Worldwide: HRP Compliance In The Western Balkans: Complex Processes In An Even More Complex Region

Last Updated: 27 October 2016
Article by Igor Dakic

Employment without Establishment region-wide, minimum wage in Serbia, directorship in Bosnia, correctness of payslips in Croatia - how aware are we of the risks of being non-compliant?

Since the breakup of Yugoslavia there have been many attempts to arrive at an adequate appellation for the region in question, and it appears that we have finally settled on the 'Western Balkans'. However, when it comes to business rather than politics, most companies still refer to it as Southeast Europe, tossing all these fledgling states into the same pot with a score of other countries whose economic histories and entrepreneurial environments may be completely different...or, to make matters even more complicated, that may be different to some former Yugoslav republics but quite similar to certain others.

To illustrate: Slovenia and Croatia are both EU member states, but do not have a common language. Montenegro and Bosnia and Herzegovina, which do share the same language with Croatia, are yet to enter the EU – but all of the four mentioned countries' recent economic histories have been marked by long or very long recessions, high levels of State interference, and (more or less) inefficient judicial systems, and, within the regional context, comparatively high taxes and labour costs (especially in Croatia).

Conversely Serbia, language-wise another closest relative of the aforementioned trio, has been attracting manufacturers for quite some time courtesy of a cocktail of low labour costs and zesty governmental incentives for foreign investors (thus competing, in terms of FDI, with the likes of Bulgaria and Romania, and by extension Slovakia and Poland); whilst Macedonia, whose language is mutually intelligible with Bulgarian, has implemented a flat tax and has, all its political instability and name disputes notwithstanding, managed to survive in the epicentre of the proverbial Balkan powder-keg.

In other words, this potpourri of overlapping, intersecting and conflicting disparities and similarities does translate rather well into the practicalities of doing business in the region. Rather logically – at least at first sight – many companies have decided to set up their (sub)regional headquarters in Belgrade or Zagreb or Ljubljana; only to realise, very early on, that the regulatory realities in these three cities and beyond require markedly different approaches and solutions.

Now let us envision a company with its HQ in Zagreb which, for its own reasons, does not wish to have registered entities across the region, merely a few people in each of the countries engaging, say, in marketing activities. In Slovenia, this company could have recourse to an elegant solution called Employment without Establishment (EwE), which allows employees to conduct (certain types of) business on behalf of a foreign employer without any need to set up a company or representative office – but that is possible only in other EU member states, meaning only in Slovenia (and, if we were to reverse the scenario, in Croatia). In other countries it would probably have to go the way of staff leasing via a representative office – but in Serbia, for instance, although offered and provided as a service, staff leasing is yet to be functionally regulated by a set of legislative acts.

In Bosnia, a country with arguably one of the most complex political systems in the world, regulations often vary between the two constituent entities – the Federation on one hand and Republika Srpska on the other – meaning there is often a conflict between how things ought to be carried out in Sarajevo as opposed to some place in the Serb entity. Any company that has ever tried to change directors in the Bosnian Register must have at least a glimpse of what is being discussed here.

A question of accuracy

Simply put, a clear question arises: how sure can anyone be of, say, the correctness of payroll calculations across different territories, especially as it is not uncommon, in this region, for a company to have four different service providers in four different countries?

How aware are we of the risks of being non-compliant? I need not say that TMF Group, with its global network of offices, integrated local knowledge, and an ability to provide a single point of contact, can solve these conundrums rather efficiently.

All the countries in question – apart perhaps from Slovenia – are still in transition, meaning the relevant legislation changes often and at times not necessarily for the better. To illustrate, did you know that as of 1 January 2017, the Serbian Government is instituting the new minimum wage of RSD 130 (cca €1) net per hour, as well as the new obligatory VAT report, to be filed simultaneously with the VAT return? Also, did you know that if an employee does not receive a salary (or one of its elements) in line with Labour Law provisions, he/she can claim repayment as well as all the accrued interest for up to three years after the incident?

Did you know that in Croatia most payroll providers actually deliver to their clients the so-called incomplete payslips, meaning that only the final gross is registered rather than all recorded types of working hours per employee as per prescribed categories? Did you know that the penalty for omitting payslip content as prescribed by the law is HRK 61,000-100,000 (Euro 8,150-13,300) for companies and HRK 7,000-10,000 (Euro 930-1,330) for physical persons responsible? That said, the same penalty is also applicable if, say, a termination is not submitted in writing, adequately explained, and delivered to the worker – and this is just the beginning of a long list of HRP-related penalties for non-compliance. Finally, are you aware – and this is true of all the aforementioned territories – how important it is that all employer sick-leave refunds be calculated and submitted by very clear and non-negotiable deadlines, for anything less than that means that the funds in question will be irretrievably forfeited?

It could be argued, at this point, that we have wrought these realities into something resembling a tangle of thorns. Then again, we are talking about complex processes in, as we have established, an even more complex region. Now let us untangle it.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.