We have outlined the fundamental guidelines regarding the legal aspects of establishing employment relationships. Employment law and relationships in Serbia encompass a broad field.
In the following, a comprehensive guide on establishing employment relationships is presented – detailing the types of contracts and employment engagements in Serbia, the conditions for employees, their rights and obligations, types of employment contracts, various forms of engagement outside of formal employment, and other related matters.
1.1. Employment Contract: An Overview
The employment relationship between an employer and an employee is established through an employment contract. According to the law, the contract is always signed before the employee begins work.
It is formalized in writing, usually in at least three copies, and is signed by both parties involved – the employer and the employee. The employment contract is considered valid only after it has been signed by both parties.
The employer may be represented by the CEO of the LLC, a member of the board of directors if this decision is defined in the company’s founding act after its establishment, or another individual authorized by the CEO.
An employment contract outlines the following:
- Job type,
- Duties and responsibilities of both the employee and the employer,
- Educational requirements,
- Gross salary,
- Working hours,
- Adherence to workplace discipline,
- Notice period (a minimum of 15 days but not longer than 30),
- Other mandatory elements.
The contract can also specify non-legally required details to better regulate the rights, duties, and responsibilities of the parties involved. These may include aspects such as the wage calculation method, the amount of meal allowances, entitlement to annual leave, compensation for annual leave, the amount of compensation for shift work or fieldwork, and more.
1.2. Elements of an Employment Contract
In an employment contract, essential details concerning both parties must be stated.
The elements included in an employment contract are:
- Employer’s name and address.
- Employee’s full name, place of residence, or domicile.
- Educational qualifications and professional expertise level.
- Job title and a description of the duties the employee is expected to perform.
- The location of work.
- The type of employment relationship (indefinite or definite term).
- The duration of a fixed-term employment contract, along with the basis for establishing such an employment relationship.
- Employment starting date.
- The working hours (full-time, part-time, or reduced hours).
- The specific amount of the basic salary as of the date of contract conclusion.
- The components used to determine the basic salary, work performance, wage supplements, increased salaries, and other benefits.
- Deadlines for salary payments and other benefits to which the employee is entitled.
- The duration of daily and weekly working hours.
If details regarding wages, allowances, payment schedules, and daily/weekly working hours are specified by law, a collective agreement, workplace regulations, or any other employer document, the employment contract does not need to include these elements. In such cases, it is sufficient to reference the legal document that defines them.
1.3. Employee Conditions when Establishing an Employment relationship
Basic conditions for both employees and employers when establishing an employment relationship require adherence to the rights and obligations defined in the contract, general regulations, and the law.
Employee rights include:
- Earning a salary.
- Ensuring safety and health at work.
- Access to healthcare.
- Protection of personal integrity, dignity, and other rights in cases of illness, reduced or lost work ability, and old age.
- Financial support during temporary unemployment.
- Entitlement to other forms of protection.
- Special protection for childcare.
- Special protection during pregnancy and childbirth (for women in employment).
- Special protection for employees under 18 and employees with disabilities.
- Participation in profits generated in the business year if stipulated by general regulations or the law.
Employee responsibilities:
- Perform tasks conscientiously and responsibly.
- Adhere to the company’s work organization and business rules, as well as contractual conditions, policies, and other obligations related to employment.
- Inform the employer about circumstances that may affect or have the potential to affect job performance.
- Notify the employer of any potential hazards to life, health, or the occurrence of material damage.
2.1. Types of Employment Engagement in Serbia
According to the Labor Law in the Republic of Serbia, workers can be engaged in two ways:
- Employment (hiring workers) with the establishment of an employment relationship,
- Engagement of individuals outside the employment relationship.
2.2. Types of Employment Arrangements
When employees enter into a working relationship with their employers, it can be either for a fixed period or on a permanent basis. In essence, there are two kinds of employment setups:
- Fixed-term employment, and
- Permanent employment.
All employees in an employment relationship enjoy certain rights and have responsibilities, whether it is a permanent or fixed-term employment relationship. Rights and obligations arising from the employment relationship begin on the day of commencing work.
The difference between these employment relationships lies in the duration of the employment contract, as a fixed-term contract expires upon the completion of the agreed-upon term.
Other forms of employment (which can be both fixed-term and permanent) include:
- Employment for performing tasks with increased risk.
- Part-time employment.
- Employment for tasks conducted outside the employer’s premises.
- Employment with domestic help staff.
- Employment with interns.
Employers opting for these employment forms also have the opportunity to benefit from various tax incentives. We have provided in-depth information about the incentives for employment.
2.3. Fixed-Term Employment Contract
A fixed-term employment contract is an agreement with a predetermined duration. It is only concluded if there are objective reasons justified by a specific project, task, or event for which work is needed.
When drafting this contract, the length of employment is pre-determined but cannot exceed 24 months. A fixed-term employment relationship can be established for a maximum of two years.
An employer can establish one fixed-term contract with the same employee, which will be valid as long as the job tasks are being performed. Additionally, the employer can establish multiple fixed-term employment contracts with the same employee as long as there is a need for the job to be done. Each new contract is made upon the expiry of the previous one.
The employment period can be intermittent or continuous. In both cases, the fixed-term employment contract cannot exceed 24 months.
There are exceptions outlined in the Labor Law, where fixed-term employment contracts can be extended beyond two years in specific situations:
- Temporary replacement: If it’s necessary to replace a temporarily absent employee until their return.
- Project-based work: For work on a project with a predetermined timeframe, up to the project’s completion.
- Employment of foreign nationals: For foreign nationals based on a work permit, up to the permit’s expiration date.
- Newly established employers: For newly established employers registered in the business registry for less than a year, the contract can last up to 36 months in total.
- Unemployed individuals close to retirement: For unemployed individuals who are within five years of fulfilling the conditions for retirement, the contract can last until retirement conditions are met, with a maximum duration specified by law.
2.4. Permanent Contract (Indefinite Duration Contract)
When an employee and employer sign an indefinite duration contract, the worker is considered permanently employed. A contract without a specific end date is termed an indefinite duration contract. In simpler terms, an indefinite duration contract, also known as a permanent contract, is an agreement without a fixed time limit.
2.5. Ehen Fixed-Term Employment Converting into Permanent Employment
According to the law, in specific situations, fixed-term employment can be transformed into an indefinite contract:
- If a fixed-term contract is made contrary to labor laws, it becomes an indefinite contract.
- If an employee continues working for the employer for at least five working days after the expiration of the fixed-term contract, it becomes an indefinite employment.
2.6. Addendum to Employment Contract
During the course of employment, changes to certain provisions of the contract or alterations in working conditions may arise. An addendum to the employment contract represents modified working conditions, which are presented to the employee for endorsement in the form of a new contract (addendum).
There are various types of addendums, and their nature depends on the situation or reasons necessitating altered conditions.
Situations in which an employee may be offered to sign an addendum to the employment contract include:
- Transfers to another suitable position due to the needs of the work process and organization.
- Transfers to a different workplace within the same employer.
- Assignment to work at another employer in a suitable position.
- When the employer has provided surplus employees with access to employment measures (transfer to other roles, work with another employer, retraining or qualification upgrading, part-time work, but not less than half of full working hours).
- Changes in elements used to determine basic salary, work performance, salary allowances, increased pay, and other compensation included in the contract.
- Other circumstances stipulated by law, company regulations, and the employment contract.
2.7. Part-Time Employment Contract
An employer has the right to hire an employee on a part-time basis, whether it’s for a fixed or indefinite period. Despite working part-time hours, the employee is entitled to earnings, benefits, working conditions, and other employment rights proportionate to the time spent working.
In this scenario, the employee can also work for another employer to achieve full-time employment. If they work part-time for one company, they have the right to be employed by another employer for the remaining hours to reach a full-time schedule.
2.8. Probationary Period
Before entering into an employment contract, the company has the right to offer a probationary period to the prospective employee. This period is defined in the employment contract and can last up to six months, but not beyond this duration. The probationary period can be agreed upon for a specific job or related jobs.
During the probationary period, the employee and the employer have the right to terminate the employment contract. In such a case, the notice period for the employment contract must be respected, which is a minimum of five working days.
2.9. Limitations Regarding Employment
There are certain limitations regarding the establishment of an employment relationship:
- Individuals under the age of 15 cannot be employed.
- Those entering employment must be at least 15 years old and meet other requirements outlined in the Labor Law and the job organization and systematization regulation (this regulation is mandatory for employers with more than 10 employees, while companies with 10 or fewer employees are exempt).
- Individuals aged 15 to 17 can only be employed with written consent from parents, adoptive parents, or legal guardians if such work is not prohibited by law. Additionally, a medical certificate of fitness for work is required.
- The company is not allowed to request private information such as marital status, current family situation, details about future family plans, or demand documents that are not relevant to the job.
3.1. Working Outside of Employment Relationship
Working outside the employment relationship is another way of engaging employees. Individuals engaged with a company based on a contract outside the employment relationship do not have the status of an employee.
This means they do not have the rights and obligations that employees in the same company do. No employment relationship is established, thus, no employment contract is signed.
3.2. Types of Contracts Outside Employment
Different types of contracts are established for work outside regular employment. Contracts that don’t constitute an employment relationship include:
- Temporary and occasional work contracts;
- Service contracts;
- Supplementary work contracts;
- Contracts for professional training and development.
When these contracts are made, the rights and obligations of the individuals involved are defined. A common factor among these contracts is that they cannot evolve into an employment relationship.
Below are the key characteristics for each of these contracts outside employment.
3.3. Fixed-Term and Temporary Jobs Contract
Fixed-term and temporary jobs are short-term positions that cannot exceed 120 working days within a calendar year. The employer has the right to enter into a contract for performing these temporary and occasional jobs with the worker they wish to engage.
Even though this employment falls outside regular employment, the company is obliged to pay taxes and contributions for the engaged worker.
Those eligible for engagement include:
- Unemployed individuals;
- Employees working part-time in another company;
- Recipients of old-age pensions.
3.4. Service Agreement
A service agreement is another type of contract outside of the employment relationship. It is most commonly used for tasks that are not within the employer’s primary business activities.
These tasks typically involve repairs, the creation of a specific item, the execution of work, or the performance of physical or intellectual tasks. Service agreements are also established for jobs in the artistic or other independent performance activities in the cultural field.
A service agreement governs all rights and obligations between the employer, as the client, and the engaged individual, as the performer of the commissioned work.
The agreement does not have a legally defined duration and continues until the contracted job is completed. The agreed-upon compensation is taxable, creating an obligation to pay taxes and social contributions.
We have also provided a comprehensive article on the legal regulations regarding service agreements.
3.5. Supplementary Employment Contract
Supplementary employment represents a distinct form of agreement outside the scope of regular employment. Individuals engaged under a supplementary employment contract receive monetary compensation treated as income, subject to taxation.
An employer has the right to hire a person already employed by another company and enter into a supplementary employment contract. During the agreed-upon periods, compensation is provided.
Similarly, an employee working full-time for one company may also enter into a supplementary employment contract with another employer. In this case, supplementary employment can occupy a maximum of one-third of the full-time workload, and compensation is provided for this additional work.
3.6. Professional Training and Development Agreement
A professional training agreement is considered a non-employment contract and is typically entered into under the following circumstances:
- For the purpose of completing an internship.
- To prepare for a professional examination.
- When it is specified as a special requirement for independent work in the field.
- To enhance and acquire specific knowledge and skills for professional work.
- During specialization as defined by the training or specialization program.
Under this agreement, the company is not obligated to provide monetary compensation to individuals engaged, but it may choose to do so.
If compensation is provided, it is not considered as regular income and is not subject to taxation.
It’s important to note that professional training and development differ significantly from voluntary work.
3.7. Freelance Employment
The term “freelance” isn’t officially recognized in labor laws, although it’s commonly used in practice. Freelance engagements typically refer to work outside formal employment contracts (part-time jobs, occasional work, etc.).
Workers are engaged on a freelance basis, usually for a few hours per day on a weekly basis or for several days a week (weekends, multiple workdays).
4.1. Agency Employees
A company has the right to hire employees through another temporary employment agency, but this form of employment is regulated by the specific Law on Agency Employment.
To initiate work with the employer, two contracts must be signed beforehand:
- Between the company as the employer and the temporary employment agency: This contract specifies that the worker will be temporarily assigned to the company.
- Between the temporary employment agency and the worker: This contract outlines the temporary assignment of the worker to the employer.
Before the worker can be assigned as an agency employee, a contract between the temporary employment agency and the company, as the client, must be established. This contract enables the assignment of the employee to work temporarily with the employer, where the employee will carry out their duties.
The second contract is signed by agency employees (as assigned workers) and the employment agency. This contract constitutes an employment agreement, either for a fixed or indefinite period. If it’s a fixed-term contract, it lasts as long as the worker is assigned to work with the employer.
Regarding working conditions, rights, and obligations, agency employees enjoy the same rights as regular employees of the company where they are assigned to work. The assigned worker is entitled to the same working conditions as other employees at the company where they are temporarily assigned.
4.2. Engaging Freelancers or Individuals
Freelancers are individuals who independently perform specific tasks without legal registration, earning income as citizens. Their income primarily comes from providing intellectual or IT services. Freelancers are obligated to pay taxes independently through self-assessment.
Companies looking to engage freelancers for specific tasks can do so in several ways:
- Employment relationship: The company can offer them an employment contract, granting all rights and responsibilities associated with employee status. Alternatively, they can offer remote work arrangements, allowing freelancers to work from home or other locations.
- Freelance contract: Companies can engage freelancers on a freelance basis through specific contracts, such as service contracts or copyright agreements. Payment is made based on the agreed compensation for completed work, subject to taxes and contributions.
IT freelancers, after a period of collaboration with legal entities, often establish their own IT companies or become lump-sum taxpayers, mainly due to tax considerations.
4.3. Engaging Freelancers under Service Contracts
In accordance with the Law on Culture, freelance performers are individuals who hold the status of independent artists, solo performers, independent stage performers, collaborators, or cultural experts, as determined by a representative artistic association.
When an employer wishes to engage an individual as a freelance performer, it typically pertains to tasks performed on a temporary or one-time basis. Compensation is provided for the services rendered. Freelance performers and employers, acting as the contracting party, usually sign a service contract when carrying out these tasks.
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