Your guide to payroll in Croatia

Managing payroll in Croatia is an essential step for staying compliant with the country’s legal and financial framework. 

For global employers engaging talent in Croatia, it is essential that they accurately handle salary calculations, tax withholdings, and social security contributions to maintain accurate payroll records.

Croatia has established clear rules regarding pay cycles, deductions, minimum wages, tax responsibilities, special allowances, and other related matters. 

If you are an employer trying to hire in Croatia, this blog will provide you with an overview of the things you need to take into consideration during Croatia payroll processing and outline the compliance requirements. 

It will also throw light on how a workforce management platform like Payoneer Workforce Management can help streamline payroll management in Croatia.

Croatia payroll: Wages and other payments

Wages and other payments form the foundation of employee compensation while structuring a payroll in Croatia. They determine how earnings are calculated and reported.

Payroll cycle in Croatia

The employment law of Croatia states that employers shall pay employees their due salary for a month by the fifteenth of the following month. Employees in Croatia are paid in Euro (EUR).

Minimum wages

Employees should be paid a minimum of EUR 970 every month for their service in an organization. This amount may, however, differ based on collective agreements between the employer and employee, or some sector-specific regulations.

Overtime pay

Employers must inform employees in writing before asking them to work overtime. 

Total working hours, including overtime, cannot go beyond 50 hours per week, and overtime is capped at 180 hours per year. Minors are not allowed to work overtime.

Pregnant employees, parents of children under 8, and part-time workers with multiple jobs can only work overtime if they give written consent, unless it’s an emergency.

Extra pay is required for overtime, as well as for work done in tougher conditions like night shifts, Sundays, public holidays, or other non-working days. 

The exact pay rates and how they’re calculated depend on the employment contract, company rules, or any applicable collective agreement.

For Sundays, typically, it is a minimum of 50% increase per hour.

Sick pay

Employees in Croatia are entitled to sick pay for 42 calendar days. During this time, the employer has to pay 70% of the employee’s average salary. 

From the 43rd day, the payment is made by the  Croatian Health Insurance Fund (HZZO). The fund continues to pay 70% of the salary, with higher compensation in certain cases (e.g., work-related injuries or maternity complications).

Maternity pay

Employees in Croatia can avail themselves of maternity benefits if they have a health insurance that is regulated by the Croatian Health Insurance Fund (HZZO).

Croatian employees are entitled to a maternity leave of 98 days, which should be taken in parts both before and after the birth of the child. The employee shall receive 100% of the salary compensation.

After 6 months, the employee can claim the same via state-funded parental leave.

Paternity pay

Fathers are entitled to get a paternity leave of 20 working days for one child, and 30 days for twins or more. Employees must take these leaves by the time a child turns 6 months old.

When an employee takes paternity leave, he shall get 100% payment from the Croatian state.

Severance pay

If an employer dismisses an employee after two years of employment, the employee must be paid severance pay. The amount of severance pay in Croatia shall be calculated by multiplying one-third of the employee’s average monthly salary for the last three months by the number of years for which the employee has served in the organization.

The non-taxable severance amount is EUR 896 per completed year of service with the employer, and it is paid as a one-time amount upon termination, with no ongoing accrual.

Payroll in Croatia: Contributions and deductions

Understanding payroll in Croatia starts with a clear view of the contributions and deductions that shape an employee’s net salary and align with statutory requirements.

Personal income tax (PTI)

There are specific laws in Croatia that govern how taxes are deducted from an employee’s income. 

Anyone earning in the country is required to pay income tax, which contributes to funding essential public services such as transport infrastructure, roads, educational institutions, and healthcare systems.

The applicable rates for income tax in Croatia are structured based on annual earnings:

• 20% on annual income up to EUR 50,400
• 30% on annual income exceeding EUR 50,400

Social security contributions

Social security contributions in Croatia are mandatory payments that are shared between employers and employees. They are deducted from an employee’s salary before employers pay employees in Croatia. 

These deductions are used to fund pensions during old age, sickness, unemployment, and health insurance systems.

The social security contributions are as follows:

1. Pillar 1: This is a mandatory pension system that is based on an employee’s generational solidarity. The contribution rate is 15% of the employee’s gross salary. This is managed by the Croatian Pension Insurance Institute (HZZO).
2. Pillar 2: This pension system is based on individual capitalized savings. 5% of an employee’s gross salary is deducted under this head. This is managed by the Central Register for Insured Persons (REGOS).
3. Health insurance: An employer contributes approximately 16.5% of an employee’s income towards contributions for health insurance. Health Insurance in Croatia is managed by the Croatian Health Insurance Fund (HZZO).

Other employee benefits

Employees in Croatia are entitled to some more benefits. They are mentioned below:

• Daily allowance for business trips: Employers shall pay daily allowances to employees for their business trips, whether domestic or abroad. The amount of allowance to be paid to the employee is determined based on the duration and geographic location of the trip.
• Holiday pay: Employers can pay out special non-taxable amounts as bonuses, such as a Christmas bonus or a vacation bonus.

Croatia payroll compliance best practices

In the case of international hiring in Croatia, employers should pay special attention to detail while processing payments. 

Some of the key considerations are as follows:

• To begin with, the employment contract between the employer and the employee must contain all the details about the employee’s basic pay, key deductions, allowances, and the net pay thereafter. 
• Employers should remain updated about the alterations in the statutory labor laws. 
• Employers should abide by the employee’s payslip requirements in Croatia. It should provide a detailed breakdown of the employee’s salary to maintain transparency.
• There should be regular audits, and all documentation must be kept up-to-date. 

Your options for payroll services in Croatia

Hiring and paying employees in Croatia may seem challenging. Here are a few ways in which it can be made simpler:

• Employers can hire independent contractors to manage their project-based tasks. This allows them to bring in professionals. Since contractors are responsible for managing their own taxes, it further simplifies payroll processing and management in Croatia. However, making compliant contractor payments 
• Businesses can set up a legal entity in Croatia. However, this is a time-consuming process. It is also not feasible for small businesses or businesses that wish to acquire talented employees from all across the globe.
• Employers can also use a workforce management platform for support with the hiring process, including onboarding, payroll compliance in Croatia, localized benefits, HR admin, and more, as per local employment laws.

Payoneer Workforce Management helps you navigate compliance and optimize employment costs in Croatia. It streamlines payroll, benefits, and statutory processes, enabling efficient and compliant workforce management.

Book a demo today!

FAQs

1. How is sick leave compensated in Croatia?

When an employee takes sick leave in Croatia, they are paid 70% of their average salary by their employer for the first 42 days. From the 43rd day, this compensation is paid by the Croatian Health Insurance Fund, for which the employee has to pay regular social security contributions in Croatia.

2. Is severance pay mandatory in Croatia?

Yes, employers in Croatia have to pay employees a mandatory severance pay. If an employee is dismissed after being employed for two years, the employer has to pay an amount equivalent to the product of one-third of the employee’s average monthly salary for the last three months and the number of years for which the employee has worked in the company.

3. What is the minimum wage in Croatia?

Employers should not pay employees anything less than the minimum wage as specified by the Labor Law of Croatia. The minimum wage in Croatia is EUR 970 per month.

4. What are the main social security contributions in Croatia?

The main social security contributions in Croatia are the mandatory insurance contributions (Pillar I and Pillar II for pension) and health insurance contributions.

5. How does Payoneer Workforce Management support payroll processes?

Payoneer Workforce Management helps you simplify payroll by consolidating a global payments infrastructure, automating mass payouts across 70 currencies, and helping you stay compliant with local regulations, so businesses pay global teams accurately, on time, and with reduced administrative effort.