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The labour market in Croatia

Each labour market has some peculiarities. It may be tricky for foreigners to fully understand the payment methods, the taxes and other benefits related to them. In TalentUp, we are starting a series of different blog articles, one for each country. This article analyses the labour market in Croatia.

General data about the labour market in Croatia

Croatian minimum wage and maximum working hours disclosure. Data for January 2024. Source: https://www.papayaglobal.com/countrypedia/country/croatia/

Payroll taxes in Croatia

Social security contributions are made by the employer and the employee and are used for funding unemployment, pension, maternity/paternity leave, and sickness or injury.

Share of contingencies applied to the gross salary. Data source: https://www.papayaglobal.com/countrypedia/country/croatia/

*Monthly cap of 7,311.17€, applicable for both pillar I and II payments

If an employer has more than 20 employees, they are required to meet certain obligations regarding the employment of individuals with disabilities. The number of disabled individuals that must be employed depends on the total number of employees, but it cannot be less than 3% of the total. Employers who fail to comply with these requirements will be subject to a monthly fee equal to 30% of the minimum salary for each disabled individual they are obligated to employ.

Once contributions are paid, employees need to pay an income tax that varies depending on their gross salaries. If the gross salary is up to 47,780.21€, the income tax is 20%. If the salary is over that amount, the income tax is 30%.

Workers are eligible to receive a monthly personal allowance of 530.89€, with an additional 232.26€ for one child, 331.81€ for two children, and 464.53€ for three children. Moreover, certain cities and municipalities in Croatia impose a municipal tax, which can be as high as 18% and is imposed as a surcharge to the individual’s personal income tax obligation.

Contingencies from self-employees

Breakdown of taxes for self-employees in Croatia:

  • Freelancers are responsible for paying 10% into the pension and social funds.
  • They need to pay VAT:
    • The tax rate for self-employed people is set at 25%.
    • The reduced rate applies to specific goods and services; it is either 13% or 5%.
    • The zero VAT rate must still be recorded to remain compliant.
    • Freelancers who earn less than 3,500 EUR per year only pay a 12 per cent rate on their income tax.

Example of net salary in Croatia

As a reference, we use the average salary of a software engineer. In Croatia, on average, software engineers earn 16,800€ annually.

From gross to net salary of a software engineer in Croatia.

The employer contributes 2,772€ to social security, and the employee contributes 3,360€.

After paying the income tax, the employee has a net salary of 10,752€ coming from a gross salary of 16,800€. 

Unemployment regulation in Croatia

The notice period for a temporary or permanent employee is dependent on the employee’s length of service:

Notice periods in Croatian contracts.  Data source: https://www.papayaglobal.com/countrypedia/country/croatia/

An additional two weeks of notice is required for employees over the age of 50 and an additional four weeks for employees over 55.

The length of an employee’s employment determines how much severance pay they will receive. If an employee has been employed for two or more years, they will receive severance pay equal to 33% of their regular monthly pay rate for each year of service, up to a maximum of six months’ salary.

The maximum probation period is one year.

Different kinds of leaves in Croatia

The paid annual leave varies between 15 and 20 days. There are 14 public holidays.

The employer provides the employee with a maximum of 42 sick leave days per year, during which the employee is paid 70% of their regular salary. If the illness lasts longer than 42 days, the employer pays for it and then receives reimbursement from Croatia’s health insurance fund.

Paid parental leave

Maternity mandatory leaves consist of:

  • 28 days of paid leave before the due date. They can be higher due to medical assessments.
  • 70 days of paid leave after the birth. They can be transferred to the father if the mother cannot care for the child.

After the 70 days, the leave can continue until the child is six months old, but it will be unpaid. It can be shared with the father. Many employees take this leave as a benefit.

Parents are entitled to 120 days of paid parental leave per child, per parent, which must be taken before the child reaches the age of eight. The leave can be taken in one go or split into two parts per year, and it can also be taken part-time, in which case the duration of the parental leave will be doubled but the compensation will be halved.

Other common Croatian benefits

Top 5 benefits offered by Croatian companies. Datasource: TalentUp’s database.

How to employ a worker in Croatia

To hire a remote employee in Croatia, companies must own a local legal entity.

When you hire a remote worker in Croatia, there is a potential risk of creating a permanent establishment. This term refers to a tax concept where businesses have a continuous presence in a country, which may make them liable for corporate taxes if certain criteria are met.