Contract form requirements
Different formal requirements apply for employment contract and for out-of-employment contracts for work engagement, as described below.
Employer is obliged to enter into an employment contract with the employee before the commencement of work. Employment contract must be concluded in writing and should contain all the compulsory elements required by the Labor Law, such as: qualification required for performance of job, title and 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.).
Employment may be established for indefinite or fixed term. Fixed term employment (up to 24 months, with or without interruptions) may be established in case duration of employment is predetermined by objective reasons justified by deadline, performance of specific work, or occurrence of the event, during these needs. Exceptionally, fixed term employment may be established for a longer period:
In the case of foreigners who are employees, they need to obtain residence and work permit before establishing employment in Serbia.
Engagement of director
The director or other legal representative of the company can be engaged on the basis of employment agreement or alternatively through non-employment Management Agreement.
If director is engaged through employment agreement such agreement may be concluded either for indefinite term or for definite term – for the duration of his/her term of office. Director engaged through 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 director is engaged through 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.
Other types of work engagement
There is also option to engage staff based on out-of-employment contracts, subject to conditions prescribed by the Labour Law. The main difference is that these agreements do not establish the employment relation. Therefore, 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. These agreements include:
Minimum employment terms and conditions
The Labour Law establishes a general framework for the legal regime applicable to labour relationships and a number of minimal employment rights and entitlements presented below.
Salary and other compensations
It is not possible to determine a fixed amount of the salary, as the Labour Law provides for rather complex mandatory structure of the salary and numerous mandatory payments:
Working hours, vacations and leaves
Full-time working hours are set at 40 hours per week. Full time employees are entitled to paid daily break during the working hours in duration of minimum 30 minutes, which is calculated towards the working hours. Employees are also entitled to certain minimum daily (12 hours between two working days) and weekly resting periods (24 hours between two working week, in addition to daily 12 hours rest), without interruption.
Overtime may be required only in certain cases determined in the Labour Law: 1) vis major; 2) unexpected increase of volume of work; and 3) in cases when the unplanned work has to be done within certain period of time. Overtime work cannot exceed 8 hours per week. Each overtime work has to be paid at increased rate of 26% on the basic salary. There are no exceptions for managerial employment contracts. Also, employers are obliged to keep a daily record on overtime working hours.
Night work is work between 10 p.m. and 6 a.m. Night work is subject to certain statutory restrictions such as: employee can work at night for more than one working week only with his consent in writing and employer must enable the employee to work during the day, in the event that employee’s health could be harmed due to work at night, etc. Night work has to be paid at increased rate of additional 26% on the basic salary, unless it has been considered within the basic salary.
Vacations and leaves
Annual vacation: The employee is entitled to annual vacation of minimum 20 working days per calendar year. The employee is entitled to proportional portion of annual leave (1/12 of annual vacation per month of work) in the calendar year when he/she commences employment or when he/she terminates employment. The length of annual vacation is increased based on criteria determined by the employment contract or internal employment rules/collective bargaining agreement (e.g. contribution to work, working conditions, years of experience, qualification etc.). Annual vacation can be used in two parts – two consecutive weeks during the relevant calendar year and the remaining part up to the June 30th of the following year, at the latest. Employee is entitled to compensation for unused annual leave if, at the time of employment termination, he/she has unused annual leave.
Paid leave: Employee has the right to a paid leave for a maximum of 5 working days in total in a calendar year in case of: marriage, child birth (for the spouse), serious illness of an immediate family member and in other cases determined in the internal employment rules/collective bargaining agreement and employment contract. The employee is also entitled for an additional 5 working days of paid leave in case of death of an immediate family member and for 2 consecutive days in each case of blood donation (including blood donation day).
The Employee also has the right on a leave during non-working national holidays - there is a total of 10 national holidays. In addition to the national holidays, employees are entitled not to work on certain personal religious holidays (only the employees, members of the respective religion): e.g. Roman-Catholics and other Christians - on Christmas day and Easter holidays, members of Jewish community – on Yom Kippur etc.
Maternity leave: Employees are also entitled to maternity leave and child care leave. Maternity and child care leave last for 365 days for the first and second child, and two years for the third and each following child. The maternity leave commences 28- 45 days prior to expected delivery date, based on the medical findings. Additionally, there is a special child care leave in case of serious illness or disability which may last until child reaches 5 years of age. Funds for these leaves are provided from the budget of the Republic of Serbia and employer is reimbursed for salary compensations it pays to employee during this period.
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 the sick leave, employee is entitled to compensation of the salary amounting to 65% of the average monthly salary for the preceding 12 months in case of work non-related injury or illness and 100% of the salary in case of work related injury or illness. Employer pays salary compensation during the first 30 days of work unrelated sick leave and for the entire duration of sick leave in case of work related sick leave.
Unpaid leave - The employer may also grant the employee an unpaid leave, during which leave the employee's rights and obligations are dormant, save for those rights and obligations for which the employment contract, the Labour Law or the employer’s enactments stipulate differently.
The employer and the employee may terminate employment relations in the manner and in cases prescribed by the Labour Law. In general, employment can be terminated in the following cases: upon expiry of the agreed term; when the employee fulfils pension retirement conditions; by mutual consent of the employer and the employee; by dismissal (only in cases specified in the Law); upon death of the employee; at the request of parents or guardians of an under-aged employee and in other cases prescribed by the Labour Law (loss of working ability, official prohibition of further work activities, prison sentence, termination of employer's business activities). We present below in more details some of the termination reasons used more frequently in the practice:
Agreement on termination of employment: The procedure for termination of employment by way of mutual agreement is rather straightforward – once the parties have negotiated the terms of termination, documents can be signed and employment immediately terminated (unless the agreement provides for some notice period). The Agreement on Termination has to be prepared in a special written form required by the Law. It has to be accompanied by a formal written Notification on unemployment benefits – a special notice confirming that employee who signs agreement is not entitled to state unemployment benefits.
In general, the agreement on termination does not entail the obligation of the employer to make the severance payment (unless otherwise provided by the internal enactments or employment contract). However, depending on the exact circumstances, it is possible that employer would need to motivate the employee to accept the agreement by offering incentive severance payment, subject to free negotiations.
Retirement: The employer can unilaterally terminate the employment once the employee reaches 65 years of age and at least 15 years of pensionable service. This is the only situation when the employee is obliged to retire, unless otherwise agreed between the employer and the employee. The employee may be also eligible for pension even earlier in line with pension regulations (e.g. when the employee meets 45 years of pensionable service, or based on a complex scale for early retirement, which is changed on a yearly basis). However, in these other cases for retirement, the employee is not obliged to retire and may freely decide whether he/she will retire or not once the conditions are met.
Unilateral dismissal: Employer may terminate employment agreement only if there is a justified reason related to employee’s work abilities or his/her behavior, as follows:
The Labour Law contains a list of few basic violations of work obligation and work discipline but employer’s enactments or employment contract can provide for more comprehensive list of disciplinary misbehaviors.
In order to effect a valid termination of the employment, the employer must observe a number of procedural issues that differently apply depending on the circumstances of the particular case: prior written warning, period for the employee to reply, time-bar for dismissal, special delivery requirements, specific form of each document in termination procedure, redundancy related procedural issues, etc. As the Labour Law is still protective with respect to employees, it is of utmost importance, in order to ensure that no valid employees' claims with regard to dismissal procedure emerge, to strictly abide by the procedural requirements in each particular case.
For example, the main steps of the process of employment termination in the case of breach of work discipline/work obligation include:
General time-bar for unilateral employment termination notice is 6 months as of information on the grounds for dismissal but not later than 12 months as of those grounds occurred. In case of a criminal act as a ground for dismissal, termination notice may be executed at the latest until the expiry of the statute of limitation for this criminal act.
When dismissed for professional inadequacy, the employee will be entitled to be firstly informed on the noted inadequacy and will be provided with additional period for improvement. Only if such period expires without improvement, his/her employment can be terminated. In this case employee is entitled to notice period of between 8 days and 30 days (depending on the total amount of work service in life).
Severance pay is legally mandated only in the case of retirement (2 monthly salaries) and in the case of redundancy. Redundancy severance is 1/3 of monthly gross salary per each year of work with the employer (and its affiliates); having in mind average total monthly salary paid in the last 3 months (including bonuses and other mandatory payments considered as the salary).
Termination by the employee: The employee can terminate his/her employment in any time by a written statement. The employee is not obliged to justify the reasons for such termination, although he/she is free to do so. Employee has to obey the minimum 15 days’ notice period, which may be prolonged up to maximum 30 days, but not more – no exception is envisaged for managerial positions.
Local regulations enable certain restrictive covenants in the employment contract, the most important being non-competition clause.
Under the Labour Law, employment contract can provide for non-competition clause i.e. can provide for activities related to employer's business that the employee cannot perform on his/her behalf or behalf of someone else, without employer’s consent during the term of employment. This prohibition can be provided only if the employment shall enable the employee to acquire (i) new, highly important technological knowledge, or (ii) wide circle of business partners, or (iii) exceptionally proprietary and confidential information and secrets of the employer.
Prohibition of competition can be valid also for up to two years upon termination of the employment. In this case, the employer has to undertake by the employment contract an obligation to pay to the employee certain agreed amount. The law does not provide anything regarding the amount which has to be paid, but based on some general principles of the law it has to be a just award. Regarding the choice between lump-sum payment and monthly payments, monthly payments are more practical, i.e. if the employee breaches the prohibition employer may cease with any further payments and minimize his damages.
Apart from the non-competition clause, local employment contracts often contain confidentiality clause during employment and some time following employment termination (usually unlimited), which prohibits disclosure of company’s business secret.
As for the non-solicitation clause, Serbian regulations do not regulate this type clause. It is sometimes seen in practice, especially in managerial agreements, but its application is still somewhat vague. Namely, due to the fact that it limits the right to work (of the individuals that cannot be recruited due to such clause) it is possible that court might find such clause illegal and contrary to the Constitution and therefore not applicable in practice.
Competent courts and authorities
In Serbia there are no special labour courts, but labour disputes are dealt with by the regular civil courts – Basic Courts, Higher Courts (first instance for harassment or discrimination cases), Appellate Courts and the Supreme Court of Cassation as the final court instance. The Supreme Court of Cassation is in charge on deciding on extraordinary legal remedies against the final rulings. Employee who finds that his employment right was violated is entitled to submit a claim before the competent court within 60 days as of the receipt of the disputable resolution or as of the date when he/she finds out on the breach of right. Monetary claims deriving from employment have 3 years statute of limitation.
Employees may choose to peacefully resolve their labour dispute by way of arbitrage. The arbitrator is determined by the parties jointly and the arbitrage process is urgent. The arbitrator’s decision is final and binding for the parties. Arbitrators are usually selected from the licensed arbitrators registered before the Serbian Republic Agency for Peaceful Settlement of Labour Disputes, who may be engaged for dispute related to discrimination or harassment at work, termination of employment or minimum salary. Arbitrage on individual labour disputes is quite rare in Serbia as employees usually refer to courts.
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 misdemeanour procedure against the employer.
This Agency for Peaceful Settlement of Labour Disputes also resolves collective disputes related to trade union relations with the employer – but in this case the role of the Agency is only to be mediator and does not provide for final and binding decision.
In addition, there are certain authorities whose field of activity may include some aspects of employment relations (though not exclusively), such as: Commissionaire for Protection of Equality (in case of discrimination claims), Commissionaire for Information of Public Importance and Personal Data Protection (in case of personal data breaches).