Employment may be terminated in several ways in Serbia, and the termination of an employment agreement by an employer is the most frequent method found in practice.
Termination of the employment agreement for redundant employees (so-called "technological redundancy") is provided to employers by the Labor Law1, when due to technological, economic, or organizational changes the need to perform a certain job ceases, or when the employer reduces the scope of work.
This cause for termination refers solely to the needs of the employer and is independent of any employee's (in)capabilities.
It is extremely important to carry out the redundancy procedure, as well as the entire termination procedure, following the law, because otherwise, the termination of the employment agreement may be unlawful.
Contents
- You Have not Adopted the Employee Redundancy Program
- You Have not Properly Defined and Applied the Redundancy Selection Criteria
- You Have not Amended the Rulebook on Internal Organization and Systematization
- You Have not Taken Appropriate Measures for Rehiring Redundant Employees
- You Have not Provided a Rationale for the Decision on Termination of Employment
- You Didn't Pay the Severance Payment to the Employee
- You Increased the Number of Employees after Making Employees Redundant
- You Cannot Prove the Workload Is Reduced
- Technological Redundancy: Employer's Obligations
- Frequently Asked Questions
1. You Have not Adopted the Employee Redundancy Program
In the process of determining redundancy, some employers must adopt a program for settling redundancies, the proposal of which is previously submitted to the National Employment Service and the trade union organization of the employer.
If you belong to the group of employers who are obliged to adopt this program, and you fail to do so, this may be the basis for a lawsuit on the part of your employees whose employment agreement was terminated due to redundancy.
The obligation to adopt an employee redundancy program exists if, due to technological, economic, or organizational changes in a certain period, you lay off a certain number of employees employed for an indefinite period, as follows:
| Company size (permanent employees) | Number of employees / period | Programme required |
|---|---|---|
| More than 20, fewer than 100 | At least 10 employees within 30 days | Yes |
| At least 100, up to 300 | At least 10% of employees within 30 days | Yes |
| More than 300 | At least 30 employees within 30 days | Yes |
| Regardless of size | At least 20 employees within 90 days | Yes |
That would mean that if, for example, you have less than a hundred employees, and anticipate 8 employees to be made redundant due to organizational changes, you are not obliged to adopt the employee redundancy program.
Also, you are not obliged to adopt the employee redundancy program even if the employee whose employment is terminated due to technological redundancy is the only employee in that position: that is, there is no reduction in the number of employees, but termination of a workplace position.
However, the fact that you do not have a legal obligation to enact a redundancy program does not mean that your decision to lay off someone as redundant may be arbitrary or unsubstantiated. In such a case, you are obliged to determine in advance by a bylaw that the need for a certain number of employees has ceased, based on which it will be assessed which employees are redundant.
2. You Have not Properly Defined and Applied the Redundancy Selection Criteria
When you must downsize employees in a work position due to technological, economic, or organizational changes (for instance, from five to three employees), whether the decision you make will be lawful depends on whether you have appropriately defined and applied the criteria for selecting employees for redundancy.
These criteria must be objective and clear. You are obliged to apply criteria for selecting redundant employees, even when there is no obligation to adopt a redundancy program. What is especially important to point out is that the criteria must be clearly defined in advance by your internal procedures, so that the entire procedure is transparent and legal.
If the employee initiates court proceedings against you to prove that the decision to terminate the employment is unlawful, the court would only review whether you applied the prescribed criteria, and would not enter the evaluation procedure itself, as this is an autonomous right of the employer.
The employer does not have discretion over deciding, without applying a certain criterion, which employees are redundant.
3. You Have not Amended the Rulebook on Internal Organization and Systematization
For the procedures of selecting redundant employees and termination due to redundancies to be carried out in accordance with the law, it is necessary to amend the Rulebook on internal organization and systematization.
By the bylaw amending the Rulebook on the organization and systematization of jobs, the employer performs one of two actions:
- Option 1: Elimination of a work position: the position is abolished entirely. It is necessary to provide proof that the need for work in that job has ceased.
- Option 2: Reduction of the number of employees in a position: the position remains, but the headcount is reduced. It is necessary to provide clear and articulate reasons why a certain employee was selected for redundancy from a pool of others who perform the same job, using the criteria described in the previous section.
Failure to amend the Rulebook on internal organization and systematization would make the decision on termination of employment agreement unlawful, and your employee would have grounds to initiate legal proceedings against you.
4. You Have not Taken Appropriate Measures for Rehiring Redundant Employees
You are required to take appropriate measures for the rehiring of redundant employees, in cooperation with the National Employment Service and the representative union.
Appropriate measures for rehiring include, for example:
- providing the employee with employment at another employer;
- assigning the redundant employee to another job within the company;
- offering the employee the conclusion of an annex to the employment agreement for another work position.
If the employee refused such a measure, the termination of the employment agreement as redundancy could not be deemed unlawful. Also, if you offered the employee an annex to the employment agreement for another work position and the employee refused, the termination would be lawful; of course, if all the previous steps have been followed.
Termination of the employment agreement for redundancy is also established as lawful in a situation when you cannot provide the employee with work in other positions, as well as when there are no conditions to apply other measures for rehiring redundant employees. Of course, it is necessary to be able to prove this.
On the other hand, you would make a mistake if you made an employee redundant while, at the time of the termination, there was a vacancy that was adequate to that employee's level of qualifications, and you did not reassign the employee to that position.
5. You Have not Provided a Rationale for the Decision on Termination of Employment
One of the most common stumbling blocks for employers, which can cause multiple consequences, is deciding on termination of employment with a rationale that is not clear and detailed enough.
Having in mind the nature of these grounds for termination of employment, the employer is obliged to state in detail:
- what the organizational, economic, or technological changes consist of;
- the reasons why the need for the employee's work has ceased;
- why the need for the work of that employee, and not someone else, has ceased; this applies when there are several executors in the same job.
It is frequent in practice that employers terminate the employment agreement without any explanation and declare one of, for example, four employees as redundant. Not only must the decision contain an explanation, but it must not contain flat and arbitrary allegations.
6. You Didn't Pay the Severance Payment to the Employee
You are obliged to pay severance to the employee who has been declared redundant before the termination of the employment agreement.
Interestingly, the termination of the employment agreement will not be unlawful if you have paid severance in a smaller amount than that due to the employee. In that case, the employee could initiate court proceedings against you for payment of the remaining part of the severance, but not for determining that the termination of the employment agreement is unlawful (provided that you did not make any of the above mistakes in implementing the termination procedure).
It is important to note that an employee cannot waive their right to severance. In other words, such a waiver statement would not produce a legal effect, and the employee would have the right to initiate proceedings for payment of severance even if they signed a waiver statement.
As mentioned previously, there is no obligation to pay severance to an employee if you have enabled them to be employed by another employer within the measures for new employment, thereby resolving their employment status.
7. You Increased the Number of Employees after Making Employees Redundant
When you make an employee redundant, you cannot hire a new employee in the same position within 3 months of the termination of that employee's employment. If the need to perform the same jobs re-emerges within 3 months, the employee who has been made technologically redundant has the advantage for new employment.
In practice, employers make various mistakes about this obligation:
- Some employers hire another person in the same workplace where the employee's employment ceased due to technological redundancy, before the 3-month period ends.
- It also happens that the employer lays off the employee because it is determined that the need to work in that workplace has ceased, and in the next 3 months the number of employees in that workplace is increased by the deployment of employees from other jobs. Since it is obvious that in this situation the need to eliminate the position did not genuinely exist, this action by the employer would make the termination of employment wrongful.
8. You Cannot Prove the Workload Is Reduced
In practice, the questionable and problematic basis for which an employer can terminate an employee's employment agreement is a reduction in the workload. An employer's simple statement that there has been a reduction in the workload will not be enough to make the termination lawful and grounded.
The case law has taken the position that if the employer operated with a positive balance in the year when they terminated the employment agreement of the redundant employee, the decision on termination would be unlawful, because there is no possibility to prove that the workload decreased.
We believe that this view is challenging and too harsh on employers, because operating with a positive balance does not automatically mean that no workload has been reduced in any sector. It is possible that in some sectors the workload has increased significantly; this can contribute to a positive overall balance while at the same time in another sector it has decreased, and objectively there is no need for certain employees to work.
For this reason, documentation is essential before initiating the procedure on this ground:
- financial statements showing a decline in revenue or turnover in the relevant area;
- contractual data showing a reduction in the number or value of contracts;
- market analysis or forecasts that justify the organisational change;
- internal documentation on process reorganisation.
How to Avoid Mistakes?
The practice has shown us that this ground for termination is one of the most challenging in practice, and therefore we would recommend exceptional caution in the execution.
Caution at every step in the process of determining redundant employees and terminating employment agreements is necessary, because when you receive a lawsuit for determining wrongful termination, it may already be too late.
Technological Redundancy: Employer's Obligations
| Step | Obligation | Consequence of failure |
|---|---|---|
| 1. Redundancy programme | When statutory thresholds are met | Unlawful dismissal |
| 2. Redundancy criteria | Always, set out in internal acts | Unlawful dismissal |
| 3. Amendment of Rulebook | Always | Unlawful dismissal |
| 4. Re-employment measures | Always (with trade union and NES) | Unlawful dismissal (if a suitable vacancy exists) |
| 5. Rationale in the decision | Always, concrete and detailed | Unlawful dismissal |
| 6. Payment of severance | Before the decision takes effect | Administrative liability + claim for the difference |
| 7. Re-hiring prohibition (3 months) | For the same position | Retroactively unlawful dismissal |
If within 3 months from the day of termination of the employment of an employee deemed a technological redundancy you need to fill the same position, you must first offer the job to that employee. Only if the employee declines may you hire someone else.
The entire procedure of terminating the employment agreement, both on this and any other grounds, must be implemented very carefully to avoid far-reaching consequences for your company. Adoption of appropriate internal procedures, prior understanding of the legal procedure, and awareness of all potential risks for the employer, are the cornerstone of proper implementation of the termination procedure in case of technological redundancy.
Frequently Asked Questions about Technological Redundancy in Serbia
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How much is severance pay for technological redundancy in Serbia?
The statutory minimum redundancy severance is one-third of the employee's monthly salary for each completed year of employment with that employer. The reference salary is the average monthly salary paid in the preceding three months. More favourable terms may be provided by the employer's general act or by the employment contract. Severance must be paid before the dismissal decision is delivered to the employee.
Is a redundancy programme always required?
A redundancy programme is only mandatory when the number of employees whose employment is terminating within a given period exceeds the statutory thresholds set by the Labour Law. If those thresholds are not reached, no programme is required. However, even without a programme, objective redundancy criteria must be defined in advance and consistently applied. For more on dismissal grounds and procedures, see our guide on Labour Law in Serbia.
Can an employee challenge a technological redundancy dismissal?
Yes. An employee has the right to bring a labour dispute before the competent court to have the dismissal declared unlawful. Serbian courts closely scrutinise the entire procedure, and any of the eight steps described in this blog can independently serve as a ground for annulling the dismissal decision.
What happens if severance is paid in a lower amount than the legal minimum?
Paying severance below the statutory minimum does not automatically render the dismissal unlawful, provided all other procedural steps were properly followed. The employee retains the right to bring a separate claim for payment of the difference. The employer also faces administrative liability and significant fines.
Can an employee waive their right to severance?
No, not in a legally effective way. A declaration by an employee waiving the right to redundancy severance has no legal effect. Even if the employee signed such a waiver, they retain the right to bring a claim for payment. The right to redundancy severance is a statutory minimum that cannot be validly waived in advance.
Can you hire someone new right after making an employee redundant?
No. Within 3 months of the dismissal for technological redundancy, you may not hire a new person for the same position. If the need for those duties re-emerges within that period, the dismissed employee has the right of first refusal for re-employment. Only if they decline may you hire someone else.
1 Labor Law of the Republic of Serbia (Official Gazette of the Republic of Serbia, Nos. 24/2005, 61/2005, 54/2009, 32/2013, 75/2014, 13/2017, 113/2017, 95/2018, 157/2020, 63/2021, 92/2023), available at: paragraf.rs/propisi/employment-act-republic-serbiahtml
