Employer of Record in Croatia

Expanding your business to Croatia is straightforward and trouble-free with EOR Services’ solutions. With our Employer of Record Croatia (EOR) solutions, there’s no requirement to set up a separate legal entity, allowing businesses to hire highly skilled employees in Croatia through our advanced HR platform. We handle taxation, payroll, and other regulatory compliance matters, streamlining the process of recruiting and onboarding remote workers. Schedule a demo with EOR Services now to learn more.

Overview of Croatia

• Population: 4.06 million people (2019)
• Currency: Croatian kuna (HRK)
• Capital city: Zagreb
• Languages spoken: Croatian, Bosnian, and Serbian
• Gross Domestic Product (GDP): USD 60.75 Billion (2019)

Employment Landscape in Croatia

In the Republic of Croatia, employment is governed by the Labor Act, employment agreements, international conventions and treaties, and the Constitution. Croatian employment laws apply to citizens of other nations as well as their nationals. There are certain differences with regard to their rights. The following table lists the important components of Croatian employment laws.

Entitlements	Explanation
Minimum age of employment	The age requirement to work is fifteen years old. It is also illegal for anyone between the ages of 15 and 18 who attends elementary school by requirement to work.
Working Hours	The statutory working hours are 40 hours spread across five days a week.
Rest	During working hours, female employees who are between the ages of 14 and 18 are entitled to a two-hour break. Sunday is a national holiday for rest. Employees who work on their days off must be paid with additional days off.
Overtime	Workers are permitted to work up to 10 hours of overtime every week. If an employee wants to expand the scope of their employment, they must obtain written consent from other workers. Unless otherwise specified in the contract, the number of overtime labor hours per year cannot exceed 180 hours. Under these circumstances, working overtime is permissible. When there is an unusual increase in company volume When there are force majeure situations In other situations when there are pressing business demands Pay: There are no legal requirements dictating how much should be paid for overtime labor. The employment agreement establishes the remuneration.
Paid Public Holidays	The public holidays in Croatia are as follows. New Year’s Day Epiphany Easter Easter Monday Labor Day Statehood Day Corpus Christi Anti-Fascist Struggle Day Independence Day Victory Day and Homeland Thanksgiving Day and Croatian Veterans Day Assumption Day All Saints’ Day Christmas Day St. Stephen’s Day
Paid annual leave	Employees are entitled to at least four weeks of paid annual leave.
Holiday pay	The employee will receive pay throughout the yearly leave period in accordance with the terms of their employment contract. This sum should, though, be at least equivalent to the previous three months’ average monthly wage.
Medical (sick) leave	Workers are entitled to 42 days of paid sick leave each year, which is 70% of their base pay. Beyond this, the employer covers the cost of the leave and Croatia’s Health Insurance Fund reimburses it.
Maternity leave	Female employees receive 98 days of maternity leave with 28 days to be availed of before giving birth.
Parental leave	For children between the ages of six months and eight years, parents are entitled to four months of leave per parent. Parents are entitled to 15 months of parental leave for each of their twins or three or more children. Following this, the workers can cut their hours in half until their kids are three years old. The kid may follow this practice until the age of eight if they are handicapped or have special needs. When a kid is adopted, employees are entitled to six months of leave for children up to the age of eighteen, plus an extra six months.
Annual leave accrual entitlement	Once an individual has worked continuously for six months, they will be eligible for leave upon hiring. Workers who have worked for the same employer for fewer than six months are entitled to yearly leave equal to one-twelfth of the total annual leave for each complete month of service rendered.
Leave expiry	Employees may spend any unused leave from a given year by no later than June 30 of the next year’s calendar year.
Leave cash out	The employee is entitled to reimbursement for the days of annual leave that are not used in the event that the employment contract is terminated.
Accrued leave at termination	A portion of the yearly leave that they were entitled to in that specific year is awarded to terminated workers. Employees may use their right to one-twelfth of their yearly leave for that month if their employment contract is terminated in the midst of an even-numbered month.
Employee protection and anti-discrimination rights	Throughout the duration of employment, the employer has a duty to uphold the dignity of its employees. The Labor Act of 2014 and the Anti-Discrimination Act forbid discrimination of any kind.
Confidentiality of personal information	According to the Labor Act, information on employees may only be gathered, utilized, or sent to other parties with permission from the Labor Act or another legal framework. Additionally, workers must consent to their employer collecting their personal data under GDPR regulations.

Make an appointment for a demo with an EOR Services representative right now to ensure that your expansion efforts adhere to legal requirements and discover more about Croatia’s employment laws. We can meet all of your requirements for employment or advancement while adhering to local laws.

Contractors vs. Full-time Employees

The Labor Act of Croatia offers precise definitions for key terms, such as “employees” and “employment relations.” Furthermore, it classifies employees based on different criteria, primarily their employment duration and commitment level, leading to the following categories:

• Definite (Fixed-term Contract): Employees with contracts for a specified period, offering clarity on their employment terms.

• Indefinite (Indefinite Term Contract): Employees engaged without a predefined end date, providing flexibility for both the employer and employee.

• Full-time Employees: Those who work a standard, full workweek, meeting the standard labor expectations.

• Part-time Employees: Individuals engaged on a part-time basis, providing greater flexibility in working hours.

• Independent Contracting: An alternative approach for hiring remote workers, involving legally binding agreements executed across jurisdictions. This method involves complex considerations, including immigration, tax, and administrative matters. A practical solution for expanding into Croatia is to utilize an umbrella company, mitigating the risk of misclassification or breaches of self-employment regulations.

Additionally, Croatia has DTAAs (Double Taxation Avoidance Agreements) with a number of states. Under the Croatian tax system, deductions are possible, depending on whether the foreign tax credit (FTC) applies. It should be noted that social security taxes amount to twenty percent of your gross pay; however, there can be exceptions if the tax laws in your place of origin exempt these contributions. Furthermore, the annual rate of withholding tax for non-resident corporations is 12%. Working within Croatia’s labor and tax systems, firms and employees may both benefit from the clarity and direction this complete framework offers.

The process of independent contracting in Croatia is shown below.

• Does being an independent contractor in Croatia need a visa?
  For non-EU nationals to operate as independent contractors, a visa is needed. EU citizens are exempt from needing a work visa.
• How does one go about becoming an independent contractor?
  • You can work for yourself as a freelancer and eventually become an independent contractor.
  • Create your own LLC.
  • To ensure performance and speed up payment, work with a holding company that acts as a go-between for you and the consumer.
• What standards must be met for tax compliance?
  In Croatia, your tax residence is determined by the 183-day rule.

• What advantages come with using freelancers?
  Such contracts are quite simple to establish. They are simple to control and provide an affordable hiring option. They don’t need to incur any legal costs for the business.

• What drawbacks might independent contracting have?
  The legal protections afforded to regular workers are not extended to independent contractors. They are also not eligible for pensions or other local benefits.

• What conditions of service apply to probation and termination?
  The employment agreement, or independent contracting agreement, governs the termination terms.

Whether your business prefers contractors or full-time employees, EOR solution for Croatia can take care of all of your employment needs. To find out more, arrange a demo with an EOR Services professional.

Recruiting in Croatia

Hiring employees in a foreign country can be a complex endeavor, but Croatia maintains robust labor laws to protect employees from unwarranted corporate practices and workplace discrimination during the hiring process. When you engage EOR Services, the process of hiring qualified employees becomes significantly smoother.

To tap into Croatia’s talent pool, several platforms provide employers with a means to post their job openings. These platforms include MojPosao, Nova Karijera, Oglasnik, Bika, and Njuskalo. The Croatian Employment Service, HZZ or Burza Rada, is a state institution that facilitates employment connections. You can also explore major newspapers like Vecernji List, Jutarnji List, Novi List, and Slobodna Dalmacija (Split) for employment opportunities.

As part of your hiring process, you may consider requesting a potential employee to undergo a medical examination, particularly if it aligns with your business requirements. It’s important to note that the cost of this examination should be covered by the employer. Additionally, conducting a background check on potential employees is a recommended practice to ensure the suitability of your hires.

Before commencing the hiring process, your business must be properly registered with the relevant authorities in compliance with Croatian employment laws. One essential requirement is the execution of a written employment contract that outlines the terms and duration of the employment relationship between the employer and employee. This contract must be drafted in the Croatian language, with all monetary amounts stated in Croatian Kuna (HRK). Furthermore, the employment contract should encompass key details, including the job description, workplace location and conditions, dates of hiring and termination, the annual allocation of paid leave, salary details, working hours, notice periods, and the permanent residence of the employees. This comprehensive approach ensures that both employers and employees have a clear understanding of their rights and obligations within the Croatian employment landscape.

Probation & Termination

In Croatia, the probationary period, as stipulated by the Labor Act of 2014, extends for a maximum of six months, starting from the date of signing the employment contract. Within this probationary period, the employer is required to provide a termination notice, with a minimum notice period of at least seven days.

Regarding contract termination, in compliance with the primary labor legislation, the employer must furnish a written declaration that clearly states the reasons for termination. Additionally, the employer is obligated to specify the particulars concerning any payments or benefits due to the employee upon termination.

It’s worth noting that employees currently on maternity, paternity, or childcare leave, or those who have sustained workplace-related injuries, are protected against termination during their designated leave period. This provision ensures that individuals in these circumstances enjoy job security while they attend to their family or health needs.

Notice Periods

Employees’ notice periods are outlined in Chapter 15 of the Labor Act of 2014 and are based on how long they have worked for their company. The notice periods listed below are relevant.

Duration of Employment	Notice Period
One year	Two weeks
After the first year	One month
After two years	One month and two weeks
After five years	Two months
After 10 years	Two months and two weeks
After 20 years	Three months

The notice period is extended by two weeks for workers who are over 50. For an employee who is older than 55, an additional four weeks are added.

Severance pay in Croatia is a benefit provided to employees who have served the same employer for a minimum of two years. The amount is calculated at one-third of the employee’s regular monthly salary for each year of service.

Immediate Termination

It is only acceptable to fire an employee without cause if there has been a serious violation of their responsibilities and duties. Within 15 days following the alleged breach, this employer may use its right to implement an instant termination.

Consult the professionals at EOR Services to ensure that your expansion into Croatia complies with the laws governing probation and termination in that nation. To be sure you are in compliance with these important areas of employment law, set up a demo with us right now.

EOR Solution in Croatia

Through EOR Services, businesses can efficiently and swiftly enter the nation more quickly and easily. If you want to ensure that employing Croatian workers goes as smoothly as possible, you might consider the EOR approach. We’ll assist you with hiring and managing staff. EOR Services will handle all obligations and compliance related to the job. We can also manage work permits, payroll filings, taxes, and monthly payroll administration. Your growth efforts can be expedited with EOR Services’ Croatia EOR solution.

Outsourcing Croatian Payroll via an Employer of Record

Employing someone from a foreign nation can be a challenging endeavor. Croatia boasts a wealth of talent, ensuring that you’ll discover qualified workers for your business. Opting for the EOR approach streamlines the hiring and staff management process. The EOR solution from EOR Services simplifies the expansion procedures into Croatia. Its advanced, comprehensive HR software ensures full compliance with Croatian employment and tax regulations, simplifies the hiring and onboarding of top personnel for businesses, and offers excellent payroll administration. Schedule a demo with EOR Services now to learn more.

For all your growth requirements in Croatia, we can provide specialized EOR solutions. Speak with EOR Services specialists now to take advantage of our services.

Types of Visas in Croatia

Croatia is open to visitors from member states of the European Union (EU) without the need for a visa. If a non-EU or European Free Trade Association (EFTA) foreign national plans to remain longer than ninety days, they must get a visa.

Types of Visas	Details and Requirements of the Visas
Short-stay Visa (Type C)	These transitory visas are available for short-term travel, medical care, and tourism. When using one of these visas, the longest stay permitted is ninety days during the first 180 days after the visa is obtained.
Business Visa	A business visa is sometimes known as a short-stay visa, allowing the bearer to travel for up to ninety days for business-related trips. Nevertheless, the bearer of the visa is not permitted to work in Croatia. These are the prerequisites for obtaining a business visa in Croatia. A letter from your employer outlining your work information; A letter of assurance signed by a Croatian legal body inviting you to Croatia; A letter of invitation from the firm inviting you to Croatia that specifies the specifics, such as the purpose and duration of stay; and Proof of financial funds The business’s registration documents and letter requesting a business visa must be written on the official letterhead of the company if the bearer is self-employed.
Long-stay Visa (Type-D)	Any foreign national who wants to stay in Croatia for a period longer than 90 days requires a long-stay visa and a residence permit. It includes a work visa, which allows a foreign national to live and work in the country. Requirements for Croatian work visas are as follows. Proof of health insurance Copy of work contract Copy of employer’s company registration Proof of financial statement Proof of educational qualification and required skills
Transit Visa	The Croatian President and the Croatian Government must include a letter of invitation on behalf of the national authority or the international event organizer with the visa application when the Croatian National Authority extends an invitation to a foreign national to attend any international conference of public interest or to take part in an event held under the auspices of the Croatian Parliament.

EOR Services manages all work-related paperwork and obligations for Croatia, including the application and acquisition of visas. To learn more, consult with EOR Services specialists.

Work Permit

It is necessary for employees to have both a work permit and a residency permit in order to work in Croatia. European people living and working in Croatia are exempt from extra visa requirements because Croatia is a member of the EU. For other foreign nationals to live and work in Croatia, the following requirements must be met.

Work Permits	Explanation
Croatian Residence Permit	Any international visitor intending to stay in Croatia for more than ninety days has to get a Croatian residency permit. The only people who qualify for the same are those who have long-stay visas. A local police agency is where the permission application may be submitted.
Work Permit	You must have a Croatian employer that can get a work permit for you before to submitting an application for a long-stay visa for work or business orders. You will not be issued a temporary residence permit unless you are in possession of a valid work permit.

One of the key responsibilities of  EOR services is obtaining work permits. Join forces with us right now to accelerate your Croatian expansion. Set up a demo to find out more.

Payroll & Taxes in Croatia

When it comes to establishing your payroll system and managing taxes in Croatia, it’s crucial to understand your obligations as an employer. If you’re a foreign company venturing into the Croatian market, you have several options to ensure compliance with local regulations:

In-house Payroll: In this approach, your internal HR team handles the payroll within your organization. These HR professionals are employees of your company and receive their compensation through the same payroll system as other staff members.

Global Outsourcing: Alternatively, you can opt for global outsourcing, a method that involves collaborating with a third-party global Employer of Record (EOR) service to oversee your payroll and other HR functions, ensuring smooth and compliant operations.

Payroll Cycle

Salary payments to employees are made on a monthly basis, usually at the end of the month or by the 15th of the following month.

Croatia set a minimum salary of HRK 4,250 per month in 2021. That is about similar to EUR 562.80 (around USD 672). You can successfully navigate the Croatian employment market by being aware of these financial restrictions and payroll choices.

Taxation in Croatia

Croatia follows a progressive tax system. Employer taxes are set at 16.5%.

Corporate Income Tax

Capital gains and losses are covered under this regime.

Income	Tax Rate (Percentage)
Up to HRK 7.5 million (for entrepreneurs)	10%

Personal Income Tax

The Personal Income Tax is applicable on taxpayers who are physically present in Croatia or have real estate at their disposal for an uninterrupted period of 183 days in either one or two calendar years are deemed as resident taxpayers.

Earning	Tax Rate (%)
Above HRK 360,000	30%
Up to HRK 360,000	20%
Lump-sum taxation of activities (such as rentals and leases)	10%
For digital nomads (third-country personnel employed to perform business operations through telecommunication)	None

Monthly Tax Rates

Earning	Tax Rate (%)
Up to HRK 30,000	20%
Above HRK 30,000	30%
Lump-sum taxation of activities (such as rentals and leases)	10%
For digital nomads (third-country personnel employed to perform business operations through telecommunication)	None

Numerous deductions are also prescribed for individuals in the form of personal allowances, exemptions, and incentives.

Withholding Tax (WHT) on Dividend Income

Dividend and other profit payments made to a resident company	Non-taxable
Dividend and other profit payments made to a non-resident company	WHT at 12%

Social Security Contribution

The pension plan and health insurance are covered by social security contributions in Croatia, which are calculated based on the gross wage of the workforce. They are not supported by the state.

Pillar Payment I: General solidarity	15% tax contribution
Pillar Payment II: Individual capital	5% tax contribution
Total employee cost	20% tax contribution

Value-added Tax (VAT)

The VAT is 25% for HRK 15 million and above.

Other Regulations

Croatia operates a well-structured insurance system encompassing various categories:

• Health Insurance: Employers are responsible for contributing 16.5% towards health insurance.
• Unemployment Insurance: Employers are required to contribute 1.7% for unemployment insurance.
• Accident Insurance: Employers contribute 0.5% to accident insurance.

An important incentive to note is that employers are exempted from these contributions for a period of five years if they hire an employee below the age of 30 years, which encourages youth employment and eases the financial burden on employers.

• Gift Tax: In Croatia, individuals receiving or inheriting gifts are subject to a gift tax. This tax is levied at a rate of 4%, ensuring that gift-related financial transactions are appropriately regulated.
• Property Tax: There is no property tax in Croatia, simplifying the taxation landscape for property owners.

Understanding these aspects of Croatia’s insurance and tax systems is essential for individuals and businesses operating within the country.

Process of Establishing a Subsidiary in Croatia

The process of setting up a subsidiary in Croatia, involving compliance with all statutory requirements such as proper registration, securing the necessary capital, and obtaining approvals, can be a time-consuming endeavor. Any missteps in this process can potentially disrupt your timeline for launching your business in Croatia. However, there’s a convenient solution to navigate these challenges. EOR Services offers an effortless alternative for all your HR requirements by assuming responsibility for establishing a subsidiary as your trusted Employer of Record (EOR) partner.

The following steps are integral to establishing a subsidiary in Croatia:

• Registration with the Commercial Court: This step entails the preparation of essential documents, including articles of association and a balance sheet of the parent company, which must be submitted to the Commercial Court.
• Obtaining a Statistical Registration Number: To engage in business activities, you’ll need to obtain a Statistical Registration Number from the Croatian Bureau of Statistics.
• Registering for VAT: Register with the Tax Authority to acquire the necessary VAT credentials, ensuring your business is fully compliant with tax regulations.
• Applying for Licenses and Permits: Depending on the nature of your business, you may need to apply for specific licenses and permits to operate legally in Croatia.
• Enrolling in the Pension Scheme and Health Insurance: Fulfilling your obligations, you’ll need to enroll in the pension scheme through HZMO (Croatian Pension Insurance Institute) and obtain health insurance coverage from HZZO (Croatian Health Insurance Fund).
• Creating a Local Bank Account: Establish a local bank account to facilitate financial transactions and operations within Croatia.
• Obtaining the Company Seal: Acquire the official company seal, which may be required for various legal and administrative purposes.
• Compliance with Legal Regulations: Ensure strict adherence to the regulations specified in the Croatian Company Act, as well as the Civil and Commercial Code.

Navigating these steps diligently is essential to ensure a successful and compliant entry into the Croatian business landscape. EOR Services’ expertise and support can significantly streamline this process, allowing you to focus on your core business objectives with confidence.

Conclusion

Overall, the cost of living in Croatia is rather low, which attracts firms looking to expand to the country. Croatia is a market full of potential, offering significant commercial chances. But creating a subsidiary here can be difficult for a variety of reasons, chief among them being the complexities of labor and employment regulations and the existence of linguistic and cultural obstacles.

The most sensible course of action to successfully navigate this environment and optimize your results is to work with an Employer of Record (EOR) company. You may access a pool of highly trained and extraordinary people by delegating your recruiting, tax duties, and regulatory compliance to these specialists. This will guarantee a more successful and seamless entry into the Croatian market.