Hire in Serbia

Challenges of Hiring in Serbia

While Serbia promises to host global businesses, there are some hurdles to overcome before hiring employees:

1. Serbian employment laws

Here are some unique challenges employment laws present for hiring in Serbia: 

• Serbian employment law is constantly evolving, particularly with the rise of freelancing, temporary work, and remote work arrangements. To stay compliant, you must stay up-to-date on all the legal requirements. 
• Serbia has a more established Union presence compared to some of its neighbors. However, the impact of trade unions’ collective agreements on employers depends on the type of industry, company size, and location in Serbia.
• Like most countries, Serbia's maximum probationary period is just three months. This can leave you less time to assess a new hire's suitability for the role.
• You must extend an end-of-service benefit called "otpremnina" for a maximum of six months' salary based on the length of service. This can be a significant cost for employers, particularly during layoffs or restructuring.

Fortunately, you can tackle the above challenges by devising a strategic human resource plan to hire in Serbia.

2. Taxes in Serbia and payroll contributions 

You must consider the following payroll requirements while hiring in Serbia: 

• Serbia has a flat income tax system. However, one must consider multiple tax brackets and a tax-free threshold when calculating payroll taxes.
• The employer cost is around 17% of an annual salary of USD 60,000. This highlights the additional contributions you must make beyond income tax, such as social security and pension contributions. 
• Serbia has a relatively high minimum wage of around 67,566.33 RSD monthly. This limits employer flexibility, especially for entry-level positions or startups.
• The laws mandate you to make salary payments within seven days after completing the previous month. 

Eventually, the fact that the employer cost can vary depending on salary and other factors underscores the importance of local expertise in navigating Serbian payroll regulations.

3. Skill gap 

Here's how the competitive talent landscape can be a hurdle for recruiting in Serbia:

• Recent studies have reported a skill mismatch, especially in IT, engineering, and advanced manufacturing.
• The need for more qualified professionals in high-demand sectors fuels international recruitment and dependence on immigrants. 
• Consequently, it is harder for smaller companies or those offering less competitive packages to hire in Serbia independently.
• Furthermore, skilled Serbian professionals find better career opportunities abroad, particularly in Western Europe. This can limit the talent pool available domestically.

How to Hire in Serbia

You can overcome these challenges with the best practices for hiring in Serbia:

• Collaborate with a lawyer specializing in Serbian employment law to ensure compliance with all regulations. They can guide you through complexities like data privacy and social security contributions.

• Serbian employer branding might be less developed. So, showcase your company's unique culture, work environment, and growth opportunities to attract talent in a competitive landscape.
• Advertise on popular Serbian job boards like Jooble, National Employment Service, Poslovi Infostud, Lako Do Posla, etc., alongside international platforms. Tailor your message to resonate with the local audience.

Ultimately, your legal compliance requirements and challenges depend on your hiring strategy. You can choose among the following three popular options: 

1) Setting up a local entity

Setting up a local entity in Serbia refers to establishing a legal business presence. This allows you to operate independently, hire employees directly, and own property under your company's name. 

Subsequently, you can choose among the four common legal structures for businesses within Serbia:

• Limited Liability Company (DOO): A most popular choice for foreigners due to its simplicity with low minimum capital and limited liability protection.
• Partnership (OD): Two or more people share profits, responsibilities, and debts but also have unlimited liability.
• Joint Stock Company (AD): This is a more complex structure for larger businesses with higher investment goals, and it allows public share offerings.
• Sole Proprietorship (Preduzetnik): Simple for one person but with limited growth potential, fewer tax benefits, and unlimited liability.

A common alternative to setting up a local entity could be a branch office in Serbia if your company already has a presence elsewhere. 

Through the Employer of Record (EOR) / Agent of Record (AOR) solution, you can also hire employees in Serbia without worrying about legal compliance. 

2) Hiring employees via EOR

Hiring employees through an EOR in Serbia, like Skuad, is a way to employ workers without setting up a local legal entity. 

An EOR acts as a legal employer on your behalf, handling the complexities of onboarding, payroll and local taxes, basic benefits administration, compliance with Serbian labor laws, and minimizing risks associated with non-compliance.

3) Hiring contractors through AOR

AOR solutions like Skuad help to hire contractors in Serbia without setting up a local legal entity. 

An AOR acts as a third-party intermediary, assuming legal responsibility for managing your independent contractor workforce in Serbia, including worker classification, contract administration, payments and taxes, and labor law compliance. 

Cost of Hiring in Serbia

Here's a comprehensive list of expenses to consider when hiring in Serbia:

• If establishing a business presence in Serbia, you will have to look after - 

• Government fees for company registration
• Legal requirements for minimum capital, along with additional capital for initial operations
• Corporate bank account and accounting services fee
• Industry-specific permits or licenses can come with associated fees

• Costs associated with processing salaries, taxes, and social security contributions
• Additional expenses related to office space and equipment, recruitment costs, and severance pay
• Further, if you are hiring through EOR/AOR, you will incur a percentage charge of the employees’ salary 

The table summarizes the cost comparison between setting up a local entity vs EOR/AOR. You can use the Skuad cost calculator for better analysis.

A Brief About Employment Laws in Serbia

Serbia's employment law goes beyond a single labor law. Several additional laws impact employment, such as 

• The Law on Peaceful Resolution of Labor Disputes outlines procedures for settling workplace conflicts.
• The Law on Employment and Unemployment Insurance governs unemployment benefits and social security contributions.
• The Law on Occupational Safety and Health ensures employee well-being by mandating safety standards in the workplace.
• Serbia's Personal Data Protection Law, similar to the EU's GDPR, strictly regulates employee data collection, processing, and storage. You must have procedures to comply with these regulations. 

Hire in Serbia with Skuad

Skuad helps you tap into Serbian talent without the complexities of setting up a local entity. 

Our Employer of Record (EOR) services streamline the hiring process and handle payroll, taxes, and social security, ensuring compliance with Serbian employment laws. 

Our expertise extends beyond Serbia, encompassing over 160 countries and making us a valuable partner for organizations seeking to build globally distributed teams. 

Book a demo today to learn more! 

FAQs

Q1. What is the employer cost in Serbia?

A1. The employer cost in Serbia is about 17% for an annual salary of USD 60,000. Typically, employer costs include fixed expenses like company registration fees and variable costs like payroll taxes and benefits. Employer of Record (EOR) services can handle legalities and compliance for a fee to avoid the time and investment of setting up a local entity. 

Q2. What is a good wage in Serbia?

A2. Serbian employment law prescribes a minimum wage of 67,566.33 RSD monthly, which can be extended for any entry-level job. However, various reports suggest a brain drain situation in Serbia. You can tackle it with higher salary compensation and better employee incentives. 

Q3. What is the employment law in Serbia?

A3. Serbian employment law prescribes a 40-hour workweek, eight hours of weekly overtime, mandatory rest periods, and paid leave. Additional laws govern dispute resolution, social security, occupational safety, and data protection. 

Q4. What are the redundancy laws in Serbia?

A4. Serbian redundancy laws offer additional protections for employees. When a position is made redundant due to restructuring, the employer cannot fill that specific role for three months. During this period, the company must first allow the laid-off employee to get their old job back.

Furthermore, when an employment contract is terminated due to redundancy, the employer must provide severance pay. This amount cannot be less than 1/3rd of the average gross salary over the last three months.