The Cost of Dismissal in Croatia Among the Lowest in Europe

While for centuries workers have fought for the enhancement of labor rights, in Croatia, at least, it is only deteriorating. These are indirect results of a new Deloitte study on the costs of terminating employment.

Namely, the costs of terminating employment in Western Europe are generally at least double those in Central European countries, which significantly contributes to the competitiveness of Central European countries, according to research conducted by the Belgian law firm Laga in collaboration with Deloitte. The study covered 23 countries, and Croatia ranked in the Central European average regarding the cost of employment termination.

In all the countries included in the study, the key factor for the amount of the cost of employment termination is the length of service. The costs are highest in Italy and Belgium. -Regarding Central European countries, Bulgaria, Poland, Romania, and Hungary lead, while Croatia, along with Slovenia, found itself in the group of countries with lower costs, which is one of the factors that could contribute to their attractiveness to foreign investors.- states Sonja Ifković, director in Deloitte’s Tax Consulting Department. However, alongside investments, there is also the question of the ethical confrontation between workers and employers, namely the fact that for Croatian workers, despite Croatia’s entry into the EU, it is easier to be dismissed than, for example, their Austrian or Belgian colleagues.

On the other hand, due to the economic crisis, some countries, such as Italy and Spain, decided to change labor legislation during 2012. The primary goal of the changes is to increase labor market flexibility.

In Croatia, just like in other countries included in the study, there are two types of dismissals: regular dismissals and extraordinary dismissals. 

-The reasons for regular dismissals fall into three categories: business-related reasons, reasons related to employee capabilities, and those conditioned by employee misconduct. When we talk about so-called shortened dismissals, or extraordinary dismissals, the trigger is a serious violation of obligations from the employment relationship, to the extent that the continuation of the employment relationship is not possible. As in other countries, in the case of extraordinary dismissal, the employee has no right to a notice period, while in the case of regular dismissal, the notice period is determined by the employment contract, collective agreement, or law, with the law stipulating a notice period ranging from two weeks to three months, depending on the duration of employment. If the employee resigns, the notice period must not exceed one month.- emphasizes Tatjana Orešković Trcin, senior consultant in Deloitte’s Tax Consulting Department.