Croatian legislation allows foreign employers to hire Croatian citizens without having to register a company, a branch, or a representative office in Croatia.
Croatian residents may establish an employment relationship with an employer who has a registered office abroad. As the Croatian social security system is compatible with the EU system, there are differences between a relationship with an employer based in an EU Member State and an employer based in a third country.
The main difference is in the payment of contributions. Employees must pay their own contributions as part of an employment relationship with an employer from a third country, say the Ecovis experts.
Employment Contract with an Employer Based in an EU Member State
If Croatian residents working for an employer based in another EU Member State conclude an employment contract according to Croatian legislation, they enjoy all Croatian pension and health insurance rights, for which they are covered by compulsory insurance. The employer is required to calculate and pay contributions according to Croatian legislation and should therefore apply for a personal identification number (PIN). The basis for contribution payments is the agreed salary, which is generally defined in the employment contract. In some cases, the employer is exempt from paying health insurance contributions and is required to calculate and pay only pension contributions.
We can take care of the complete payroll for you if you employ Croatian employees and do not have a permanent establishment in Croatia. Mihael Gruičić, Payroll Specialist, ECOVIS FINUM, Zagreb, Croatia
Employment Contract with an Employer Based in a Third Country
However, if Croatian residents conclude an employment contract with an employer based in a third country, they remain in the Croatian social security system and pay contributions. Here, the employees submit the application for pension and health insurance using the forms prescribed by the tax administration. The basis for calculation of the employees’ contributions is determined by the tax administration annually. Employees pay contributions for the first and second pillars of the pension scheme, as well as health insurance.
It is easily possible to hire Croatian workers in Croatia, even without a branch or a local representative. However, entrepreneurs must know the rules of the game exactly, explain the Ecovis consultants.
For further information please contact:
Mihael Gruičić, Payroll Specialist, ECOVIS FINUM, Zagreb, Croatia