Understanding Payroll in Serbia: What Global Companies Need to Know About Serbia’s Payroll
Home of the word “vampire”, the majority of the world’s raspberries, legendary hospitality, and one of the oldest cities in all of Europe, the nation of Serbia has a truly fascinating history for visitors to discover. With a population of about 8 million and a GDP of approximately €42 billion, Serbia's economy relies on energy, mining, and machinery. Plus, it's one of the largest exporters of raspberries and plums in the world. Located between Macedonia and Hungary, this fertile land is home to a diverse population of residents from Hungary, Romania, and Bosnia.
Serbia has some very tax-friendly rules to both businesses and workers alike, but their payroll regulations can be difficult for outsiders to learn. The tax code has a number of exceptions and mandates that make it easy to make a mistake — especially if you’re not a native speaker. Choosing an experienced international payroll solution may be the right first step toward organizing finances properly for the benefit of both company and employees.
The first stop for any organization is the Serbian Trade Register, where businesses can complete their incorporation application online or by visiting the physical location. Serbia requires at least one natural-born Serbian representative of the company. Businesses will receive their official registration data through the Republic Statistical Agency. They'll also need to register with the Pension, Employment and Health Fund in Serbia.
Companies can register under a variety of titles, including joint-stock, limited liability, and general partnership. Required capital and paperwork will vary based on which form the company will take. Opening a bank account generally takes between four and five weeks, and may be difficult to do without a native Serbian speaker. Companies will also need to register with tax authorities, which is free and can be done online.
Employment Law & Employee Rights
The workweek in Serbia is a standard 40 hours from Monday to Friday. Overtime is rarely asked of Serbian workers but is allowable under extreme circumstances. Regardless of rank in the company, overtime is compensated with at least 125% of the normal wage. Probation periods are allowed but cannot last longer than six months. Written employee contracts are required and need to state the official title, description of work, and basic salary. Contracts are required to be written in Serbian, though additional versions in other languages are allowed. Collective bargaining is practiced in Serbia and is regulated by the Labor Code. However, due to general disorganization among the major sectors, there has been an erosion of collective bargaining in recent years.
Compensation & Severance
For 2018, the monthly minimum wage is 24,882 Serbian dinars (RSD), or approximately €210. Serbians are entitled to a pay raise of 0.4% for each year of their employment. Bonuses are not required but are generally expected by most workers. Severance pay is mandatory in the case of a layoff, with the amount based on the number of years the employee worked for the company. Employees cannot receive lower than 1/3 of their yearly salary for each year of employment with an employer. Per Labor Law, severance is not taxed. Employers are required to give written notice to employees prior to terminating them. Employers are highly encouraged to have honest conversations with employees about compensation expectations prior to signing a contract.
Tax Requirements & Withholding
Serbia has an attractive corporate tax rate of 15% and a standard personal income tax of just 10%. Only those who make three times more than the average yearly salary are taxed at an additional 10%. Those who make more than six times that of the average worker will be taxed at an additional 15% (for a total of 45%). Employees contribute 13% to the state pension fund, while employers contribute 11%. Both employees and employers contribute 6.5% to the state health fund and 0.5% to unemployment. Those who make capital gains on their assets are not subject to personal income tax.
Time Off & Unpaid Leave
Serbia recognizes 14 public holidays each year, although some are designated as “working holidays” and others regularly fall on the weekend. Serbians also enjoy 20 days of annual vacation per year. There is no limitation on sick time in Serbia, and the first 30 days of leave are paid for by the employer. For a non-work related injury, the worker is entitled to 65% of his average salary for the previous year. Employers will continue to pay for the employee's sick leave after 30 days, but they are allowed to recoup those costs from the state at a later date. New mothers can take up to 26 weeks of fully paid leave. Additionally, they may take up to one year of additional leave beyond 26 weeks, paid at a reduced salary.
A Welcoming Country
The workforce in Serbia is highly educated and ready to work, making it a welcoming country in more ways than one. The low corporate tax rate can make it easy for a larger company to expand their profit margins. However, global payroll can be difficult to navigate in Serbia due to its complicated tax code and time-off mandates. Having a payroll partner can make it easier to do business in this beautiful country.