Hiring an Employee in Serbia: Contract and Contributions

The first employee turns a company from one person’s instrument into an employer with the full set of duties under the Labour Act (Zakon o radu). Serbian employment law protects the worker fairly strictly: a written contract before work begins, registration in the social insurance system before the first working day, a minimum wage, at least 20 working days of annual leave and a formal dismissal procedure. At the same time, hiring in Serbia is predictable in cost and requires no permits for citizens of the country. Below: how to put an employee on the books, what they cost the company and which alternatives to an employment contract are lawful.

The employment contract: what is mandatory

The employment contract (ugovor o radu) is concluded in writing before the employee starts work. An employee found at their workplace without a contract is deemed to have been hired for an indefinite term from day one — and this is one of the most common breaches the labour inspectorate finds. The contract states:

• The parties, the start date and the place of work — including remote work (rad na daljinu) if the employee works from home.
• The position, a description of the work and the qualifications required.
• The term: indefinite or fixed. Fixed-term contracts are limited to 24 months in total, with exceptions for projects and for covering absent staff.
• A probationary period — up to six months, with the right of either party to terminate on at least five working days’ notice.
• The basic salary, the elements of the calculation and the payment dates — at least once a month.
• Working time: full time is 40 hours a week; part-time or reduced hours by agreement.

The contract is drawn up in Serbian; for a foreign employee or director a bilingual version is common. Alongside the contract the employer needs internal acts: work rules (pravilnik o radu) are mandatory with more than ten employees, and an occupational safety risk assessment is required of every employer.

Registering the employee

1. File the registration application with the Central Registry of Compulsory Social Insurance (CROSO) electronically before work begins. The application is signed with the electronic signature of the employer or of an authorized accountant.
2. Obtain the registration confirmation (form M-A) and hand a copy to the employee.
3. Arrange the health insurance card through the health insurance fund — registration in CROSO starts this process automatically.
4. Open a personnel file: the contract, a copy of the identity document, and proof of education if the position requires it.
5. On termination, deregister the employee from CROSO within the prescribed period.

What an employee costs

The salary in the contract is stated gross. From it are withheld income tax of 10% — after deducting the tax-free allowance, which is indexed annually — and the employee’s share of contributions: 14% for pensions, 5.15% for health, 0.75% for unemployment. On top of the gross figure the employer pays 10% for pensions and 5.15% for health. The upshot: for the employee to take home a notional 1,000 euros, the company spends about 1,600 euros.

The minimum wage is set by the government for the year as an hourly rate; an employer may not pay less than that for full-time work. Beyond salary, the law obliges the employer to reimburse commuting costs, to pay business travel expenses and to pay regres — the annual holiday allowance. The calculation of taxes and contributions is filed electronically on form PPP-PD before payment, and the payment itself and the transfer of contributions happen at the same time. How this fits into the company’s monthly cycle we describe in the article on accounting in Serbia.

Leave, sick pay, working time

• Annual leave is at least 20 working days; the right to full leave arises after a month of work, and in the first year it accrues pro rata.
• Sick leave of up to 30 days is paid by the employer at no less than 65% of the base (100% for a workplace injury); from day 31 the health insurance fund pays.
• Overtime is limited to 8 hours a week and is paid with a premium of at least 26%; work on holidays and at night carries premiums of its own.
• Public holidays are non-working days; work on them is paid with a premium of at least 110%.
• Maternity leave and childcare leave run to up to 365 days in total for the first and second child, with the allowance paid through the state.

Dismissal

An employer may terminate a contract only on the grounds set out in the law: breach of work discipline, failure to perform duties, or technological and organizational changes (redundancy). The procedure is formal: a written warning with an opportunity to respond, then a decision with reasons. On redundancy, severance pay is due, and the same position cannot be filled again for three months. The notice period when the employee resigns is 15 to 30 days; by mutual agreement the contract can end on any day.

How to hire a foreigner

Serbian citizens need no work permit. A foreigner needs the single permit for temporary residence and work (jedinstvena dozvola), which since 2024 has been issued in a single procedure through the portal for foreigners. The application may be filed by the employer or by the foreigner personally; it is accompanied by the employment contract or a job offer, documents on qualifications, and proof of accommodation and insurance. Processing takes up to 30 days, and the permit is issued for up to three years and tied to the employer.

Foreigners who already hold a valid single permit on other grounds — owners of their own business, for instance — are entitled to work in Serbia within that permit. More on the procedure and renewal in the article on residence through business. Certain categories (EU citizens under agreements, highly qualified specialists) have a simplified route, which is worth confirming at the time of filing.

Alternatives to an employment contract

The most widespread mistake relocating founders make is to put full-blown employees on the books as sole proprietor contractors. As long as a person has one client, a fixed schedule and the company’s equipment, they will not pass the independence test, and the additional tax assessed falls on the company as withholding agent. We went through the criteria of the test in the article on the lump-sum tax.

First-hire checklist

• The contract is signed before the first working day and the employee has a copy.
• Registration in CROSO is done and the confirmation received.
• The occupational safety risk assessment is in place and the briefing has been given.
• The accountant knows the payment date and files PPP-PD before it.
• Records of working time and leave are kept from the first month.
• If the employee works from home, the terms of remote work are written into the contract.
• There is a place where the employee can work and where an inspection can come — an office or a desk in a business centre.

Hiring in Serbia costs the company roughly 1.6 times the net salary and demands discipline in the paperwork, but it holds no hidden traps as long as the contract is signed on time and the payroll is run by an accountant. What accounting support with payroll includes, and which plans cover it, is set out on the service pages.