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Employer of Record in Croatia

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​​​​​published on 26​ April 2024 | reading time approx. 5 minutes​

    

Employer of Record (EoR) solutions make the expansion of companies to Croatia simple and easy, but the EoR model is not possible in Croatia. However, a company that has a temporary employment licence can work on behalf of another company in Croatia. There are compani​es on the market in Croatia that offer recruitment via an EoR. There is a demand for EoR and foreign companies are showing more interest in the model.​
    
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​If the concept of EoR has been regulated by law, since when? Is there already case law on this?

​Employer of Record (EoR) solutions make business expansion to Croatia easy and hassle-free. The HR plat­forms active in Croatia allow companies to hire exceptionally talented employees in Croatia, without having to set up a separate legal entity. It streamlines the process of hiring and onboarding a remote team by handling payroll management, taxation, and other legal compliances. Employment in the Republic of Croatia is regulated by the Constitution, international conventions and treaties, the Labour Act, and employment agreements. Croatian employment laws apply both to foreign nationals and their citizens. However, there are some dif­ferences in terms of their entitlements.
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​What does Employer of Record mean in Croatia?

​​While possible in many other countries, an Employer of Record model is not possible in Croatia. However, an organisation holding a temp agency license can employ on behalf of another company in Croatia as far as the government, tax, and employment authorities are concerned. They are responsible for:
  • informing the client about any pre-employment requirements,
  • ensuring their employment is compliant with Croatian employment law,
  • informing the client about the length of the maternity leave, paternity leave, public holidays, Illness benefits, medical benefits,
  • providing a locally compliant employment contract,
  • processing local payroll,
  • filing employment-related tax returns,
  • issuing payslips to the employee,
  • distributing salary payments,
  • payments to the local tax authorities.​

  
The temp agency takes care of all Croatia compliance aspects of employment, including payroll, taxes, statutory benefits, employment contracts and more.

The Temp Agency is responsible for:

  • ensuring their employment is compliant with local employment laws,
  • processing local payroll,
  • filing employment related taxes and returns,
  • issuing payslips to the employee,
  • distributing salary payments.
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Customers that work with a temp agency in Croatia are responsible for:
  • sourcing and recruiting their own workers,
  • managing the employee’s day-to-day work load,
  • contributing to the personal/professional development of the employee through their work,
  • following any guidance we give on employment and HR best practices or legal obligations in Croatia, such as the employment contract, public holidays, annual leave, sick leave, maternity and paternity benefits, pro­bationary periods, overtime pay, statutory redundancy payments, liability insurance and many others,
  • ensuring that payroll bills relating to their team are paid to Boundless before the cut-off point in each pay cycle.
   
As an EoR service for Croatia, the providers take care also for applying and obtaining visas. 
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Work Permit

A work permit and a residency permit are mandatory requirements for employees planning to work in Croatia. Since Croatia is a member nation of the EU, European citizens are allowed to live and work in the country without additional visa requirements. Other foreign nationals require the following to live and work in Croatia:
  

Croatian Residence Permit

Every foreign national who plans on staying in Croatia for a period longer than 90 days requires a Croatian residence permit. Only the holders of long-stay visas are eligible for the same. The application for the permit can be made at a local police department.​

  

Work Permit

Before applying for a long-stay visa for work and business orders, you must have an employer in Croatia who can obtain a work permit for you. A temporary residence permit shall not be granted to you unless you hold a valid work permit.​ Securing work permits is an essential task of EoR services providers. ​

    

Contractors vs. Full-time Employees

The Labour Act of Croatia defines the terms “employees” and “employment relations.” Apart from ordinary employees (natural or legal persons performing certain works for an employer), employees can be further divided based on their term period, as follows
  • Definite (fixed-term contract)
  • Indefinite (indefinite term contract)
  • Full-time employees
  • Part-time employees
  • Independent Contracting.

  

​​Hiring in Croatia​

The Croatian Labour Law protects employees against unwanted corporate practices. Further, the country has established a strong legal regime to combat any kind of discrimination at the workplace or in the hiring process. There are several websites on which employers post their job openings, such as MojPosao, Nova Karijera, Oglasnik, Bika, and Njuskalo. HZZ or Burza Rada is a Croatian Employment Service by the State institution. Major newspapers that advertise for employment opportunities are Vecernji List, Jutarnji List, Novi List, and Slobodna Dalmacija (Split).
  
The hiring process cannot be initiated unless your business is registered with the authorities. As per the employment laws in Croatia, a written employment contract specifying the term and duration of the rela­tionship between the employer and the employee is a prerequisite. The contract should necessarily be exe​­cuted in the Croatian language. 
  
An easy solution to hiring remote workers is through independent contracting. Independent contracting agreements are legally binding across different jurisdictions that should be executed between the parties. This form of employment involves complex issues such as immigration, taxes, and administrative work. An easy approach to handle such issues while expanding to Croatia can be to use an umbrella company to avoid any kind of misclassification or breach of self-employment rules. 
​The following provides a guide to independent contracting in Croatia:
     

Do you need a visa to become an independent contractor in Croatia?

Non-EU nationals require a visa to work as independent contractors. EU nationals do not require a work visa.
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What are the different modes of becoming an independent contractor?​

To become an independent contractor, you can,
  • Work as a self-employed freelancer
  • Set up your own LLC
  • Work with an umbrella company acting as an intermediary between you and the client for facilitating payment and ensuring performance.

  

What are the tax compliance requirements?​

Croatia adheres to the 183 days rule to determine your tax residency.
  

What are the benefits of hiring independent contractors?

Such contracts are extremely easy to set up. They represent an inexpensive mode of hiring and are easy to regulate. They require no legal overhead for the company.
  

What are the disadvantages of independent contracting?

Independent contractors are not offered the legal protection ensured to the regular employees. They are also ineligible for local perks and pensions.
  

What are the terms of service related to termination and probation?

The termination clauses are determined as per the employment agreement, that is, the independent contracting agreement.
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Special features of the activity within the framework of the EoR concept or temporary employment

A temporary license is required for the borrower's activity. In most cases EoR or temporary employment is temporary. The employee is entitled to the same employment conditions as a regular employee of the actual employer, even if the actual employer is based abroad and other regular employees also work abroad.
  

​What are the special tax features of the EoR concept in your country?

Croatia has signed the Double Taxation Avoidance Agreement (DTAA) with numerous jurisdictions; depending on the applicability of the foreign tax credit (FTC), relevant deductions can be made under the Croatian taxation regime. While the social security taxes constitute 20Percent of your gross salary, you can be exempted if such contributions are covered in your native country’s tax regime. The withholding tax for a non-resident company is set at the rate of 12 Percent p.a.
  

​​​​Conclusion Partnering with an Employer of Record Croatia (temp licence holder)

Pro: ​Employment is handled by a platform that specialises in employing people on behalf of customer com­panies. The temp agency helps to hire and pay employees.
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Cons: The ongoing costs may be higher than direct employment. Some education is needed to inform employees about how the employment relationship will work.​​​​

Insights
Employer of Record
Employer of Record – A country overview of opportunities and limits​​

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Radu-Dragos Dobrescu

Partner, Office head

+ 385 1 4920 468

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Alina Dobrescu

Commercial Manager Adria

+385 1 4920 481

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