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Employer of Record in Croatia

Employer of Record in Croatia

Skuad’s Employer of Record Croatia (EOR) solutions make business expansion to Croatia easy and hassle-free. Our unique HR platform allows companies to hire exceptionally talented employees in Croatia, without having to set up a separate legal entity. It streamlines the process of hiring and onboarding a remote team by handling payroll management, taxation, and other legal compliances. To learn more about Skuad, Book a demo today.

Croatia at a Glance

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 in Croatia

Employment in the Republic of Croatia is regulated by the Constitution, international conventions and treaties, the Labor Act, and employment agreements. Croatian employment laws apply both to foreign nationals and their citizens. However, there are some differences in terms of their entitlements. The following table lays out the key aspects of employment laws in Croatia.

To learn more about Croatia’s employment policies to ensure your expansion efforts fall within the legal requirements, book a demo with Skuad experts today. We can meet all your expansion or employment requirements while complying with the local laws.

Contractors vs. Full-time Employees

The Labor Act of Croatia defines the terms “employees” and “employment relations.” Apart from ordinary employees (natural or legal persons performing certain works for an employer), employees can be further divided based on their term period, as follows.

  • Definite (fixed-term contract)
  • Indefinite (indefinite term contract)
  • Full-time employees
  • Part-time employees

Independent Contracting

An easy solution to hiring remote workers is through independent contracting. Independent contracting agreements are legally binding across different jurisdictions that should be executed between the parties. This form of employment involves complex issues such as immigration, taxes, and administrative work. An easy approach to handle such issues while expanding to Croatia can be to use an umbrella company to avoid any kind of misclassification or breach of self-employment rules.

Croatia has also signed the Double Taxation Avoidance Agreement (DTAA) with numerous jurisdictions; depending on the applicability of the foreign tax credit (FTC), relevant deductions can be made under the Croatian taxation regime. While the social security taxes constitute 20% of your gross salary, you can be exempted if such contributions are covered in your native country’s tax regime. The withholding tax for a non-resident company is set at the rate of 12% p.a.

The following table provides a guide to independent contracting in Croatia.

Whether your business requires contractors or full-time employees, Skuad’s EOR solution for Croatia can take care of all your hiring needs. To know more, book a demo with Skuad experts.

Hiring in Croatia

Hiring in any foreign country is difficult. The Croatian Labor Law protects employees against unwanted corporate practices. Further, the country has established a strong legal regime to combat any kind of discrimination at the workplace or in the hiring process. With the assistance of Skuad, you can hire suitable employees without hassle. 

There are several websites on which employers post their job openings, such as MojPosao, Nova Karijera, Oglasnik, Bika, and Njuskalo. HZZ or Burza Rada is a Croatian Employment Service by the State institution. Major newspapers that advertise for employment opportunities are Vecernji List, Jutarnji List, Novi List, and Slobodna Dalmacija (Split).

During the hiring process, you can ask a potential employee to undergo a medical exam as per your business requirement. However, the cost should be borne by the employer. It is also recommended to run a background check on the employee.

The hiring process cannot be initiated unless your business is registered with the authorities. As per the employment laws in Croatia, a written employment contract specifying the term and duration of the relationship between the employer and the employee is a prerequisite. The contract should necessarily be executed in the Croatian language; the wages and other amounts must be mentioned in HRK. 

The employment contract should also include the following details.

  • Job description
  •  Place and mode of work
  • Date of hiring and termination
  • Number of paid leaves (annually)
  • Salary
  • Working hours
  • Notices
  • Permanent residence of the employees

Outsourcing the Hiring Process

As the process to set up and register a subsidiary could take months before formal approval, you can partner with Skuad to expand into Croatia and begin your business operationsand outsource hiring in Croatia. Skuad’s Croatia EOR solution helps your business expand into Croatia without the need for an entity setup. Our unified and automated global HR platform enables you to expedite the onboarding of your remote team, manage their payroll, benefits, taxation, and other HR tasks in compliance with the local laws. We help you streamline your expansion process with the able assistance of our international network and experts. Contact us today to kick-start your expansion to Croatia.

Probation & Termination

Probation

The probationary period in Croatia lasts for a maximum of six months after signing the employment contract as per the Labor Act of 2014. The notice period for termination during the probationary period is at least seven days.

Termination

Under the principal labor legislation, if the employer wishes to terminate a contract with an employee, a written declaration has to be made to that effect stating the reason for termination. The employer is also required to specify the payments that shall be given to the employee upon termination.

The employees who are availing of their maternity, paternity, or childcare leave or those who have sustained medical injuries from their workplace will not be terminated during their specified leave period.

Notice Periods

Chapter 15 of the Labor Act, 2014 prescribes the notice period of employees determined by their duration of service with the employer. The following notice periods are applicable.

For employees over 50 years of age, two additional weeks are added to the notice period. Further, four weeks are added for an employee above 55 years of age.

Severance Pay

Severance pay is granted during termination to an employee who has completed two or more years of service with the same employer. It is set at one-third of the regular monthly salary per year.

Summary Dismissal

Termination without notice shall only be considered lawful in cases where a serious breach of an employee’s obligations and duties has been reported. This right shall be utilized by the employer within 15 days of the reported breach.

To ensure your expansion endeavors are in compliance with the laws regarding probation and termination in Croatia, talk to Skuad experts and book a demo today.

EOR Solution in Croatia

Skuad’s EOR service makes it easier and faster for businesses to expand into the country. You can take the EOR route to ensure things go smoothly for you while hiring employees from Croatia. We will help you onboard and manage employees. Skuad will take care of all employment-related responsibilities and compliance. Additionally, you can rely on us to manage monthly payroll, work permits, taxation, and payroll filing. Skuad’s Croatia EOR solution can .expedite your expansion efforts.

Payroll Outsourcing in Croatia through an Employer of Record 

Hiring employees from a new country is not an easy task. Croatia’s talent pool has immense potential and you will find suitable employees for your company. To make the journey of hiring and employee management easier, you can take the EOR route. Skuad’s EOR solution totally simplifies the expansion processes into Croatia. Its integrated and, high-tech HR platform enables seamless hiring and onboarding of top talents for organizations, topnotch payroll management, and ensures total compliance with the Croatian taxes and employment laws. To learn more about Skuad, Book a demo today.

We can offer tailor-made EOR solutions for all your expansion needs in Croatia. To avail yourself of our services, speak to Skuad experts today.

Types of Visas in Croatia

For European Union (EU) member states, traveling to Croatia is allowed without a visa. Every other non-EU or European Free Trade Association (EFTA) foreign national requires a visa if their stay extends beyond 90 days.

As an EOR service for Croatia, Skuad takes care of all the requirements and responsibilities related to employment, including applying for and obtaining visas. Get in touch with Skuad experts to learn more.

Work Permit

A work permit and a residency permit are mandatory requirements for employees planning to work in Croatia. Since Croatia is a member nation of the EU, European citizens are allowed to live and work in the country without additional visa requirements. Other foreign nationals require the following to live and work in Croatia.

Securing work permits is an essential task of Skuad’s EOR services. Partner with us today to expedite your expansion in Croatia. To learn more, book a demo.

Payroll & Taxes in Croatia

Setting Up Payroll in Croatia

To set up payroll and manage taxes in Croatia, it is necessary to have clarity regarding your responsibilities as an employer. As a foreign company, you can opt from the following options to ensure your compliance with the local laws of Croatia.

  1. In-house payroll: In-house payroll is managed by an HR team in the internal department of the same business. HR team members are employees of the business. They also draw their pay from the same payroll system, similar to other employees.
  2. Global outsourcing: Global outsourcing involves partnering with a third-party global EOR service to look after your payroll and other HR activities.

Payroll Cycle

  • The salaries are paid to the employees monthly by the end of the month and no later than the 15th day of the succeeding month.

In 2021, Croatia set the monthly minimum wage of HRK 4,250 or EUR 562.80 (approximately USD 672).

Taxation in Croatia

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

1. Corporate Income Tax

Capital gains and losses are covered under this regime.

2. 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.

3. Monthly Tax Rates

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

4. Withholding Tax (WHT) on Dividend Income

5. Social Security Contribution

In Croatia, social security contributions are based on the gross salary of employees and cover the pension scheme and health insurance. They are not state-sponsored.

6. Value-added Tax (VAT)

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

7. Other Regulations

Croatia has an established system in the following types of insurance.

  • Health insurance: 16.5% of employer contribution
  • Unemployment insurance: 1.7% of employer contribution
  • Accident insurance: 0.5% of employer contribution

However, an employer is exempted for five years from paying such contributions if they hire an employee under the age of 30 years.

  • Gift tax: A person who receives or inherits a gift in Croatia is liable to pay a gift tax. The tax is determined at a rate of 4%.
  • Property tax: None

To manage payroll and taxes while expanding in Croatia, it is prudent to partner with an EOR service. Skuad’s Croatia EOR solution enables 100% compliance with the Croatian tax regulations and its unified employment platform helps in effective payroll management for organizations. To learn more about Skuad, Book a demo today

Incorporation: How to Set Up a Subsidiary in Croatia

This section will address how to register and incorporate a business in Croatia. Primarily, an employer cannot initiate their business and hiring operations in Croatia without registration. The following are the five main business structures followed in the country.

Process of Setting Up a Subsidiary in Croatia

The process of setting up a subsidiary and fulfilling all the statutory requirements such as getting it duly registered, obtaining the required capital, and getting approval could take several months. Any misstep can cause you to veer off your timeline for getting your business running in Croatia. Skuad offers an easy alternative to all your HR needs by taking over the HR tasks of establishing a subsidiary as your EOR partner.

The following steps are involved in setting up a subsidiary.

  • Registration with the Commercial Court after preparing relevant documents such as articles of association and a balance sheet of parent company
  • Getting a Statistical Registration Number from the Croatian Bureau of Statistics
  • Registering for VAT through the Tax Authority
  • Applying for licenses and permits
  • Enrolling in the pension scheme (HZMO) and health insurance (HZZO)
  • Creating a local bank account
  •  Obtaining the company seal
  • Abiding by the regulations under the Croatian Company Act, and Civil and Commercial Code

Professional Employer Organization (PEO)

What is a PEO?

A professional employer organization (PEO) acts as a co-employer of the organization to provide comprehensive HR services. It can be termed as an outsourced HR department providing access to different services.

Services Provided by PEO

A PEO offers in-house HR training and development, recruitment and hiring, compliance assistance with local labor and employment laws, payroll processing, and support in providing employee benefits.

Is an EOR Service a Replacement for PEO?

An EOR company offers similar HR services to a PEO. However, the EOR acts as a legal employer and not a co-employer.

A PEO is useful when a foreign company intends to establish its legal presence in the country where it has employees. However, an EOR is more suited to the needs of an employer who wishes to hire employees in a country without setting up a legal presence.

Though a PEO offers a wide range of HR services, it has its drawbacks, such as the employer’s loss of control over organizational policies that are to be decided by the hired PEO and unexpected price fluctuations made by the PEO in the services offered by the employer’s company. Importantly, the employer will be held liable for the penalties imposed on any unwarranted employment-related actions executed by the PEO.

Things to Consider before Selecting Your EOR Service

Before moving ahead with your business plans by partnering with an EOR service, assess their background and capabilities properly. 

Here’s a checklist for selecting the perfect EOR solution for your organization.

  1. What services are offered by the EOR company and are they consistent with the services you are looking for?
  2. Do the pricing and plans of the EOR company suit your needs? Determine the method in which service fees are charged and the invoice records are managed.
  3. Do they have a global presence? It is important to assess if the EOR service has its operations in the international markets. In addition, do they have the required staff physically present or have subsidiaries in those locations?
  4. IP protection and security are crucial. Gather comprehensive details about the sharing of information, such as the number of people who will have access to your information, whether the web transfers are done through the HTTPS mode, and how the sensitive information is safeguarded. 

Skuad provides both PEO and EOR solutions for companies. Hire Skuad’s EOR solution for Croatia to take care of all the compliance and HR-related tasks, from onboarding to training. Talk to Skuad experts to learn more.

Conclusion: What Gives Skuad’s Croatia Solutions an Edge?

Overall, the cost of living in Croatia is quite reasonable. It has tremendous business potential. Establishing a subsidiary in Croatia can be an option, though the overall execution of work becomes very complex, given the stringent employment and labor laws in place and the language and cultural barriers. Thus, the most viable option would be to let an EOR firm handle your hiring, tax, and other regulatory compliances and provide you with a skilled team of exceptional talent.

Skuad has an extensive network in 150+ countries across the globe and provides a single interface to onboard and manage employees and contractors. It offers consistent prices irrespective of the locations and manages the payment of your team through a single invoice. It also ensures that your IP, invention rights, and sensitive employee details are fully protected wherever you operate. For more details, contact Skuad experts!

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