companies hiring employees in Croatia must operate within this framework of legislation, which provides safeguards and guarantees for the workforce.
The responsibilities of foreign companies reach further than simply complying with tax, social security, and payroll regulations – although this is a demanding scenario. Failure to comply with specific regulations applying to benefits and entitlements runs the risk of fines and sanctions. It is vital that employers have a firm grasp of what is guaranteed for their employees, as this will affect the employer-employee relationship.
What Compensation Laws exist in Croatia?
Employment legislation in Croatia is dealt with in the Labor Act (1995), covering employment contracts, working hours and breaks, termination, discrimination, equal treatment, collective agreements, and other areas. Minimum levels of pay and other employment aspects come under supplementary statutes or collective agreements, with European Union Directives also playing a role.
- Croatia is not part of the Eurozone and uses the Kuna (HRK) as its currency.
- Maternity Leave: Pregnant employees are entitled to 98 days of leave, which can begin 28 days before the due date or up to 45 days where there are complications. Full entitlement depends on having made the required contributions to the Croatian Health Insurance Fund (HZZO)
- Sick Leave: Employees unable to work through ill health receive the first 42 days of benefit paid by their employer at a statutory minimum of 70% of salary, although most employers pay the full amount. After 42 days employers are compensated through the HZZO
- Minimum Wages: The minimum wage for 2022 was set by the Government at HRK 4,866 (€623.70, US$694) equating to HRK 56,640 (€7,484, US$8,082) based on 12 payments annually. Some foreign employers must earn more than the minimum by up to twice the national average
- Probation Periods: Employers must give seven days’ notice to persons on a trial period, which cannot exceed six months
- Working Hours: A regular working week is 40 hours over five eight-hour days as set by the Labor Act. Hours can be redistributed to more or less than eight per day up to 48 a week – or 56 in exceptional circumstances – but must average 40 a week over 12 months
- Overtime: Extra hours cannot exceed 10 a week or 180 annually unless collective agreements allow up to an annual maximum of 250. Overtime rates depend on contracts or agreements as the Labor Act makes no statutory provisions. Employers must request overtime in writing
- Notice Periods: Statutory notice periods depend on the length of service. Two weeks for one year’s continuous service; six weeks for two years’ service; two months for five years’ service; 10 weeks for 10 years of service; three months for more than 20 years’ service
- Termination, Severance, Redundancies: Under the Labor Act, justifiable termination includes such economic reasons; breach of contract; incapacity to fulfil work duties. Statutory Severance pay is one-third of the average salary over the previous three months multiplied by years of continuous service with the same employer, capped at six times the average monthly salary. Dismissing at least 20 staff over 90 days involves collective dismissal or redundancy regulations. The Croatian Employment Service has the power to suspend the dismissals for up to 30 days.
- Paid Vacations: The statutory minimum is 20 days of paid leave per calendar year, after six months of continuous employment, and excludes public holidays or statutory non-working days. Leave must include one period of two weeks and unused allowance must be taken by June 30 of the following year
Social Security in Croatia
The social security program in Croatia covers health insurance and pensions. The Ministry of Health is responsible for administering the health system and the functions of the Health Insurance Fund (HZZO).
Healthcare contributions are mandatory for employers on behalf of their employees. All residents must have health insurance, while European Union and European Economic Area citizens can be covered by insurance from their home country’s social security organizations. Employers contribute 16.5% of gross salaries to health insurance.
The state pension system has two mandatory tiers, Pillars 1 and 2, while Pillar 3 is based on voluntary contributions. The Croatian Pension Insurance Institute (HZMO) administers pillar 1 with benefits governed according to the Pension Insurance Act. Pillar two is based on private sector funds under the supervision of the Financial Services Supervisory Agency.
Employees contribute 20% of gross income to the pension fund, split 15% to pillar 1 and 5% to pillar 2.