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Employment Agreement Termination in Serbia in 2026

17/03/2026

Employment Contract Termination in Serbia 2026 | Zunic Law

Updated: March 2026 | Next review: September 2026

Every employer faces the challenge of terminating an employment contract sooner or later. Regardless of the reason, whether it involves restructuring, cost reduction, or inadequate performance, dismissal is not merely a legal process but also a moral and organisational responsibility.

Serbia does not recognise the concept of at-will employment. Termination by the employer must fall under one of the statutory grounds set out in the Labour Law, and must be substantiated with concrete facts and evidence. Every missed procedural step opens the door to litigation, and the consequences of unlawful dismissal can be serious: reinstatement, compensation for lost wages, and additional damages of up to 36 monthly salaries where reinstatement is not possible.

This guide provides a comprehensive overview of all forms of employment termination, the grounds for dismissal, the statutory procedure, and the most common employer mistakes in 2026.

60 days deadline within which an employee may initiate a labour dispute from the date of delivery of the dismissal decision (Labour Law, Art. 195)

Contents

Ways of terminating employment
Termination of an open-ended employment contract
Termination of a fixed-term employment contract
Grounds for employer-initiated dismissal
Dismissal for breach of work duty
Dismissal for breach of workplace discipline
Dismissal for failure to meet performance targets
Dismissal due to redundancy
Written warning before dismissal: a mandatory step
Employee resignation and notice period
Mutual termination of employment
Severance pay: when is the employer obliged to pay it?
Consequences of unlawful dismissal
Frequently asked questions

1. Ways of terminating employment

TL;DR: Employment can end in several ways: employer-initiated dismissal, employee resignation, mutual agreement, expiry of a fixed-term contract, retirement, and other cases provided by law. Employer-initiated dismissal generates the most disputes in practice and demands the strictest observance of the statutory procedure.

Under the Labour Law, employment terminates in the following cases:

expiry of the agreed period (fixed-term contracts);
when the employee reaches 65 years of age and has at least 15 years of pensionable service, unless the employer and employee agree otherwise;
by agreement between the employee and the employer;
by termination of the employment contract by the employer or the employee;
at the request of a parent or guardian of an employee under 18 years of age;
death of the employee;
in other cases provided by law.

Each of these modes carries its own rules and specificities. The most complex and legally risky for the employer is dismissal initiated by the employer, which is covered in detail below.

TL;DR: Not every end of employment is a dismissal. Expiry of a fixed-term contract or retirement does not trigger the dismissal procedure. Employer-initiated dismissal must always have a lawful basis and be carried out in procedurally correct manner.

2. Termination of an open-ended employment contract

TL;DR: An open-ended employment contract is the rule under the Labour Law. Its termination by the employer must be based on one of the statutory grounds and carried out through the prescribed procedure. A mistake at any procedural step can result in the dismissal decision being annulled and an obligation to pay damages.

The Labour Law treats an open-ended employment contract as the default. A fixed-term contract is an exception, permitted only when the legally prescribed conditions are met.

In practice, some employers misuse fixed-term contracts: they enter into them even when the conditions are not fulfilled, or extend the employment relationship beyond the statutory maximum of 24 months. This does not give the employer an easier position upon dismissal, because the conditions and procedure for dismissal are identical regardless of the type of contract.

Employer-initiated termination of an open-ended employment contract must be:

based on one of the statutory grounds;
substantiated by concrete facts and evidence;
carried out through the prescribed procedure (written warning, time to respond, written decision).

TL;DR: Employers who keep employees on fixed-term contracts beyond the statutory limit, hoping this will make dismissal easier, are mistaken. The dismissal procedure is identical to that for open-ended contracts.

3. Termination of a fixed-term employment contract

TL;DR: A fixed-term employment contract may only be concluded where there are objective reasons justified by a time limit, the completion of a specific task, or the occurrence of a particular event. The maximum duration is 24 months (with statutory exceptions). Early termination of such a contract is only possible if the circumstances that existed at the time of conclusion have ceased to exist.

A fixed-term employment contract is concluded where the duration of the employment relationship is determined in advance by objective reasons justified by a time limit, the completion of a specific task, or the occurrence of a particular event. An employer may enter into one or more such contracts with the same employee for a total period not exceeding 24 months.

Exceptionally, the period may exceed 24 months in the following cases provided by law:

replacement of a temporarily absent employee, until the absent employee returns;
work on a project whose duration is determined in advance, up to the completion of the project;
a foreign national employed under a work permit, up to the expiry of the permit;
a newly established employer (registered no more than one year prior), for a total of up to 36 months;
an unemployed person who lacks up to five years to meet the conditions for old-age pension, up to the fulfilment of those conditions.

In practice, a fixed-term contract most commonly ends by the simple lapse of the agreed period. A distinctive feature of this type of contract is that it may be terminated early if the circumstances for which it was concluded have ceased to exist.

TL;DR: Early termination of a fixed-term contract is not automatically lawful merely because of the type of contract. Every dismissal, regardless of contract type, must have a lawful basis and be procedurally correct.

4. Grounds for employer-initiated dismissal

TL;DR: The Labour Law provides for four groups of grounds for employer-initiated dismissal: grounds relating to the employee's capacity and conduct, breach of work duty, breach of workplace discipline, and grounds relating to the employer's needs. Each ground has its own procedure and consequences if carried out incorrectly.

The Labour Law provides that an employer may terminate an employee's contract if there is a justified reason falling within one of the following four groups:

Category	Examples
Employee capacity and conduct	Failure to meet performance targets, lack of required knowledge and skills, final criminal conviction for an offence committed at work
Breach of work duty	Negligent and careless performance of duties, abuse of position, improper use of work equipment
Breach of workplace discipline	Unjustified refusal to carry out instructions, abuse of sick leave, reporting to work under the influence of alcohol
Employer's needs	Redundancy, refusal to sign an annex to the employment contract

In addition to the grounds provided by statute, employers may establish further grounds for dismissal in their internal rules (Rulebook on Work), within the limits permitted by the Law. Many employers are unaware of this option, yet it can be decisive in court proceedings. A particularly relevant example is introducing unauthorised use of artificial intelligence as a breach of work duty in internal rules. For more on how employers can protect themselves, see our blog Do You Need a Rulebook on Work?

TL;DR: If a ground for dismissal exists but is not provided for either in the Law or in the employer's internal rules, the dismissal will not be lawful. Well-drafted internal rules are the employer's first line of defence in litigation.

5. Dismissal for breach of work duty

TL;DR: Dismissal for breach of work duty requires fault on the part of the employee. The Law provides examples of breaches (negligent performance, abuse of position, exceeding authority, improper use of work equipment), but internal rules may define additional breaches. A written warning and a minimum eight-day period to respond are mandatory before issuing the dismissal decision.

Dismissal for breach of work duty is one of the most common grounds for dismissal in practice. The Law provides the following examples of breaches of work duty:

negligent and careless performance of work duties;
abuse of position or exceeding authority;
improper and irresponsible use of work equipment;
failure to use, or improper use of, personal protective equipment provided by the employer;
other breaches of work duty established by a general act or the employment contract.

This list is not exhaustive. Employers can and should use the Rulebook on Work to define additional breaches relevant to their business, including unauthorised use of artificial intelligence, disclosure of trade secrets, and similar conduct.

Example: An employee uses confidential client data for private business activities. An employer whose Rulebook on Work clearly defines the misuse of confidential data as a breach of work duty is in a substantially stronger position before the court than an employer who relies solely on the general statutory formulation.

TL;DR: Having a ground is not enough. The ground must be clearly defined in internal rules and supported by evidence. The court does not only assess whether the breach occurred, but also whether the entire procedure was correct.

6. Dismissal for breach of workplace discipline

TL;DR: The Law lists examples of breaches of workplace discipline: unjustified refusal to carry out instructions, failure to submit a sick leave certificate, abuse of sick leave, reporting to work under the influence of alcohol or narcotics, providing false information when entering employment, and others. A prior written warning is also mandatory for this ground of dismissal.

Unlike breach of work duty, which requires fault, breach of workplace discipline covers specific employee conduct that disrupts the functioning of the workplace. The Law provides the following examples:

unjustified refusal to perform work and carry out the employer's lawful instructions;
failure to submit a certificate of temporary incapacity for work within the statutory deadline;
abuse of the right to absence due to temporary incapacity for work;
reporting to work under the influence of alcohol or other narcotics, or consuming alcohol or narcotics during working hours;
providing false information that was material to establishing the employment relationship;
refusal by an employee working in high-risk positions to undergo a health assessment;
breach of workplace discipline established by the employer's rules, where the conduct is such that the employee cannot continue working for the employer.

Employers may establish further examples of workplace discipline breaches in their internal rules, which is always recommended. As with breach of work duty, dismissal for breach of workplace discipline must be reasoned and must be preceded by a written warning.

TL;DR: Clearly defined workplace discipline rules in internal acts are not a formality, but a prerequisite for a lawful dismissal in the event of a breach. Without a precise internal act, the court may conclude that the employee was not sufficiently warned about the rules of conduct.

7. Dismissal for failure to meet performance targets

TL;DR: Unlike dismissal for breach of work duty, dismissal for failure to meet performance targets does not require fault on the part of the employee. An objective finding that the employee is not achieving results or lacks the knowledge and skills for the job is sufficient. This is a procedurally sensitive ground that requires particular care and prior documentation.

Where an employee fails to achieve the required results and lacks the knowledge and skills to perform the duties of the position for which the employment contract was concluded, the employer may terminate the contract without needing to establish the employee's fault.

However, precisely because fault is absent, this is procedurally one of the most sensitive grounds for dismissal. For the dismissal to be lawful, it is necessary:

that the performance criteria are clearly defined in internal rules or the employment contract;
that the employee was made aware of those criteria;
that documented evidence of the failure to meet targets exists;
that the employee was given an opportunity to respond before the dismissal decision was issued.

TL;DR: Without clearly defined performance criteria and documentation showing that the employee is not meeting them, this ground for dismissal is unlikely to hold up in court.

8. Dismissal due to redundancy

TL;DR: Redundancy dismissal is possible where, due to technological, economic, or organisational changes, the need to perform certain work ceases or the volume of work is reduced. This ground is independent of the employee's (in)ability. The procedures are complex and formal, and mistakes in them are costly. All statutory alternatives should be considered before proceeding with dismissal.

Redundancy dismissal is one of the most complex and procedurally demanding grounds for termination. A detailed overview of the mistakes employers make in this process, as well as the steps they must take, can be found in our blog Redundancy Dismissal in Serbia.

Key points to bear in mind:

under certain conditions, the employer is required to adopt a redundancy resolution programme, after prior consultation with the trade union and the National Employment Service;
the criteria for determining which employees are redundant must be objective, clearly defined, and properly applied;
the Rulebook on Organisation and Job Classification must be amended;
measures to re-employ redundant employees must be taken before dismissal;
severance pay must be paid before the dismissal decision is issued;
no new person may be hired for the same position within three months of the dismissal.

Before deciding to dismiss employees as redundant, we recommend considering alternatives to redundancy dismissal, from unpaid leave and reduced working hours to reassignment. These measures can avoid or delay a costly dismissal procedure.

TL;DR: Redundancy dismissal carries high financial and legal risk. Any failure in the complex procedure can result in a finding of unlawful dismissal and damages in amounts that can exceed the annual HR budget.

9. Written warning before dismissal: a mandatory step

TL;DR: In the case of dismissal for breach of work duty or breach of workplace discipline, the employer is required to issue the employee with a written warning and allow at least eight days to respond before issuing the dismissal decision. This step is not a formality: omitting it renders the dismissal unlawful regardless of how well-founded the underlying reason may be.

The obligation to issue a written warning before dismissal is one of the most frequent points at which employers lose litigation. The legislature has clearly prescribed that the employee must be given an opportunity to respond to the allegations in the warning, so that they can present their side of the story and potentially provide evidence or explanations that could influence the employer's final decision.

The written warning must contain:

a description of the breach of work duty or workplace discipline that is being attributed to the employee;
the evidence on which the employer bases the allegation;
a clear statement of the deadline for the employee to submit a written response (minimum eight days);
an indication that failure to respond will not prevent the employer from issuing the dismissal decision.

In practice, the warning should be served in a manner that confirms receipt: by delivery to the employee in person with a signed acknowledgment, or by registered mail with return receipt. A warning that cannot be proved to have been served is, for legal purposes, equivalent to no warning at all.

Example: An employee visibly arrives at work under the influence of alcohol. The employer immediately issues a dismissal decision. The ground is entirely justified, as reporting to work under the influence of alcohol is explicitly listed in the Law as a ground for dismissal. However, the procedure was not followed: before the dismissal decision for breach of workplace discipline, the employer was required to issue a written warning and allow the employee at least eight days to respond. Without that step, the decision is formally unlawful regardless of the obvious nature of the grounds.

The consequence of omitting the warning in court proceedings: the court annuls the dismissal decision.

TL;DR: The written warning is not bureaucracy, but a statutory obligation and a key piece of evidence in any subsequent litigation. Without a written warning with proof of delivery, the employer enters proceedings without the most important document.

10. Employee resignation and notice period

TL;DR: An employee who resigns is required to give the employer written notice at least 15 days before the date they specify as the last working day. The employer's general rules may extend the notice period to a maximum of 30 days. If the employee fails to observe the notice period, the employer may claim damages.

Employee resignation less frequently leads to disputes, since the employee has personally expressed the wish to end the employment relationship. However, rules exist here too that both parties must observe.

The notice period is mandatory. The employee must give written notice of resignation at least 15 days before the date specified as the last day of employment. Under the employer's general rules (Rulebook on Work), the notice period may be extended, but not beyond 30 days.

If the employee fails to observe the notice period and the employer suffers loss as a result, the employer may claim compensation for that loss. Where the employment contract or the Rulebook provides for a contractual penalty for failure to observe the notice period, that penalty could also potentially be applied.

The only way for employment to end without observing the notice period is by agreement between the employer and the employee. In that case, a mutual termination agreement may be signed on the same day, which effectively eliminates the need for a notice period.

TL;DR: Employers who wish to retain employees until a replacement is found should have a clearly defined notice period in the Rulebook on Work, up to the maximum of 30 days. Without an internal rule, the statutory minimum of 15 days applies.

11. Mutual termination of employment

TL;DR: Mutual termination of employment is the "amicable" way of ending the employment relationship that eliminates the risk of litigation. As with entering into employment, both parties agree on the terms. However, employers must take care to properly inform the employee, otherwise the employee may subsequently seek to have the agreement annulled.

A mutual termination agreement is an arrangement under which the employer and the employee agree on all the terms of ending the employment relationship. This is the simplest and least risky way to end employment, as it eliminates the possibility of subsequent litigation over the unlawfulness of the dismissal.

The employer's key obligation in a mutual termination: the employee must be clearly and fully informed of all relevant facts, the rights to which they are entitled, the amount they will receive, and the consequences of signing the agreement. A failure in this duty may give the employee grounds to subsequently seek annulment of the agreement.

It should be noted that an employee who ends employment by mutual agreement loses the right to unemployment benefits from the National Employment Service, unlike an employee who has been made redundant. This circumstance can affect the negotiating position of both parties.

TL;DR: Mutual termination of employment is the safest option for the employer, but requires carefully prepared documentation and clear communication with the employee. A poorly drafted agreement can be annulled, returning both parties to square one, only now with more problems.

12. Severance pay: when is the employer obliged to pay it?

TL;DR: The Law provides for mandatory severance pay in two cases: retirement (at least two average salaries) and redundancy dismissal (minimum one third of the monthly salary per year of service with that employer). In all other cases, severance pay is not a statutory obligation, unless it is provided for in internal rules or the employment contract.

Severance pay is a statutory obligation in two situations only:

retirement: in accordance with the Rulebook on Work, at least the equivalent of two average salaries;
redundancy dismissal: minimum one third of the salary for each completed year of employment with that employer, paid before the dismissal decision is issued.

The salary figure used as the basis for calculating severance pay is the employee's average monthly salary paid in the preceding three months. More favourable terms may always be provided for in a general act or an employment contract.

A notable exception: if the employer arranges employment for a redundant employee with another employer, thereby effectively resolving their employment status, the obligation to pay severance does not arise. An employee cannot waive their right to severance pay in advance, as such a waiver would have no legal effect.

TL;DR: Severance pay in redundancy cases must be paid before the dismissal, not after. This is a common employer mistake and attracts regulatory liability in addition to the procedural consequences.

13. Consequences of unlawful dismissal

TL;DR: Unlawful dismissal can result in reinstatement, compensation for lost wages for the entire duration of the dispute, damages of 6, 18, or 36 monthly salaries, statutory interest, litigation costs, and fines of up to RSD 2,000,000. A detailed account of all scenarios and amounts is available in a dedicated blog on compensation for unlawful dismissal.

If the employee initiates litigation and prevails, the employer faces a combination of the following consequences:

reinstatement of the employee (where the employee has requested it) or damages of up to 36 monthly salaries;
payment of lost wages for the entire period from dismissal to enforcement of the judgment, inclusive of taxes and contributions;
statutory default interest on each awarded amount from the date the damage arose;
litigation costs, including the opposing party's legal fees;
fines of between RSD 800,000 and RSD 2,000,000 for regulatory liability, where regulatory proceedings are initiated.

Labour disputes in Serbia take an average of two to three years at first instance, according to data regularly published in the annual reports of the First Basic Court in Belgrade.^[1] Throughout that period, interest accrues and the employer also pays its own legal fees. The total cost upon conclusion of the dispute regularly exceeds the amount the employee originally sought.

A detailed overview of all scenarios, compensation amounts, and how costs accumulate is available in our blog on compensation for unlawful dismissal.

TL;DR: Serbian court practice is favourable to the employee as the "weaker" contracting party. An employer who enters litigation with procedural shortcomings has little prospect of success, regardless of how well-founded the underlying grounds for dismissal may be.

Frequently asked questions about employment contract termination

Can an employer terminate an employment contract without any reason?

No. Serbia does not recognise at-will employment. Every employer-initiated dismissal must be based on one of the statutory grounds and substantiated by concrete facts and evidence. A dismissal without a lawful basis is unlawful and the employee may challenge it before the court within 60 days of the date of delivery of the dismissal decision.

What happens if the employer fails to issue a written warning before dismissal?

The dismissal is unlawful. The court will annul the dismissal decision regardless of whether the underlying reason was justified. A written warning with a minimum eight-day period for the employee to respond is mandatory in cases of dismissal for breach of work duty and breach of workplace discipline.

What is the difference between breach of work duty and breach of workplace discipline?

Breach of work duty relates to the failure to perform the actual work tasks (negligent performance, abuse of position), while breach of workplace discipline relates to conduct that disrupts order and discipline at the workplace (reporting to work under the influence of alcohol, abuse of sick leave). In both cases a prior written warning is required, but the distinction may be relevant to the level of compensation awarded in litigation.

How much does an unlawful dismissal cost?

Depending on the scenario, the total cost can be very high. If the dismissal was made without lawful grounds and the employee does not seek reinstatement, the court may award up to 18 monthly salaries. Where reinstatement is not possible, the award may reach 36 salaries. On top of this come lost wages for the duration of the dispute (on average two to four years), statutory interest, litigation costs, and fines of up to RSD 2,000,000. A detailed overview of all amounts is available in our blog on compensation for unlawful dismissal.

What are the alternatives to dismissing employees?

Before initiating a dismissal procedure, we recommend considering the statutory alternatives: mutual termination of employment, temporary recruitment freeze, unpaid leave, reduced working hours with a proportional reduction in salary, redistribution of tasks, and reassignment of employees to other positions. A detailed overview of all options is available in our blog Redundancy: Alternatives.

A properly conducted dismissal is not merely a legal obligation, but also a reflection of the company's legal and business culture. Every missed procedural step can be exploited in litigation that lasts years and costs many times more than obtaining legal advice at an early stage.

Our employment law team helps employers establish procedures that are lawful, documented, and enforceable, from drafting internal rules to representation in labour disputes. If you are facing a dismissal procedure or wish to review your existing procedures, schedule a consultation with an employment law specialist.

About the author

Aleksandra Jaćimović, Senior Associate

Aleksandra Jaćimović is an attorney-at-law at Zunic Law focusing on employment law. She represents employers and employees in employment contract termination, redundancy, and court proceedings. She advises companies on internal rules, employment contracts, and confidentiality agreements. View full profile.

Reviewed by

Vitomir Žunić, Managing Partner

Vitomir Žunić is the founder and senior partner of Zunic Law. He leads the team in corporate law, M&A transactions, and commercial disputes. He advises founders, investors, and international companies on doing business in Serbia. View full profile.