The services of an employer of record (EOR) are one the most cost-effective ways to grow quickly beyond borders. An EOR is armed with expertise and experience to help foreign companies navigate international expansion in their countries of choice. Croatia offers a low cost of hiring, is located in a favorable time zone, and is a country which shares many cultural commonalities with adjacent regions.
How Does an Employer of Record Help with Remote Work?
A foreign company lacking permanent establishment (PE) status in another country isn’t legally allowed to conduct business there. An EOR is the legal employer of record to a foreign company. It oversees hiring, payroll, tax withholding, and other matters relating to employment such as compensation and benefits. An EOR is also a fantastic resource for understanding and navigating the cultural norms of work.
The Benefits of Hiring Remote Workers in Croatia
Lower Hiring Costs
The Euro (€) replaced the Kuna (kn) as of January 2023, simplifying financial transactions by reducing currency exchange costs for businesses operating in Croatia. In the same month, the levels of the two minimum wage rates have also come into effect. For a regular employee, an EUR 700.00 minimum wage translates to a take-home pay of EUR 560. The gross pay of EUR 888,67 nets to EUR 668,44 for employees in managerial positions.
The corporate tax rate for employers is 18%. A reduced rate of 10% applies to small businesses with annual revenue of up to EUR 995,421.06. On a global scale, the relatively low salaries and favorable pay rates provide foreign employers with a very cost-effective place to do business and hire talent in. The cost of hiring an employee in Croatia, in terms of payroll costs, is about 1.4 times an employee’s base salary.
Looking to grow your business in another Central European country? Check out How to Hire an Employee Through an EOR in Hungary.
Similar Work Culture
Croatian employees can work beyond 40 hours per week if the total hours are spread across multiple employers. Up to a certain limit, employers may require overtime. In 2020, the Croatian government announced a law that would regulate Sunday work by significantly limiting the number and type of workplaces allowed to open, reinforcing the increasing importance employees place on work-life balance.
Croatian, the official language, is spoken by 6 million people worldwide. English is by far the country’s most commonly taught language, followed by German and Italian. The diversity is helpful for collaboration with Europe and North America. Likewise, the common languages serve to connect individuals of varying experiences, encouraging creativity and different perspectives. Working with North America will likely take place during mornings which are mid to late afternoon across Europe.
Time Zone Overlap
Differing from countries in Western and Eastern European Time by only an hour, Croatia’s working hours are Central European Time. Its geographical proximity fosters ease in coordination and collaboration.
Shared Public Holidays
Here are Croatia’s 14 public holidays, many of which fall on the same dates as those observed in North America.
- January 1: New Year’s Day
- January 6: Epiphany
- March/April: Easter Sunday
- March/April: Easter Monday
- May 1: Labor Day
- 60 days after Easter (date changes annually): Corpus Christi
- May 30: Statehood Day
- June 22: Anti-Fascist Struggle Day
- August 5: Victory and Homeland Thanksgiving Day and the Day of Croatian Defenders
- August 15: Assumption of Mary
- November 1: All Saints’ Day
- November 18: Remembrance Day
- December 25: Christmas Day
- December 26: St. Stephen’s Day
The overlap of and close range in public holidays with Europe as well as North America facilitate shared cultural understanding, work norms, and most importantly, collaboration.
Manage Employees Through a Global Employer of Record
Here are some of the key employment areas that a foreign employer must comply with when hiring in Croatia.
Employment Contract and Written Documentation
An employment relationship, whether fixed or indefinite, should be established based on a written employment contract signed by both an employee and an employer. In its absence, a written record of the employment contract known as a written certificate must be issued. The absence of a written document, neither nullifies the existence nor enforceability of an employment contract. Furthermore, its absence also presumes an employment relationship to be indefinite.
A fixed-term contract and any successive terms are only allowable for up to three years. If there is an interval of less than two months between terms, employment is regarded as continuous as opposed to successive. This is as per the Labor Act, which as of January 2023 includes many new provisions. An employer must also either offer permanent employment to an employee after their fixed-term contract ends or terminate the relationship. This narrows the implementation of successive fixed-term employment in long-term expansion.
Although employees of both contracts receive benefits, basic entitlements such as annual paid time off or severance pay, among others, may increase with seniority. The implication for foreign employers is to conclude lengths of contracts appropriate to the requirements of work, and be aware that in doing so, employees’ benefits and entitlements are protected. Furthermore, knowing the clear delineations enable headcounts estimation, budget forecasting, and document preparation in global expansion.
A probationary period can’t exceed six months. This is also the maximum period upon which a temporary employee can request indefinite employment. With written responses, an employer may deny this and any of an employee’s requests. This again highlights the importance of written documentation in Croatia when it comes to employment.
A written contract makes expectations clear for both parties. It ensures compliance, avoids gray areas, and helps to foster trust from the start. An EOR, like Borderless, is ready to help you structure contracts that are both compliant with Croatia’s various employment laws and regulations and incentivizing to employees.
Overtime
40 hours per week are considered full-time. However, employees who desire to work an additional eight hours can do so for another employer by simply informing their main employer. Where the hours of a workweek are unevenly distributed, an additional 16 hours are allowed. Not stipulated in the Labor Act, overtime pay should be defined either in an employment contract or a collective bargaining agreement. An employee is entitled to one and a half times regular pay if working on a Sunday, but doing so is limited to three times a year.
Within a week of unevenly distributed hours under a collective bargaining agreement, an employee can work up to 60 hours per week including overtime. Without one in place however, an employee can only work up to 50 hours per week including overtime. An employer with changing business needs can require overtime up to a maximum of 110 hours per week. On a yearly basis, overtime is allowable up to 180 hours, or if regulated under a collective bargaining agreement, 250.
Paid Leaves
Upon six consecutive months of work, employees are entitled to a paid annual leave minimum of 18 working days. Employees are encouraged to use their paid time off within each calendar year under a use-it-or-lose-it policy. If an employee cannot use their annual leave because they’re on maternity or illness leave, the unused days can be carried over until June 30, the fiscal year-end.
Unique to Croatia is also its entitlement to longer paid leave for “irregular” jobs. Minor employees who can sign on to employment contracts starting at age 15 receive 24 days. 30 days are provided to employees whose jobs expose them to more harm, such as firefighters and explosives handlers.
Sick leave is 42 days and is fully paid. Maternity leave of up to 115 is fully paid. Its portion of 70 days after birth can be taken instead by the father. Upon its completion, an unpaid six-month maternity leave may continue if needed, but typically employers offer to pay this as an additional leave benefit.
An EOR like Borderless will provide you with the clarity you need to provide the different types of mandatory leaves in employment contracts.
Social Security Benefits
Contributions to social security are calculated as a percentage of an employee’s base salary with no base wage limits. Croatian employers pay 16.5% between public healthcare, work accident insurance, and unemployment. Croatian employees pay a total of 20% to the mandatory pension fund in two pillars.
An EOR, like Borderless, will ensure your payroll taxes are processed accurately and comply with the Croatian social security system.
Other Employer Responsibilities
While a 13th-month bonus isn’t mandatory, it’s customary for employers to pay a tax-free holiday bonus of up to HRK 5,000, around EUR 664. Other monetary entitlements, up to certain limits, such as a gift to an employee’s child under aged 15 is common. Performance-based remuneration is also popular. With regards to separation of employment, severance is 1/3 month's pay per year of employment to employees that have worked a minimum of 2 years.
An EOR like Borderless can help you stand out as a foreign employer by advising you on constructing incentivizing packages as much as it can ensure that you fulfill your employer's responsibilities in the event of separation in employment.
Choosing the Right EOR for Your Business
There are several key considerations for employers to make the most informed decisions in choosing the best EOR for their businesses.
- Geographic coverage: Make sure that your EOR of choice can legally operate in Croatia.
- Employment services: The suite of employment services offered by a competitive EOR should cover hiring, onboarding, payroll, benefits, and HR management.
- Reputation: When selecting an EOR, get a sense of its past work and experience. Make sure that it has a great track record and the local know-how to bring you value add.
- Cost: A high-value EOR’s pricing should be transparent and reasonable.
- Flexibility: An EOR should offer customized employment solutions to meet your specific needs and requirements.
Overall, foreign employers should choose an EOR that can provide cost-effective, reliable, and compliance-first employment solutions. This will enable you to navigate and expand into foreign waters with confidence, ease, and trust.
Simplify Global Hiring With the Borderless EOR
Borderless is in over 150 countries and our experienced team of legal experts is here to help you get set up quickly, comply with employment requirements, and navigate the cultural and professional environment in your country of choice. Our platform has been proven to Book a demo today.
Disclaimer
Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
