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).