€2,654.14 per misclassified employee plus the possibility of having the business premises, devices, and equipment for work sealed by the labour inspector.

FUN FACT

The number of Croatians living in their home country is close to the number of expatriates — 4.2 million.

Taxes

Employer tax:

16.5% + €5 - €527

Social security: 16.5%

Chamber of Commerce contributions: €5 - €527

Employee tax:

40% - 50% + municipal tax levied as surtax to the income tax

Social security: 20% capped at EUR 970 monthly and EUR 12,095 annually

Municipal tax 10% - 18% depending on the city of residence, levied as a surtax to the income tax liability.

Income tax:

GROSS INCOME	PROGRESSIVE TAX RATE
Up to €50,399	20%
Over €50,399	30%

Croatia Employment Cost Calculator

Use our handy calculator to understand what are all the employment costs you have to consider in Croatia

Provide us with some extra details and we will send you a full breakdown of the salary costs.

Employment Model in Croatia

Usually an Employer of Record acts as the legal employer in a country where the company isn't registered as an employer. However, in Croatia, the employment model requires a temp agency licence. The temp agency takes care of all Croatia compliance aspects of employment, including payroll, taxes, statutory benefits, employment contracts and more.

the temp agency is responsible for:

Ensuring their employment is compliant with local employment laws

Processing local payroll

Filing employment related taxes and returns

Issuing payslips to the employee

Distributing salary payments

The employment model in a nutshell

COMPANY

Maintains a direct relationship with the employee, allocates them work tasks, and manages their performance.

BOUNDLESS

Takes care of payroll, taxes, benefits, ensuring the employee and the company are compliant with all legal regulations.

EMPLOYEE

Signs an employment agreement with Boundless and fulfils all of their obligations as a worker for the company.

Statutory Benefits in Croatia

Pension

The Croatian pension system is divided into three pillars. For the first two pillars, contributions are mandatory by employees. Employers’ contributions are optional and fall under the third pillar of the system.

Health insurance

Croatia provides basic mandatory health insurance to all of its residents, funded through social security contributions by employers

Common Non-mandatory Benefits in Croatia

Meal

Public Transportation allowance

Supplementary pension

Supplementary health insurance

Life insurance

Cash bonus

Flexible working hours

Wellness

Stock options

Employee Rights and Protections in Croatia

Written employment contract

Training

Union membership

Work flexibility

Whistleblower protection

Protection from discrimination

Protection from harassment

Data protection

Pregnancy rights

Leave

Paid time off: 20 days + bank holidays

Paternity leave: 10 days

Sick leave: 18 months. First 42 days are paid by the employer, the rest by Croatian Health Insurance Fund (“Hrvatski zavod za zdravstveno osiguranje or HZZO”) at a rate between 70% and 100%. The rate could be determined by a collective or employment agreement.

Parental leave: 4 months per child per parent for the first two children, increased to 15 months per child for subsequent children or twins

Maternity leave: 98 days + extra time until the child turns 6 months

Probationary period

Probationary periods can last a maximum of six months, with a notice period of at least seven days during the probationary period.

Payment Frequency

Salaries in Croatia are paid on a monthly basis.

End of Employment

Permanent employment contract termination requires a justified reason, except in situations of gross employee misconduct.

Employers must present employees with a written notice of dismissal, explaining the reasons for the employment termination, and respect the appropriate notice, which varies from two weeks to three months, depending on the length of service.

Upon termination, employers must de-register employees with the Tax and Insurance Authorities and pay employees any salaries and severance that are due and for unused holidays.

Severance pay varies based on the duration of employment and requires at least two years of service. For every year of work, employees are entitled to a minimum of 1/3 of their average monthly salary in the last three months before termination, capped at six months of salary.

Frequently Asked Questions

What are my options if I want to hire a worker in Croatia?

While there are generally four ways of employing people across borders, not all are legal or sensible. Here is an overview of each way to employ a worker in Croatia, outlining the potential cons.

HQ country employment & payroll

While the person is in Croatia, they are employed and payrolled directly by the company’s HQ entity.

Cons: This may appear attractive, but it generally isn't legal in the long term. HQ payroll won't be possible if the person is not a tax resident in the HQ country.

Independent contractor agreements

People are locally registered as sole traders or limited liability company owners in Croatia and invoice for their work. There is no direct employment relationship.

Cons: In Croatia, this is not a compliant or legal way to engage full-time workers who work solely for your company. There will be challenges in attracting and retaining talent.

Direct local employer setup

The company sets up as a fully-compliant local employer. This often involves setting up a local entity and local tax registration.

Cons: Expensive, time-consuming, high-level of complexity. Unknowns around how obligations and costs will evolve over time. There will be a need to stay on top of changes in regulations.

Partnering with an Employer of Record Croatia (temp agency licence holder)

Employment is handled by a platform that specialises in employing people on behalf of customer companies. The temp agency helps to hire and pay employees.

Cons: The ongoing costs may be higher than direct employment. Some education is needed to inform employees about how the employment relationship will work.

How long does it take to set up a company in Croatia?

Setting up a local company in Croatia is relatively straightforward. However, the difficult part comes after the initial setup when payroll needs to be calculated and run every month, taxes filed, benefits extended, change of rules and regulations followed. Here is an overview of everything you will find yourself needing to do.

Can I employ people as independent contractors in Croatia?

While many employers practice employing remote workers as independent contractors, it's a bad practice. If an individual is giving their full and undivided attention to your company in Croatia, treating them as an independent contractor is a likely breach of Croatian employment laws and of those in your country.

Your company could be liable for fines on owed holiday pay, sick pay, social welfare payments, paternity benefit, maternity benefit, or other legal measures. Since the individuals you are working with do not receive the benefit of local employment laws and protections that are often afforded to people working full-time hours.

What does HR compliance mean in Croatia, and why does it matter?

When you hire employees in Croatia, you have certain obligations as an employer. HR compliance is about ensuring your policies and procedures respect all applicable laws and regulations regarding employment and work practices. Complying with local employment law in Croatia is fundamental for the correct running of your business - not only because these laws are in place to protect employees and guarantee their rights are safeguarded, but to minimise your risk of liabilities as an employer. Being compliant means respecting and following all local labour laws, sick leave and illness benefits, annual leave, minimum wage, tax credits, working hours regulations.

How much does it cost to employ someone in Croatia?

As with every other country, there are certain costs associated with employing a worker in Croatia that come on top of the gross salary you are offering. A Croation employer must contribute to social security, which covers work accident insurance, pension, family and maternity benefits. They also have to make contributions to the Chamber of Commerce. To view the exact percentages and amounts given the salary you are planning to offer, you can use our handy calculator tool.

What does Employer of Record mean in Croatia?

While possible in many other countries, an employer of record model is not possible. However, an organisation holding a temp agency license can employ on behalf of another company in Croatia as far as the government, tax, and employment authorities are concerned. We are responsible for:

informing you about any pre-employment requirements
ensuring their employment is compliant with Croatian employment law
informing you about the length of the maternity leave, paternity leave, public holidays, illness benefits, medical benefits
providing a locally compliant employment contract
processing local payroll
filing employment-related tax returns
issuing payslips to the employee
distributing salary payments
payments to the local tax authorities

Customers that work with a temp agency in Croatia are responsible for:

sourcing and recruiting their own workers
managing the employee’s day-to-day work load
contributing to the personal / professional development of the employee through their work
following any guidance we give on employment and HR best practices or legal obligations in Croatia, such as the employment contract, public holidays, annual leave, sick leave, maternity and paternity benefits, probationary periods, overtime pay, statutory redundancy payments, liability insurance and many others
ensuring that payroll bills relating to their team are paid to Boundless before the cut-off point in each pay cycle

Who is responsible for filing and paying employees' taxes and social insurance contributions in Croatia if employing through a temp agency model?

Boundless as the legal employer files all pertinent taxes and social contributions as they relate to the compliant employment of an individual in Croatia.

How does Boundless as a temp agency legal employer ensure HR compliance in Croatia?

We carefully choose employment lawyers or advisories to partner with in each country we operate in, including Croatia. They ensure the Croatian employment contracts, and any other relevant documents required for new employees comply with the local jurisdiction. We have thorough discussions on specific norms such as payroll services, social protection, data protection, notice period or work-from-home regulations. Whenever a potentially sensitive issue arises in Croatia, our internal team contacts the relevant firm to ensure all steps are taken to resolve it promptly.

What are the legal responsibilities of a company when they use a temp agency service like Boundless in Croatia?

The company remains responsible and informs employees of the day-to-day management of the people and teams that are employed through Boundless, including any disciplinary or performance issues.

Boundless ensures compliance with Crioatian-specific procedures, practices and labour laws while employing people and teams on behalf of the company.

Do employees get all their rights and benefits when employed through a temp agency acting as the legal employer in Croatia?

Any new employee that is locally employed through a temp agency gets full employment rights and benefits as specified in Croatian employment law. They get a locally compliant employment contract, statutory maternity leave, annual leave, illness benefits, any relevant tax credit, and many more.

What taxes do I need to pay in Croatia?

In Croatia, both employers and employees have to pay taxes. For employers, these include social security, which covers work accident insurance, pension, family and maternity benefits. They also have to make contributions to the Chamber of Commerce. For employees, these are social security contributions, as well as municipal and income taxes. To get a clear overview of both employee and employer taxes, use our salary breakdown calculator, submitting any additional data needed and get a downloadable pdf like this one.

Choose Boundless as your employment partner in Croatia

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