Labor Law in Serbia – 8 Facts Foreign Investors Should Know

If you have been thinking about company formation in Serbia, one of the matters that you should understand is the legal perspective of employment and some of the essential characteristics of the Employment Law in Serbia. In this blog post, we will provide you with basic guidelines regarding the eight main aspects of the labor law in Serbia, which every foreigner should know prior to deciding to open a company and hire employees in Serbia.

1. Employment Law Is Not the Only Source of Labor Law

All foreigners interested in employing in Serbia should bear in mind that the Serbian employment law is not unilaterally arranged. On the contrary, all rights, duties, and responsibilities arising from employment are regulated by both the regulations of the Republic of Serbia, and regulations created via a mutual agreement between employers and employees.

Government regulations include the Employment Law, as the fundamental act regulating this field of law in full, as well as numerous special laws, which regulate certain areas of employment in more detail (e.g. the Law on Protection of Whistleblowers, The Law on Prevention of Harassment at Work, the Law on Health and Safety on Work). When establishing an employment relationship, it is mandatory to comply with the obligations not only stipulated under the Employment Law but also of the special laws. For example, as it will be further explained, at the moment of commencement of employment, he employee must sign the statement that he/she has received alerts on whistleblowing protection and protection against harassment at work.

Regulations that are the result of employers’ and employees’ consensus are a collective agreement and an employment agreementwhich must conform with the government regulations. According to the Employment Law, a collective agreement is an agreement that arranges rights, duties, and responsibilities arising from the employment, and mutual relations of participants in the collective agreement – employers and employees.

An employment agreement, on the other hand, regulates only rights, duties and responsibilities that arise from the employment relationship.

collective agreement and an employment agreement may stipulate extended rights and more favorable conditions of work than the rights and conditions established by the Employment Law and other government regulations. However, they may not, under any circumstances, specify less favorable conditions than the ones provided by the Employment Law. In case that a less favorable provision exists, the provisions of the government regulations shall apply.

2. Multiple Types of Work

It is important to note that all types of work in Serbia may be performed both inside and outside the employment relationship.

When it comes to the employment relationship, its most relevant types are employment relationships for a definite period of time and employment relationships for an indefinite period of time. An employment agreement may be concluded for a definite period of time, only if there are the objective reasons that are justified by the time period or execution of a certain task, or occurrence of a specific event. Such employment lasts only for the duration of those reasons, but no longer than two years from the conclusion of the employment agreement.

It is important to keep in mind that if an employment agreement does not specify the validity period, it is considered to be a contract for an indefinite period of time.

Turning to work outside the employment relationship, its most common forms are temporary and periodical jobsengagement under the service contracts, and supplementary work. Although these work forms have their own specific characteristics, they all still have one main aspect in common – an entity who hires and the hired worker does not conclude an employment agreement, but another type of a written contract, regulating their non-employment relations in detail.

3. Breaks, Leaves and Working Hours

The previously explained forms of work can be performed full-time (40 hours a week), part-time (less than 40 hours a week), overtime and in a reduced capacity. As a rule, a workday lasts for eight hours and a workweek lasts for five days a week.

The working hours of an employee working at jobs that are particularly difficult, exhausting and harmful to health – shall be reduced in proportion to the harmful impact of the conditions of work on the health and work ability of the employee, at a maximum of 10 hours a week.

At the employer’s request, an employee is obliged to work overtime in the event of a sudden increase in volume of work, force majeure, or in other cases when it becomes indispensable to complete an unplanned work within a specific deadline. The overtime cannot last longer than 8 hours a week, and an employee cannot work more than 12 hours a day.

Every employee who works 4 hours per day is entitled to a break in the course of a workday, lasting at least 15 minutes, and those employees working 6 and 10 (and more) hours a day, are entitled to a break of a minimum of 30 and 45 minutes, respectively. Except for the daily break, employees are entitled to a weekly rest for a minimum of 24 straight hours, which is, as a rule, used on Sundays.

After a month of continuous employment with the employer, an employee acquires the right to annual leave in the duration determined by an employment agreement or employer’s internal general regulations, but no less than 20 work days per calendar year. It is interesting to point out that an employee may neither waive the right to annual leave nor may such right be denied to him or replaced with pecuniary compensation, except in the case of termination of the employment relationship.

4. Complex Salary System

The salary system in Serbia could be considered one of the most perplexing aspects of the Serbian employment law since the term salary does not have a unique meaning or capacity.

First of all, it is important to point out that the total employee’s salary is comprised of the salary for performed work and time spent at work, the other earnings on the ground of employment, and the salary based on an employee’s contribution to the business success of the employer (e.g. awards, bonuses).

Salary for performed work and time spent at work consists of the base salary (determined in the employment agreement), a portion of the salary for working performance (based on the quality of work), and the increased salary (in cases of working on holidays, working at night, overtime work).

Other earnings that the employer is obliged to pay to the employee on the ground of employment include the retirement gratuity, the compensation of funeral expenses in the event of a death of an immediate family member or the employee himself and the compensation of damage sustained due to an injury at work or professional illness.

Secondly, the term salary in the sense of the current employment law implies gross pay and not net earnings, since it includes personal income tax and contributions.

There are three types of mandatory contributions: contributions for health insurance, contributions for pension and disability insurance, and unemployment insurance contributions.

Both employees and employers, bear a portion of the contributions. Namely, one portion of the contributions is paid at the expense of the employee (contributions payable from the salary), and the other part at the expense of the employer (contributions that represent the employer’s expense on the employee’s salary). However, unlike in many other countries, in Serbia, both of these types of contributions are calculated and paid by the employer when paying the salary.

The current applicable contribution and tax rates are as follows:

  • Contributions for health insurance amount to 5.15% of the gross pay, both at the expense of the employee and at the expense of the employer;
  • Contributions for pension and disability insurance at the expense of the employee and at the expense of the employer amount to 14% and 11% of the gross pay, respectively;
  • Unemployment insurance contribution amounts to 0,75% of the gross pay (which is born by the employee);
  • Income tax amounts to 10% of the gross salary (which is born by the employee).

5. Termination on the Employment

The Serbian Employment Law defines several different ways to terminate an employment relationship.

Firstly, an employment relationship ends as a result of circumstances unrelated to the will of employer and employee, by the force of law, when certain circumstances appear on the side of the employee or employer. When it comes to the employee, those circumstances can be related to suffering a loss of working ability, reaching 65 years of age and a minimum of 15 years of social insurance coverage, serving a prison sentence, or death. Turning to the side of the employer, the employment relationship terminates in the event of the employer going out of business.

Secondly, an employment relationship may terminate as a result of the termination of the employment agreement by the employer or the employee. An employee who wishes to cancel the employment agreement has to deliver the termination notice to the employer in writing, at least fifteen days before the day indicated by the employee as the day of termination of the employment relationship, without the obligation to state the reasons for his cancellation. On the other hand, an employer may terminate the employment agreement only if there is an existence of just cause. That just cause can be related to the employee’s work inability, breach of work duty or disrespect of the work discipline, but also to the situations where, as a result of technological, economic or organizational changes of the employer, the need to perform employee’s job ceases.

Finally, there is a possibility of a consensual termination of the employment relationship, based on a written agreement, signed between the employer and the employee.

6. General and Special Protection of Employees

The Serbian Employment Law provides a high level of protection for all employees. Thus, every employee in Serbia has the right to a corresponding salary, personal integrity and dignity protection, safety and health at work, protection of rights in the event of illness, reduction or loss of work ability, and old age, including financial benefits in course of temporary unemployment. Moreover, all employees have the right to other forms of protection, in conformity with the collective agreement and the employment agreement.

Besides mentioned general protection, certain categories of workers enjoy special protection, based on their specific characteristics of a permanent or temporary nature.

First of all, an employed woman is entitled to special protection in the course of pregnancy and childbirth, to tend to a child. A female employee in the course of pregnancy may not work at jobs that are considered harmful to her health and the health of her child. Also, she may not work overtime and at nighttime, should such work in any way be harmful to her health and the health of the child. She is entitled to paid leave from work during the day to perform medical examinations related to the pregnancy.

Employees with disabilities are entitled to special protection, in accordance with the Employment Law. The employer is obliged to provide that an employee who is a disabled person and an employee with serious health issues perform work only according to their work abilities. In addition to the labor law, special protection and special working conditions for people with disabilities are also guaranteed by the Constitution of the Republic of Serbia.

Turning to the protection of youth, employment regulations in Serbia allow establishing an employment relationship with a person who is at least 15 years old. However, any employee under 18 cannot be involved in jobs that could harmfully or with higher risk affect his health and life considering his psycho-physical abilities. Moreover, employees aged 15-18 cannot work overtime.

7. Notice of Protection Against Harassment at Work and Whistleblower Protection

As we previously mentioned, some of the most relevant special laws in the area of employment law are definitely the Law on Prevention of Harassment at Work and the Law on Protection of Whistleblowers.

It is interesting to point out that Serbia is one of the first countries that passed the Law on Protection of Whistleblowers. Whistleblowing is a disclosure of information about the violation of regulations and violation of human rights, or public health, information about life threats, safety, and damaging the environment. A whistleblower is a natural person who performs the whistleblowing in connection with his/her work engagement, and who is, due to that, entitled to special protection. The Law on Protection of Whistleblowers binds the employer to notice the employees about the whistleblowing protection and to protect the whistleblower from potential harmful action of third parties.

Besides the employer’s obligation to notify its employees about the whistleblowing protection, an employer is also obliged to alert them regarding protection against harassment at work. Namely, the Law on Prevention of Harassment at Work forbids any repetitive active or passive behavior directed towards an employee, which is intended to constitute a violation of the dignity, personal integrity, reputation, health or position of an employee, which causes fear or which creates hostile, degrading or offensive environment. The employer is obliged to inform the employee, in writing, about the prohibitions of harassment at work and about the rights, obligations and responsibilities of the employee and the employer in connection with the harassment.

8. Labor Inspection, Misdemeanor Proceedings and Labor Dispute

Supervision over implementation of all employment-related regulations which arrange the rights, obligations and responsibilities of employees, is affected by the labor inspection. Both employers and the employees are required to enable the labor inspector to supervise, inspect the documentation and work freely, and provide them with the data needed to perform the inspection.

If the labor inspector finds that an employer has committed a misdemeanor by violating the employment regulations, he is obliged to submit a request for initiating the  misdemeanor proceedings. The most common violations committed by employers are failing to conclude an employment agreement or another contract with a worker, not paying the salary and the other earnings on the ground of employment, acting contrary to the provisions that regulate annual leave and break periods, canceling the employment agreement contrary to the employment regulations, failing to provide the special protection of persons protected in accordance with the employment provisions. For the stated violations, the sanctions envisaged are fines that amount from 150.000 up to 2.000.000 dinars.

In addition to the mentioned ways of sanctioning breaches of the employment law, there is also a possibility of judicial protection, by initiating labor disputes. It is important to mention that the competent court takes particular care of the need for an urgent resolution of labor disputes, which is reflected in the shorter duration of the court proceedings. During the proceedings, the court is allowed to issue a decision on the determination of provisional measures before making a final verdict, in order to prevent violent treatment or to eliminate irreparable damage. Moreover, labor disputes can never fall under the provisions of Serbian law regulating “disputes of low value”, regardless of the real financial worth of the labor dispute in question.

Conclusion

As you may have already gained the impression while reading this blog, the Serbian Employment Law is rather formalistic. Therefore, although starting a business in Serbia may seem simple at the first glance, it is recommendable to pay attention to all of the fundamental procedural details.

If you are particularly interested in the issues of employing foreign citizens in Serbia, feel free to visit our texts dealing with the procedures of getting temporary residence permitsobtaining work permits, and engaging foreigners as directors of companies established in Serbia.

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