Contract form requirements
Employment contracts. The employment contract must be concluded in writing and before the commencement of work. It must contain all of the mandatory elements prescribed by the Labour Law i.e. (i) name and seat of the employer; (ii) name and residence of the employee; (iii) date of commencement; (iv) work position, workplace, work duration and work schedule; (v) salary and other remunerations; (vi) annual leave; (vii) contract term; (viii) termination notice period and other elements prescribed by the Labour Law. Certain mandatory elements can be stipulated by indicating the exact provision of the law or internal enactments of the employer. The employment contract cannot contain terms which are less favorable to the employee than those set out under the Labor Law, collective bargaining agreements (if applicable) and internal enactments of the employer.
Foreigners. Employees with foreign citizenship need to obtain work and residence permits before concluding the employment contract and commencing work.
Representatives. The engagement of a Director/CEO/other representative can be executed through establishing employment or without establishing employment (manager contract in which rights and obligations must be regulated). In RS, the representative is entitled to compensation for his engagement which in both cases (employment contract or manager contract) has the legal nature of a salary.
Other types of engagements. There is also an option to engage staff based on other types of contracts, which include:
Minimum employment terms and conditions
Fixed and indefinite terms. Employment may be established with a person with at least 15 years of age (with the consent of the parent/guardian until 18 years of age – minors, for which separate regimes apply in terms of minimum terms and conditions). Employment is established for an indefinite term or fixed term. Fixed term employment may be established with one or more consecutive contracts (with or without interruptions) with a maximum duration up to 24 months in the Republic of Srpska and 36 months in the Federation of Bosnia and Herzegovina.
In the Republic of Srpska, fixed term employment should be considered an exception, which is justified by objective reasons such as predetermined deadlines, the performance of a specific work or the occurrence of a specific event. Exceptionally, fixed term employment may be established for a longer period than 24 months under certain legal conditions set out by the Labour Law. In case of fixed term employment, the reasons for concluding such an employment must be indicated in the employment contract.
Working hours. Employment can be established for a full time engagement (40 hours weekly or exceptionally shorter) or for a part time engagement (at least 1/4 of full time in the Republic of Srpska).
The employer may request the employee to work overtime only in certain cases determined in the Labour Law such as vis major and an unexpected increase of volume of work. Overtime in the Republic of Srpska is defined up to 4 hours daily, up to 10 hours weekly and up to 180 hours yearly. It is possible to increase the maximum amount of yearly hours up to 230 by collective bargaining agreements. Overtime in the Federation of Bosnia and Herzegovina is defined up to 8 hours weekly. The employees are entitled to a salary increase for overtime and night work (from 22.00 hours to 06.00 hours). It is important to mention that there are specific rules regarding minor and maternity protection regarding overtime and night work.
The employer can organize working hours in a way to distribute more working hours in a certain period of the year (but not longer than 52 hours weekly or 60 hours weekly for seasonal work) and less working hours in the rest of the year. The distribution of working hours must be 40 hours weekly on average throughout the year in both entities.
Breaks and leaves. The daily work break is 30 minutes for employees with at least 6 hour engagements and 15 minutes for employees with 4 to 6 hour engagements (only applicable for the Republic of Srpska). Every employee has the right to a minimum 12 hour rest between two working days, as well as a minimum 24 hour rest weekly in the Federation of Bosnia and Herzegovina and 36 hours in the Republic of Srpska.
Annual leave is defined as minimum 20 working days per year. The minimum days of Annual Leave are increased by the number of years of work experience and in other cases prescribed by the collective bargaining agreements (if applicable), internal enactments of the employer or employment contract. Annual leave in the Federation of Bosnia and Herzegovina cannot last longer than 30 working days.
It is prescribed that the employee should use the entire annual leave at once, but based on the request of the employee and approval of the employer, it can be used in two parts in the Federation of Bosnia and Herzegovina or several parts in the Republic of Srpska, whereas the first part is minimum 12 working days in the Federation of Bosnia and Herzegovina and 10 working days in the Republic of Srpska, and the remaining days must be used latest until June 30th of the following year.
The employee is entitled to compensation for unused annual leave if, at the time of employment termination, he/she has unused annual leave due to the employer’s fault.
Paid leave. The employee has the right to a paid leave for personal needs, for a maximum of 5 working days in the Republic of Srpska (except in case of death of a family member) and 7 working days in the Federation of Bosnia and Herzegovina, per calendar year. Paid leave is used in certain cases prescribed by the collective bargaining agreements, internal enactments of the employer or employment contracts (e.g. marriage, child birth, serious illness of an immediate family member, natural disasters, moving etc.).
In the Republic of Srpska, the employee is entitled to 3 working days of unpaid leave for religious purposes while in the Federation of Bosnia and Herzegovina, the employee is entitled to 4 days for these purposes (2 paid, 2 unpaid).
Maternity leave. Employees are also entitled to maternity leave and child care leave. Maternity and child care leave last for 1 year and an additional 6 months for twins and more children in the Republic of Srpska. The maternity leave can commence 28 days prior to expected delivery date, based on medical findings. If the child needs special care, one of the parents is entitled to work halftime until the child reaches three years of age.
Sick leave. An employee is entitled to a sick leave every time there are appropriate medical grounds. Sick leave cannot be limited in time. During sick leave, the employee in the Federation of Bosnia and Herzegovina is entitled to compensation of the salary in amount of 80% of the basic salary in case of work unrelated sickness or injury and 100% of the salary in the case of work related sickness or injury, pregnancy and maternity leave and tissue or organ donation. In the Republic of Srpska, the compensation varies from 70% to 90% depending on the type of sickness or injury. Compensation is covered by the employer for the first 42 days of sick leave in the Federation of Bosnia and Herzegovina and first 30 days of sick leave in the Republic of Srpska, while the relevant health insurance authority will compensate the employer for the compensation paid after these periods.
Salary. The Labour Law provides for a rather complex mandatory structure of the salary and numerous mandatory payments. The monthly salary is determined in the employment contract or internal enactments of the employer (and exceptionally in the collective bargaining agreements).
The net amount of the salary consists of: (i) the basic salary (which is calculated in the Republic of Srpska based on the coefficient of complexity of the work post and the minimum price of labour determined by the Government or in another way which cannot amount to lower); and (b) the increase for work efficiency in accordance with the internal enactments of the employer or employment contract; and (c) in the Federation of Bosnia and Herzegovina – other salary increases.
In the Republic of Srpska, the monthly salary is increased by 0.3% for each year of work if it is not otherwise regulated by law, collective bargaining agreements or the employment contract.
There are several other obligatory salary increases as well as other obligatory remunerations prescribed by the Labour Law, collective bargaining agreements, internal enactments of the employer and employment contracts (difficult work conditions, overtime, night work, work on holidays and non-working days, food allowance, transportation to work, daily substance allowance etc.).
Employees are entitled to a minimum wage. This minimum wage has to be paid as a basic salary and the employee is entitled on top of that to other mandatory payments as regulated by the law. The employer has to regularly provide the employees with the salary slips and keep the records on salary payments as provided by the Labor Law. Salaries must be paid in intervals no longer than 30 calendar days.
Employment may be terminated only in specific cases prescribed by the Labour Law (expiry of fixed term employment contract, dismissal in accordance with the provisions of the Labour Law, retirement, mutual agreement on employment termination, court decision etc.) Different employment termination reasons trigger different rules and procedures that have to be conducted.
Expiry of fixed term employment. Even though the employment is terminated based on the very provisions of the employment contract, it is important to note that if the employee continues to work for the employer after the fixed term has expired, such employment will transform into an indefinite term employment.
Retirement. In case of retirement, the employer may unilaterally issue a resolution on employment termination (without the employee’s consent or request) only if the employee has reached 65 years of age and at least 15 years of service in the Republic of Srpska or 20 years of service in the Federation of Bosnia and Herzegovina (cumulative conditions). In other cases, when the employee has fulfilled conditions for early retirement which are prescribed by special retirement regulations the employee’s request is mandatory. In such cases, when the employee submits a request, the employer issues a resolution or enters into mutual agreement with the employee that confirms employment termination due to retirement.
Mutual agreement. The content of this agreement is subject to free arrangement between the parties but it must be in writing. In any case, this agreement should regulate all mutual rights and obligations in relation to employment termination (termination notice, severance payment, non-competition clause, repossession of items etc.). This agreement is valid in the Republic of Srpska starting from the day the employee verifies his/her signature at the Municipality. We highlight that, from the Labour Law perspective, severance payment is not mandatory in this case but it can be stipulated by the parties.
Termination of employment by the employer. The employer may terminate the employment contract only if there is a justified reason as prescribed by the Labour Law i.e.:
The decision on employment termination encompasses justification of the employment termination and instruction on legal remedy. In case of a court dispute, the employer is obliged to provide proof for existence of justifiable reasons for termination.
Protected Group. The employer cannot terminate employment during pregnancy, sick leave for work related reasons, maternity leave and the childcare period as prescribed by the Labour Law. There are also specific procedures on terminating employment to employee syndicate representatives and former representatives.
Severance payment. In certain cases prescribed by the Labour Law, the employee has the right to severance payment. The conditions which must be fulfilled is that the employment contract was concluded for an indefinite term and the employee was employed with the employer for at least two years. The minimum amount is 1/3 of the net average salary paid to the employee in the three months prior to termination, for each year the employee was employed with the employer. The maximum amount is 6 average salaries paid to the employee in the three months prior to termination.
Redundancy. There are specific provisions of the Labour Law and a detailed procedure which must be followed in case of mass termination of employment contracts, which also includes the involvement of the employees syndicate and relevant Employment Agency.
Non-compete. Local regulations enable certain restrictive covenants in the employment contract, the most important being the non-compete clause. The non-compete clause is prescribed by the law for the duration of the employment. The employment contract can prescribe for a non-compete clause after the termination of employment. In the Federation of Bosnia and Herzegovina, the non-compete clause can be set for no longer than 2 years after employment termination while in the Republic of Srpska, this clause can be set for 1 year after employment termination. In this case, the employer has to undertake by the employment contract an obligation to pay to the employee monthly remuneration in the minimal amount of half of the average salary of the employee in the months prior to contract termination.
Confidentiality clause. Apart from the non-competition clause, local employment contracts often contain a confidentiality clause during employment and a certain time following employment termination (usually unlimited), which prohibits disclosure of company’s business secrets.
Competent courts and authorities
Tax authority. The employment must be reported to the competent Tax Authority (for registering the employee in the social security insurance system) no later than one day prior to the commencement of work and the Tax Authority is authorized to fine the employer with severe monetary sanctions in case of any delays.
Disputes. In Bosnia and Herzegovina, there are no special labour courts, but labour disputes are dealt with by the regular civil courts – Basic and Municipality courts, Cantonal and District courts and the Supreme courts of the entities as the final court instance. The Supreme Court is in charge on deciding on extraordinary legal remedies.
In the Republic of Srpska, the employee who finds that his employment right was violated is entitled but not obligated to submit a claim directly to the employer. The employee is also entitled to file a petition for peaceful settlement within 30 days from gaining knowledge on the violation but no longer than 3 months from the executed violation. This petition is obligatory if the employee is to file a further lawsuit to the court (6 month statute of limitation period).
In the Federation of Bosnia and Herzegovina, the employee who finds that his employment right was violated is entitled to submit a claim directly to the employer within 30 days from gaining knowledge on the violation, which claim is obligatory in case the employee will pursue his rights further at the relevant courts (except for monetary claims). The statute of limitation period for filing a lawsuit at the relevant court is 90 days from failing to peacefully resolve the dispute.
Monetary claims deriving from employment are subject to a three year statute of limitation.
The Ministry of Labour. The Ministry of Labour supervises application of the labour regulations through the Labour Inspection, which often performs field controls – regular or extraordinary controls, based on an individual’s application (which can also be anonymous). If the Labour Inspection identifies certain failure of the employer to abide by the laws, it may initiate a misdemeanor procedure against the employer.
Other. In addition, there are certain authorities whose field of activity may include some aspects of employment relations (though not exclusively), such as Ombudsman (for discrimination cases). Ombudsman does not have the power to enact binding decisions, but his recommendations are observed by the authorities.