Hiring Employees in Croatia: Key Differences and Legal Risks for Czech Companies

Are you planning to hire employees in Croatia? Croatian labor law differs from the Czech legal system in several key aspects, and these specific elements can cause serious issues if not handled correctly. This article explains what to watch out for to ensure your employment relationships are legally compliant under Croatian regulations and to help you avoid fines, lawsuits, or administrative complications.

Quick Summary

• Croatian labor law is more formal and protective. Fundamental differences involve the form of contracts, recording of working hours, strict overtime rules, and specific severance pay calculations. Incorrectly applying Czech law to employees in Croatia can cost you hundreds of thousands of crowns.
• An employment contract in Croatia must meet specific formal requirements. If not concluded in writing before the start of work, it is automatically considered an indefinite-term contract, which significantly complicates your situation during potential termination.
• Terminating employment in Croatia is more procedurally demanding. You must have a legal reason (unless it is by mutual agreement), adhere to statutory notice periods, and employees are entitled to statutory severance pay if conditions are met. Failure to follow these rules leads to lost litigation in Croatian courts.
• Social security, health insurance, and taxes are subject to the "lex loci laboris" principle. If you wish to post a Czech employee to Croatia or vice versa, you must correctly apply EU coordination regulations and potentially utilize exemptions for cross-border remote work.

Czech companies entering Croatia and associated risks

Czech companies are increasingly deciding to expand their activities into the Adriatic region. Croatia represents an interesting opportunity, but also a range of legal pitfalls. If your company already has workers in Croatia, or you are considering it, you must know that it is not just a translation issue. It involves differences in the very legal substance of the relationship between employer and employee.

Our attorneys in Prague at ARROWS law firm regularly handle cases where Czech companies erred by applying the Czech legal system to employees performing work in Croatia.

We see this repeatedly in practice: a project manager from Brno manages a team of workers in Zagreb but uses a Czech employment contract template and follows Czech legislation. When it comes to termination or employee dissatisfaction, it is discovered that they acted unlawfully and must face proceedings before Croatian courts.

Key differences between Czech and Croatian law

Before diving into the details, you should understand the main differences in the approach of both legal systems. The Croatian Labor Act (Zakon o radu) is in some areas less flexible than the Czech Labor Code and places great emphasis on employee protection.

In such cases, the law automatically presumes the existence of an employment relationship, which has a fundamental impact on social security and tax contributions.

Another critical difference is the approach to terminating employment. While you also need a legal reason for dismissal in the Czech Republic, the process of serving and justifying a notice in Croatia is extremely formal. If an employee has worked for you longer, the notice period extends and the entitlement to severance pay grows.

How to correctly conclude an employment contract in Croatia

An employment contract in Croatia must always be concluded in writing. This obligation arises directly from Article 14 of the Labor Act. If the employer does not conclude a written employment contract with the employee before the start of work, it is deemed that an indefinite-term contract has been concluded.

The contract must contain essential elements according to the Labor Act. These include in particular:

• The contracting parties and their place of residence or registered office.
• The place of work.
• The job title and a brief job description.
• The start date of work.
• The type of employment relationship.
• The duration of paid leave.
• Notice periods.
• Basic salary, bonuses, and payment dates.
• The length of the working day or week.

Unlike older practices, current Croatian law allows for data on leave, notice periods, and wages to refer to relevant laws or collective agreements. Nevertheless, we recommend specifying key parameters directly in the contract for clarity and legal certainty.

Fixed-term vs. Indefinite-term contracts

In Croatia, the standard is an indefinite-term contract. A fixed-term contract can only be concluded in specific cases where the duration is limited by objective reasons, as stipulated in Article 12 of the Labor Act.

The maximum total duration of successive fixed-term contracts with the same employer may not exceed three years. If you conclude a fixed-term contract in violation of the law, the relationship transforms into an indefinite-term one.

Probationary period

The probationary period (probni rad) in Croatia can last a maximum of 6 months. If a probationary period is agreed upon, the notice period during it is at least 7 days, unless otherwise agreed. Rules for the probationary period are governed by Article 53 of the Labor Act.

The probationary period is extended by the time the employee was absent, for example, due to temporary incapacity for work.

microFAQ: Employment contracts in Croatia

1. Can I conclude an oral employment contract in Croatia?
The law requires a written form. If not followed, it does not mean the relationship is invalid, but it is automatically assumed to be an indefinite-term employment relationship, which is disadvantageous for the employer. The employer is obliged to issue a written confirmation of the concluded contract before the start of work.

2. What language must the employment contract be in Croatia?
For the purposes of inspection by the labor inspectorate and court proceedings, the Croatian version is decisive. In practice, bilingual contracts are often concluded (e.g., Croatian-English or Croatian-Czech), and it is necessary to determine which version takes precedence in case of conflict (usually the Croatian one).

3. What happens if the employee does not agree with the terms in the employment contract?
The contract is a bilateral legal act. If the employee does not sign it, the employment relationship does not arise. Starting work without a signed contract is a major risk for the employer. In case of disagreements, we recommend consulting with our Czech legal team at ARROWS law firm – office@arws.cz.

Working hours and overtime

In Croatia, the standard working time is 40 hours per week. A fundamental difference compared to the Czech Republic is that a meal and rest break of at least 30 minutes is included in the working hours, provided the employee works at least 6 hours a day.

This means that an employee is at the workplace for 8 hours, takes a 30-minute break during that time, and you pay them for the full 8 hours. In the Czech Republic, the break is usually not included in working hours, and the employee remains at the workplace for 8.5 hours.

Exceeding working hours and overtime

Overtime work is possible in cases of force majeure or an extraordinary increase in the volume of work. The employer must order overtime work in writing. The limit for overtime is 180 hours per year; however, a collective agreement may increase this limit up to 250 hours per year.

Weekly working hours, including overtime, must not exceed 50 hours, or an average of 48 hours over a 4-month period.

Night and weekend work

Employees are entitled to increased wages for difficult working conditions, overtime, night work (generally 10:00 PM – 6:00 AM), and work on Sundays and public holidays. The law does not set exact percentage supplements; specific amounts are determined by collective agreements, internal regulations, or the employment contract. It is essential to define these supplements in the contract.

Rest periods

Employees have the right to a minimum of 12 hours of continuous rest between two shifts according to Article 74 of the Labor Act. Weekly rest must last continuously for at least 24 hours, to which the daily rest period is added.

microFAQ: Working hours and overtime

1. If an employee works 50 hours in a week, do I have to pay them more?
Yes. Hours beyond the standard working time (standardly 40 hours) are considered overtime and must be paid at an increased rate or (if the contract/agreement allows) compensated with time off in lieu.

2. What about working on Sundays?
Since 2024, stricter rules for Sunday work in the retail sector have applied in Croatia (regulated by the Zakon o trgovini). In other sectors, Sunday work is possible if the nature of the work requires it, but the employee is entitled to a supplement, which must be at least 50%.

3. Is the break included in working hours?
Yes, in Croatia, the mandatory 30-minute break (for shifts over 6 hours) is included in the paid working hours.

Vacation, sick leave, and parental rights

Paid annual leave

Employees are entitled to a minimum of 4 weeks of paid leave per calendar year. The right to full leave arises after 6 months of continuous employment, as stipulated in Article 77 of the Labor Act.

Unused leave for a calendar year can be carried over to the following year, but must be used no later than June 30th of the following year. If the employment relationship ends and the employee has not used their leave, the employer must pay compensation for the unused days.

Sick leave (Bolovanje)

In Croatia, the first 42 days of incapacity for work are paid by the employer from their own funds. From the 43rd day, the employer still pays the compensation but subsequently claims a refund from the Croatian Health Insurance Fund (HZZO). This differs from the Czech Republic, where the state takes over payment earlier.

During temporary incapacity for work caused by a work-related injury or occupational disease, the employer cannot dismiss the employee.

Parental rights

Croatia distinguishes between maternity leave (rodiljni dopust) and parental leave (roditeljski dopust), which are regulated by the Zakon o rodiljnim i roditeljskim potporama.

• Maternity leave: Generally begins 28 or 45 days before birth and lasts until the child is 6 months old.
• Parental leave: Follows maternity leave, lasting another 8 months (for the first and second child) or 30 months (for twins, the third, and subsequent children).
• Paternity leave: Fathers are entitled to paid leave of 10 working days (one child) or 15 days (twins and more) upon the birth of the child.

Employees are also entitled to paid leave (up to 7 days per year) for important personal reasons (wedding, death in the family, serious illness of a family member) according to Article 86 of the Labor Act.

Termination of employment in Croatia

Termination of employment in Croatia is highly formalized.

Ordinary termination

An employer may give notice only for the following reasons defined in Article 115 of the Labor Act:

1. Business reasons (poslovno uvjetovani otkaz): Cancellation of a position, organizational changes, decline in orders.

2. Personal reasons (osobno uvjetovani otkaz): The employee is unable to fulfill work duties due to their permanent characteristics or abilities.

3. Culpable breach of duties (otkaz uvjetovan skrivljenim ponašáním): Breach of work obligations.

Before termination due to a breach of duties, the employer must warn the employee in writing of the breach and advise them of the possibility of dismissal if the behavior does not improve. The employee must be given the opportunity to respond to the allegations.

Notice periods

The length of the notice period in the case of termination by the employer is governed by the duration of the employment relationship with the same employer:

• Less than 1 year: 2 weeks
• 1 year: 1 month
• 2 years: 1 month and 2 weeks
• 5 years: 2 months
• 10 years: 2 months and 2 weeks
• 20 years: 3 months

If the employee is over 50 years old and has worked for you for a long time, the periods are further extended.

Immediate termination of employment

This is possible only for particularly serious breaches of work duties where it cannot be reasonably expected for the employment relationship to continue even during the notice period. It must be delivered within 15 days of the moment the employer became aware of the reason.

Severance pay (Otkaznina)

An employee who has worked for the employer continuously for at least 2 years and was dismissed for business or personal reasons (not for a breach of discipline) is entitled to severance pay.

The law sets a minimum of one-third of the average monthly salary for each completed year of the employment relationship.

The total amount of statutory severance pay is capped at six times the average salary, unless a collective agreement or employment contract stipulates otherwise, as regulated by Article 126 of the Labor Act.

Risks during termination of employment

Risks and Sanctions	How ARROWS Assists (office@arws.cz)
Invalid Termination: A court may rule the termination invalid; the employee must be reinstated and is entitled to back pay for the entire duration of the dispute under Czech or local labor laws.	Legal Assessment: Our Prague-based attorneys assess whether the grounds for termination are sufficient and assist with correct phrasing and formal delivery.
Failure to Follow Procedure: Even if valid grounds exist, a court may overturn a dismissal due to formal errors (missing warnings, incorrect delivery).	Procedural Oversight: ARROWS ensures all steps are followed (notices, deadlines, employee defense) in accordance with the relevant legal framework.
Incorrectly Calculated Severance: Risk of lawsuits for the remaining balance, including interest and legal costs.	Calculation Audit: We verify the accuracy of calculations according to Croatian law and the length of service.
Discriminatory Grounds: High fines and reputational risk in the event of dismissing protected persons (pregnant women, those on parental leave).	Compliance: We ensure that termination does not conflict with the prohibition of dismissal for protected groups under applicable legislation.

Social Security and Posting of Employees

When operating between the Czech Republic and Croatia, it is crucial to determine which social security system the employee falls under.

Basic Rule: Place of Work

According to Regulation (EC) No 883/2004 of the European Parliament and of the Council, an employee is subject to the legislation of the state where they physically perform the work.

If you employ a Czech citizen who moves to Split and works there, you must pay social security contributions into the Croatian system.

Posting of Workers

If a Czech company temporarily sends its employee to work in Croatia, the employee may remain in the Czech social security system if they hold an A1 form. The standard posting period is a maximum of 24 months.

During the posting, you must guarantee the employee certain elements of Croatian law if they are more favorable than Czech law.

Remote Work and the Framework Agreement

As of July 1, 2023, a multilateral Framework Agreement on cross-border telework is in effect. If an employee works from home for an employer in another state for 25% to less than 50% of their working hours, they may agree to remain insured in the state of the employer's registered office. This exception must be formally processed.

Wages, Minimum Wage, and Taxes

Minimum Wage in Croatia

The Croatian government sets the minimum wage annually. For 2025, the gross minimum wage is set at EUR 970 according to the Decree on the Minimum Wage for 2025.

As an employer, you must also add health insurance contributions to the gross wage.

Employers must strictly adhere to minimum wage tariffs, which may be set higher in collective agreements for certain sectors (construction, hospitality).

Taxes and Contributions

In Croatia, pension insurance contributions (totaling 20%, divided into Pillar I and II) and income tax are deducted from the gross wage. Unlike in the Czech Republic, health insurance (16.5%) is calculated on top of the gross wage and is paid entirely by the employer.

Employment of Foreign Nationals (Non-EU Citizens)

Croatia has faced labor shortages in recent years and imports workers from third countries. To employ a non-EU/EEA citizen, it is necessary to obtain a residence and work permit according to the Act on Foreigners.

The process usually involves a so-called labor market test, where the employment office verifies if a local candidate is available.

Amendments to the Act on Foreigners and related regulations introduce stricter rules for employers to prevent the purposeful establishment of companies solely for importing workers. Illegal employment of foreigners is strictly punished with high fines and bans on activity.

Common Mistakes

Mistake No. 1: Using a Czech Employment Contract

A translation of a Czech template is not sufficient. Croatian law has different mandatory requirements and terminology. Such a contract may be considered confusing or invalid.

Mistake No. 2: Ignoring Paid Breaks

If you do not include a 30-minute break in the working hours, you are not paying for it, thereby violating the law on minimum wage and working hours. Retroactive payments for several years can be financially devastating.

Mistake No. 3: Incorrect Severance Calculation

Using the Czech model (e.g., 3 months' salary) may conflict with Croatian law, which links severance pay to the number of years worked (1/3 of the salary for each year). For long-term employees, Croatian severance pay may be higher.

Mistake No. 4: Disguised Employment (False Self-Employment)

Croatian authorities actively combat "prikriveni radni odnos" (disguised employment). If a contractor shows signs of being an employee (works at specified times, using your equipment, under your direction), there is a risk of reclassification as an employment relationship with back-payment of contributions and taxes.

Conclusion

Navigating Croatian employment contracts requires knowledge of local legislation. Differences in calculating working hours, severance pay, and formal termination requirements are fundamental. Every mistake costs time and money.

Attorneys from the ARROWS law firm in Prague provide comprehensive legal support to Czech companies expanding into Croatia.

Do not risk unnecessary fines and litigation. Have your employment contracts prepared or reviewed by experts who understand both legal systems.

Do you need professional assistance with Croatian employment contracts? Contact us at office@arws.cz.

FAQ – Frequently Asked Questions on Croatian Labor Law

1. Must the employment contract be in Croatian even if the employee speaks English?
For legal certainty and dealings with authorities, a Croatian version is essential. We recommend a bilingual version.

2. What is the minimum wage in Croatia for 2025?
The gross minimum wage is EUR 970.

3. Do I have to pay severance if the employee resigns?
No. The entitlement to statutory severance pay generally arises during termination by the employer (for organizational or health reasons) after 2 years of employment, not when the employee leaves voluntarily or is dismissed for breach of duties.

4. How long does it take to process a permit for a foreign employee?
The process can take 2 to 3 months, depending on the workload of the authorities and the necessity of conducting a labor market test. We recommend starting well in advance.

5. Can an employee work 12 hours a day?
Not on a regular basis. Overtime work is limited and must be ordered in accordance with the law. A daily rest period of at least 12 hours must be observed. There are exceptions for uneven distribution of working hours, but this requires a specific shift plan.

Disclaimer: The information contained in this article is for general informational purposes only and serves as a basic guide to the subject matter. While we strive for maximum accuracy, Czech legal regulations and their interpretation evolve over time. To verify the current wording of the legislation and its application to your specific situation, it is essential to contact our Prague-based law firm, ARROWS, directly (office@arws.cz). We assume no liability for any damages or complications arising from the independent use of information in this article without our prior individual legal consultation and professional assessment. Every case requires a tailored solution under Czech law; therefore, please do not hesitate to contact our Czech legal team.

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