Contract form requirements
Employment contracts have to be concluded in written form and executed by (i) authorized representative of the employer on one side, and (ii) the employee on the other. For purposes of conclusion of an employment contract, the employer may be represented by its manager, or other person appointed by written authorization.
Employment agreements should contain all the compulsory elements required by the Labour Law, such as: information on the parties, description of job, place of work, type of employment (definite/indefinite term), working hours (full time/part time) and their daily/weekly duration, commencement date, monetary amount of basic salary and elements for determining other legal payments (performance part of the salary, allowances, increased salary etc.) etc.
Employment is registered at the Employment Agency, which registers the employee for mandatory social and health insurance automatically with the registration of conclusion of the employment contract. Employers have an obligation to register the employment of their employees at the Employment Agency.
Minimum employment terms and conditions
The employers are bound by the regulations on the minimum salary for workers regulated by a specific law. The current minimal net salary in Macedonia is in amount of MKD 10,080 (approx. EUR 164), but this amount does not apply to sectors for production of textile, production of clothes, and production of leather and similar leather products where the minimal salary is lower. There are announcement for increase of the minimal salary in all sectors by the end of 2017.
Furthermore, employers are also bound by minimum employment terms regarding daily and weekly breaks, annual leave duration, maternity and parental leave, maximum working hours, termination causes and notice periods, working age limitations, overtime payment and limitations, informing procedure and severance payments for redundancies and other issues specifically regulated with the applicable regulation.
Employment may be established for indefinite or fixed term. Fixed term employment contracts may be concluded for a period up to 4 years, with or without interruptions. Upon expiration of this period of time, the fixed term employment agreement is transformed into an employment for indefinite period of time.
Macedonian legislation also acknowledges seasonal work which due to the climate or other natural conditions is not carried out during the whole year, but in particular periods – seasons. Seasonal work does not last more than eight months in a period of 12 consecutive months.
Employees may be hired on full or part-time working hours. In order to work full-time, an employee should be hired for a 40 hour working week, i.e. should have 8 work hours per day. Part-time employment should consist of at least 20 working hours per week, i.e. 4 working hours per day.
Full time employees have the right of a 30 minute break during working hours, while part-time employees have the right of a 15 minute break. The break time is calculated within the working hours of the employee.
As a general rule employees have the right to an annual leave of at least 20 working days. A longer annual leave could be agreed within the employment contract, but no longer than 26 working days. Elderly employees, a disabled employee, an employee with at least 60% of physical impairment, and employees who take care of a physically or mentally handicapped child, are granted the right to additional three working days of annual leave.
Managerial contracts – As an exception, employers may conclude managerial contracts with employees on managerial positions. By concluding a managerial contract, the parties are free to agree on different terms with respect to (i) conditions for fixed-term employment; (ii) working hours; (iii) daily breaks and annual leave: (iv) salary and (v) termination of the employment. Note that persons hired based on managerial contracts do not have to be the appointed managers, i.e. authorized persons at a specific company. This means that employers are allowed to conclude managerial contracts with other employees as well, e.g. heads of departments etc.
The manager or other legal representative of the company can be engaged on the basis of a standard employment agreement, managerial agreement according to the Labour Law (2005) or alternatively through non-employment Management Agreement in accordance with the Company Law (2004).
If a manager is engaged through employment agreement or managerial agreement according to the Labour Law, such agreement may be concluded either for indefinite term or for definite term – for the duration of his/her term of office. A manager engaged through a standard employment agreement is entitled to the same basic employment rights as all other employees – including the salary and all other mandatory payments, vacations and leaves, limited reasons for termination of employment etc.
If a manager is engaged through a managerial agreement under the Labour Law or an out-of-employment Management Agreement, limitations of employment relation do not apply to such agreement. The parties are free to agree the amount of remuneration and any other mutual rights and obligations that they deem adequate.
The employment contract will cease to be valid in case of:
The employment could be terminated by the employer if there is (i) a justified reason for termination related to the conduct of the employee (i.e. termination due to personal reasons), (ii) violation of the work order and discipline, or failing to meet work obligations (i.e. termination due to causes of fault); or (iii) if the worker is no longer needed to perform certain work under the conditions stated in the employment contract due to economic, organizational, technological, structural or similar reasons by the employer (i.e. termination due to business reasons). The worker and employer may terminate the employment contract within the specified statutory or contractual notice period.
If the employer terminates the employment contract with an individual worker or fewer workers, the minimal statutory notice period is one month. The notice period is two months in the case of termination of employment of more than 150 employees or 5% of the total number of workers working for the employer prior to the termination of employment. If the employer terminates the employment contract of seasonal workers, the notice period is seven working days. The notice period starts on the day after the worker received the decision for termination of the employment contract. Parties could agree on longer notice periods within the employment contract. Furthermore, the parties may agree that the employer pays a certain remuneration in order to waive the applicability of the statutory notice period.
Based on the law the following reasons are considered as absolutely ill-founded reasons for termination:
In accordance with the Labour Law, the provisions relating to termination of the employment contract shall apply in the case when the employer terminates the employment contract and, at the same time, the employee is also proposed with a new amended employment contract.
As a general rule, according to the law, the employer is not required to obtain any kind of consent from a third party before the employee’s contract is terminated. However, the employer may terminate the employment contract of a union representative only with prior consent of the union. The union representative is protected against dismissal during the whole period of their term of office and at least two years after expiry of their term of office.
If the employment contract is terminated, the employer is obligated to state the reasons for the termination, defined by law and the collective agreement, and the employer is required to prove the merits of the cause that justifies the termination and to provide an explanation. The employee has the right to a legal remedy against the decision on termination.
Termination due to personal reasons - The employer is entitled to dismiss the employee due to reasons related to the individual worker when the worker, because of his behavior, lack of knowledge or opportunities, or for failure to meet specific conditions set by law, is not capable of performing contractual or other obligations of employment (personal reasons). The employer may terminate the employment contract of a worker for personal reasons only if the worker is provided with the necessary working conditions and is given appropriate instructions and guidelines. Before terminating the employment, the employer is obliged to provide the employee with a written warning confirming that the employer is not satisfied with the manner of the execution of duties and providing a reasonable period of time for the employee to improve its performance. If the worker does not improve the performance by the set deadline, the employer may proceed with the termination.
Termination due to cause of fault – If the employee violates the work order and discipline, it could be dismissed due to cause of fault with or without a notice period. The Labour Law stipulates the cases when an employment could be terminated without a notice period, such as in cases when (i) the employee is under the influence of alcohol or narcotics, (ii) the employee misses work for at least three days in a raw without a justified reason; (iii) the employee abuses its right to sick-leave etc.
Based on the court practice in event of violation of the work order and discipline, the employer should implement an internal procedure for determining the facts of the case prior to termination by establishing a disciplinary proceeding. Usually, the disciplinary procedure is regulated by an internal rulebook of the employer.
Termination due to business reasons – In the case of termination of the employment contract for business reasons, the employer is obliged to pay the worker a severance payment. The severance payment is calculated based on the years of employment of the respective employee. For purposes of calculation of the severance payment, the employer takes into consideration the years of employment at the same employer, or the period of employment with the same employer and the period of employment with the previous employer, in cases when the current employer is the legal successor of the previous employer due to so called amendments in status of the companies. Macedonian Company Law considers company restructurings such as mergers, acquisitions and division of companies in accordance with its provisions as amendments in status of a company.
The amount of severance payment could range between one and six net salaries of the respective employee. As a rule the employee shall receive severance payment in amount of one net salary for every five years of employment. The basis for calculation of the severance payments is the average net salary of the employee in the last six months prior to the termination, but it cannot be lower than 50% of the average net salary paid in Macedonia in the month prior to the termination.
Collective dismissal due to business reasons - If the employer intends to make a decision on the termination of the employment of a number of workers due to business reasons, or at least 20 employees for a period of 90 days at each termination of employment regardless of the total number of employees by the employer, it shall be considered as a collective dismissal due to business reasons. When the employer intends to carry out collective redundancies, the process is initiated with consultation with the workers’ representatives, at least one month before the collective dismissal. The employer is obligated to provide the representatives with all relevant information before starting consultations to achieve an agreement. The employer has an obligation to issue a written notice to the Employment Agency informing them on the intent for collective dismissal at least 30 days before the dismissal occurs. Upon this notice, employees are free to provide their suggestions to the Employment Agency with respect to the collective dismissal. If the Employment Agency finds that the problems due to the collective dismissal cannot be surpassed in the provided 30 day period, it the right to require that the period since the submission of the written notice till the termination is extended to 60 days. In practice, the Employment Agency exercises this right in all cases for collective dismissal.
The most common restrictive covenant in employment contracts in Macedonia is the non-compete clause. A non-compete clause is usually met in employment contracts in sector specific industries (IT, health-care, auto-motive industry, banking & finance sector etc.).
Non-compete clause is valid during the duration of the employment and usually employees are not allowed to carry out activities that may be deemed as competitive to the employer, unless the employer provides its prior approval. However, the validity of the non-compete clause could continue for a period of up to two years since the termination of the employment and only in cases when the employment is terminated based on employee’s will or fault. The term of validity of the non-compete clause should be determined with the employment contract. The non-compete clause should not exclude the possibility of employment for the employee.
If the observance of the non-compete clause prevents the employee from earning an appropriate living, the employer shall be obliged to pay him monetary compensation during the whole period of validity of the non-compete. The monetary compensation has to be defined in the employment contract and its amount should not be less than 50% of the average salary paid to the employee three months prior to the termination of employment.
The employer and the employee may agree on termination of the validity of the non-compete clause. Also, if the employee terminates the employment contract due to breach of the employment contract by the employer, the non-compete clause shall cease to have effect if the employee notifies his former employer in writing that he is not bound by the non-compete clause within one months since the termination of the employment.
Apart from the non-competition clause, local employment contracts often contain confidentiality clause during employment and following employment termination (usually unlimited), which prohibits disclosure of company’s business secret. Macedonian Labour Law does not regulate the non-solicitation clause, but usually it is seen in practice as part of managerial contracts. However, court practice regarding enforceability of non-solicitation clause is severely underdeveloped.
Competent courts and authorities
There are no specialized courts for labour disputes in Macedonia, but these cases are handled by regular civil courts. Some courts with bigger capacities have established special departments handling labour disputes. The First Instance Courts initially deal with labour disputes, while parties also have the right to file appeals to the competent Appellate Courts against first instance judgments. The Supreme Court of the Republic of Macedonia is competent for deciding on extraordinary legal remedies against the final rulings. Depending on the type of disputes different statutes of limitation apply. As a general rule, the employee should first file an objection against the decision of the employer to the competent body within the company in a period of eight days after it receives the decision it would like to challenge. Within eight days since the submission of the objection, if the employee does not receive any feedback from the employer regarding its objection, or its objection is denied, it has the right to initiate a labour dispute within a period of 15 days. Monetary claims deriving from employment have 3 years statute of limitation.
In proceedings of labour disputes, the procedure before the First Instance Court should be completed within six months from the date of filing the claim. In appeal proceedings, the Appellate Court should decide on the appeal filed against the decision of the First Instance Court within 30 days of receipt of the application or within two months if before the Appellate Court to hold a hearing. However, due to overload with cases, courts tend to exceed these deadlines for reaching a decision and labour disputes may take up to two years and longer. Regarding extraordinary legal remedies, the Supreme Court of the Republic of Macedonia should decide within eight months since its starts working on the case. However, it does not start working on the case upon its receipt, so this period of time could also be delayed.
Although there is an applicable Law on Amicable Resolution of Labour Disputes in force since 2007, this regulation fails to meet its purpose in practice and most of the labour disputes are still handled before competent courts. The regulation on amicable resolution of labour disputes provides an alternative dispute resolution mechanism for collective labour disputes, as well as individual labour disputes. Parties are free to choose and appoint a conciliator or arbiter for amicable resolution of a labour dispute from the registry of competent arbiters administered by the Ministry of Labour and Social Policy.
The Labour Inspectorate is the main authority for monitoring the implementation of the labour and health and safety regulation among employers. Employers have the right to initiate administrative disputes before the Administrative Court against decisions of the Labour Inspectorate.
Depending from the procedure, other public authorities could have specific competences related to employment relations, such as the State Commission for Prevention of Discrimination, in cases of discrimination claims or the Directorate for Personal Data Protection, in cases of violations of privacy or other data protection matters.