How to Hire Remote Employees In 

Croatia

The Basics

Currency
Kuna (HRK)
Employer Taxes
19.2%
Payroll Frequency
Monthly
Official Language
Bosnian & Serbian

Employment in 

Croatia

Hire Independent Contractors

Independent contractors or freelancers are self-employed individuals who provide services to companies as a non-employee. This is one of the most common ways companies tend to hire non-local designers, engineers, support reps, etc.

For legal and tax purposes, independent contractors are not classified as employees. They may work for multiple clients, set their own work hours, negotiate their pay rate, and decide how a job gets done.

For example, the IRS says that if an independent contractor or freelancer does work that can be controlled (what will be done and how it will be done) by an employer then they are, in fact, classified as an employee.

As you can imagine, hiring someone as an independent contractor versus an employee is a fine line to tread.

While there are benefits when you choose the contractor route, there are quite a few drawbacks to consider and you’ll need to weigh them carefully to determine the best fit for your company.

Benefits of Hiring Independent Contractors
Reduced overhead: Lower cost in expenses, payroll, benefits, and more.
Greater flexibility: Contractors can be brought on as-needed. If not a good fit, you simply don’t have to move forward with the contract.
Reduced legal risk: Contractors aren’t usually protected by employment anti-discrimination and workplace safety laws.
Disadvantages of Hiring Independent Contractors
Risk of Misclassification: Not only does this deny workers their proper protections, it can also result in steep penalties and damage to your company. If the IRS determines that employee misclassification has occurred, you will be liable for a percentage of the employees wages, FICA contributions, penalty fines, unpaid taxes, up to a year in prison, and more.
Lack of Control: Contractors are drawn to being independent because it gives them greater control over the work they perform and who they work with. Because they’re not employees, you can’t tell them what to work on and how it should be done.
Lack of Loyalty: Contractors come and go as-needed. Many companies hire contractors for short-term work, which makes it difficult to cultivate loyalty.
Increased Scrutiny: Using Independent Contractors typically leads to an increased risk of being audited.

Set up a subsidiary in 

Croatia

A foreign subsidiary is a company that operates overseas as part of a larger company who’s HQ is in another country.

Establishing a foreign entity is great for having an international presence and accessing new markets. Though, setting up a subsidiary in Croatia can be expensive, stressful, and time-consuming. It's not for the faint of heart.

To set up a subsidiary in Croatia, you have to:

  1. Register your business name and file articles of incorporation
  2. File for local bank accounts
  3. Learn and keep track of the local employment laws
  4. Set up local payroll
  5. Hire local accounting, legal, and HR people

If you're lucky, this process can take months. If you're not so lucky, it can take up to a year. And on average, it costs about $50k-$80k, all-in-all, to get setup. And that's just for Croatia.

Use an Employer-of-Record (EOR)

An employer-of-record (EOR) is a company that hires and pays an employee on behalf of another company.

An EOR is typically used to overcome the financial and regulatory hurdles that often come with employing remote workers.

Each country has its own payroll, employment, and work permit requirements for non-resident companies doing business in their jurisdiction. Meeting those demands can be a huge obstacle when it comes to hiring remotely.

At Panther, we help companies employ and pay people in over 160 countries, without having to set up a foreign subsidiary. Payroll, benefits, taxes, compliance, and more are all handled by us, at a fraction of the cost.

Outside of saving you months and tens of thousands of dollars, other advantages of using Panther are:

  • Ability to attract talented and motivated employees from all over the world.
  • Full legal compliance: There is no risk of violating local employment laws.
  • Transparency: Employees are still your employees. All the work, processes, operations and day-to-day business belong to you, the company, just like with any other employee. Panther just takes on all of the responsibilities, obligations and admin work related to your team's employment.
  • No risk of misclassification

Because you no longer have to set up your own subsidiary, you’ll save a ton of time and tens of thousands of dollars using Panther.

Paying Remote Employees

Paying employees in Croatia is not the same as paying workers in your own country. Employees have to be paid using Croatia’s employment and payroll standards.

This means that you have to know, understand, and keep up with 1) fluctuating currency changes, and 2) local payroll and tax laws in the countries you’re looking to hire in.

Outside of the laws and regulations around payroll, there may be different conditions surrounding leave, overtime, termination, and more. As you can imagine, maintaining this kind of regulatory knowledge can be challenging. But it is crucial and necessary to follow local legislation.

After, you’ll have to determine the best way to pay your international employees. This can be done in a number of ways, including but not limited to:

Pay through a local entity

One of the most challenging (and expensive) parts of paying international employees is setting up the infrastructure to do so.

Before you start to run payroll, you have to register your company as the local employer in the country the worker resides in. As you can see in the “Set up a subsidiary” section, this is a multi-step process that can take up to a year and put you on your way to bankruptcy.

Work with an EOR

Outside of EORs acting as the full admin employer, many also provide remote payroll.

For example, at Panther, in just 1-click, you’re able to pay your entire global team, anywhere in the world. We send you an invoice each month, charge you in US Dollars, and pay your employees the same amount in their local currency.

We factor in currency fluctuations and use the mid-market rate plus any applicable fee passed on by our provider at cost at the time of billing.

Croatia

 Specific Information

Working Hours

Full Time employment is considered 40 hours weekly – however can be extended to 50, and if agreed to in a collective agreement up to 60.

Overtime

Employees generally cannot work more than 180 hours overtime annually (unless agreed to in collective agreement in which case the maximum is 250 hours).

Overtime work is paid at a higher rate, though the government does not specify how much extra. 

Payroll Tax

Employer

Employer

     Health

Minimum Wage

The minimum wage is 4,250 Croatian kuna per month.

Payroll

Pay Cycle

Salaries are paid on monthly basis, no later than the 15th of the following month.

13th Salary

Not mandated by law but a Christmas bonus is common.  

Leave

Paid Time Off (PTO)

PTO is calculated by the:

  • Employees receive 20 days of paid time off. 

Public Holidays

There are 14 public holidays.

Sick Days

The duration of sick leave entitlement provided to workers is dependent on how long they have been employed by their employer:

  • Sick leave is paid by the employer for the first 42 days. 
  • The amount paid depends on the collective agreement, but cannot be less than 70% of the employee’s average salary over previous 6 months.  
  • After 42 days, employer pays, but receives reimbursement from the Croatian Health Insurance Fund (HZZO).

Maternity Leave

Mandatory paid maternity leave starts 28 days (or 45 days, if necessary) before the due date for the child and goes until 70 days after birth. After that, the mother may continue with paid maternity leave until the baby is six months old, but it is not mandatory.   

In all, paid maternity leave goes for 208 days. 

Paternity Leave

In special circumstances, the father can take over the mother’s mandatory leave if the mother is unable to care for the child.

After the 70th day after birth, the mother can transfer the remainder of the leave to the father.

Parental Leave

Each parent has the right to paid parental leave for each child, usable until the child turns 8. It goes for 8 months (for the first and second-born child) or 30 months (for twins, third and each subsequent child).

Both parents use parental leave for 4 or 15 months, but if only one parent takes it, it goes for 6 or 30 months.  

Other Leave

None. 

Marriage Leave

None.

Bereavement Leave

None.

Termination

Termination Process

Employers can terminate a fix term contract by giving the following reasons – business, personal or worker’s’ misconduct. It requires notice and a written explanation for the termination. If the reason is misconduct, a warning needs to be given and the employee gets a chance to explain actions.  

Severance is paid, and all statutory obligations, such as paid time off, are compensated. 

Notice Period

The notice period in Croatia  is:

2 weeks for employees with a year of service
6 weeks for employees with two years of service
8 weeks for employees with five years of service
10 weeks for employees with 10 years of service
12 weeks for employees with over 20 years of service

Add 2 weeks for an employee over 50. Add four weeks for an employee over 55.  

Severance Pay

An employee with two or more years of service with a company has the right to severance pay in the event of termination. Minimum severance is one-third of the regular monthly pay per year at the company.

Probation Period

The probation period cannot be longer than one year.