Payroll & Employment Guide Croatia

In Croatia, employment contracts must be written and signed before employment begins. They must comply with the Croatian Labour Act and outline all key terms, including job responsibilities, working hours, compensation, and termination conditions.

Notice periods: Usually 2 weeks to 3 months.

Termination of employment: Can occur through resignation, mutual agreement, or dismissal with notice. Specific rules apply depending on the reason and duration of employment.

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Employers in Croatia are legally required to provide several statutory benefits. In addition to these, many employers offer additional perks to attract and retain talent. There are no mandatory allowances in Croatia. Meal and transportation allowances are standard but not required. Other benefits, such as performance bonuses and holiday bonuses, are also optional and depend on individual employer policies or collective agreements.

Croatia has a private pension system that operates alongside the public pension scheme. The private pension system is voluntary and allows individuals to contribute to private pension funds in addition to the mandatory public pension contributions.

Employees in Croatia must complete reimbursement forms to claim work-related expenses. Paid in net. Expenses are paid in the amounts of the submitted invoices.

A performance bonus can be paid through a tax allowance up to 1,200.00 annually; in that case, no tax is paid.

Employees in Croatia can receive a variety of incentives that go beyond their standard compensation.

These can include:

• Performance bonuses
• Additional salaries
• Health benefits
• Flexible working arrangements and
• Professional development opportunities.

The specific incentives available will depend on the employer's policies and the nature of the employment contract.

Performance bonuses up to €1,200 annually are exempt from personal income tax and social security contributions.
Mandatory benefits: Social security contributions, overtime pay, sick leave compensation, vacation pay.
Common perks: Meal and transportation allowances, performance bonuses, health benefits, flexible working arrangements, professional development, and holiday bonuses.

Leave policies: Annual leave, sick leave, maternity leave, paternity leave, parental leave.

Croatia operates a progressive income tax system. Employers must withhold taxes and social contributions from employee salaries and make additional contributions as part of their employment costs.

Employees are responsible for allowing their employers to deduct income taxes from their salaries.

Tax calculation process

Deduction of contributions: Income tax is calculated after deducting employee contributions from the gross salary.

Tax allowances: Each individual is entitled to a minimum tax allowance of 600 EUR. Additionally, employees may qualify for further allowances.

Income tax base calculation

The formula for calculating the taxable income is:

Gross salary − employee contributions − tax allowances = taxable income base

Tax brackets

If the salary is below EUR 5,000, it falls into the lower income tax bracket; if it exceeds this amount, it falls into the higher income tax bracket.

Tax rates: The percentages for the lower and higher income tax brackets vary by city of residence.

Employers are required to withhold income tax from employees' salaries and remit it to the tax authorities on the employees' behalf.

Personal Income Tax: Croatia uses a progressive income tax system. Income up to €50,400 annually (€4,200 monthly) is taxed at a lower rate, while income above this is taxed at a higher rate.

Local municipalities and cities also apply a surtax on income tax. For example, in the City of Zagreb, the total tax rate ranges from 15% to 23.6% for lower income and 25% to 35.4% for higher income, depending on the taxpayer’s residence.

Corporate tax: Standard rate of 18%, with a reduced rate of 10% for small businesses.

Value Added Tax (VAT): 25%

Social security contributions: Employers are required to contribute 16.5% of an employee’s gross salary toward social security, covering health insurance, and employees contribute 20% of their salary toward pension.

Withholding taxes: On dividends, interest, and royalties, typically at 12%.

Employers in Croatia must process employee salaries in accordance with the country’s labour regulations and the terms outlined in individual employment contracts. This includes adhering to legal timelines, applying the correct tax rates and contributions.

Salary payment deadline: By the 15th of the month following the payroll period

Taxes and contributions payment deadline:

Payroll declarations deadline: By the 15th of the month following the payroll period

Payroll currency: Euro (EUR)

Croatia’s labour laws are governed by the Labour Act and are aligned with EU directives. Understanding these laws is crucial to ensure fair employment practices and compliance.

Total employment cost:

• Employer’s social security contributions: 16.5%
• Employer’s health insurance costs: 16.5%
• Employees’ social security contributions: 20%
• Employee’s health insurance costs: 0

Minimum wage: EUR 970 gross/month

Probation period: Up to 6 months

Foreign nationals working in Croatia must obtain a residence and work permit unless exempted (e.g., EU nationals). Requirements vary by nationality, role, and duration of employment.

Types of permits: EU blue card and work permit.

Process length: Three to four months.

Process cost: Starts at €1,500 for an EU blue card and at €1,400 for a work permit.

*Please note that additional costs may apply after reviewing individual use cases.

Using EOR services in Croatia allows you to legally employ individuals in the country without opening legal entities there. The EOR takes over all the legal responsibilities as an official employer, including:

• Legal employment and contracts
• Payroll processing
• Tax withholding
• Benefits administration
• Onboarding/offboarding employees

Using PEO services in Croatia provides HR and administrative support, while you remain the legal employer. PEO services are ideal for employers who already have legal entities in Croatia but need support to manage their workforce operations, including:

• HR support and workforce administration
• Payroll and benefits management
• Compliance and local labour law guidance
• Employment contracts assistance

Native Teams provides a payroll calculator adjusted per Croatia’s labour laws. Estimate gross-to-net salaries, tax withholdings, and employer costs in Croatia with our localised calculator. Designed to meet all payroll and compliance requirements.