By prescribing exemptions and relief from the obligation to pay contributions on salaries for certain workers, the state aims to influence the increase of social security for young individuals. The impetus for introducing and maintaining this measure for several years is the data indicating that a significant proportion of young workers lack work experience within the structure of the unemployed, and fixed-term contracts still dominate when establishing employment relationships. The exemption from salary contributions has proven to be a fiscal relief that employers frequently utilize. The process is straightforward, requiring no approvals from state bodies, and the financial impact for the employer is substantial; moreover, the effect of this relief will be seen upon the payment of the first salary.
Currently, there are three forms of this measure in effect: two are prescribed by the Law on Contributions, and one by the Law on Croatian Veterans. In previous years, exemptions prescribed by the Law on Minimum Wage and those prescribed by the Law on the Labor Market were also applied. The Law on Contributions regulates the exemption from the obligation of contributions on salaries for workers who are being employed for the first time and for workers under thirty years of age.
Who Can Benefit
A person being employed for the first time is considered to be a worker who has no recorded pensionable service in the registry of HZMO or with a foreign holder of mandatory pension insurance, except for service based on parental duties and up to eight days of service based on the recalculation of income from other income into acquired pensionable service. Pensionable service acquired on other grounds, regardless of duration, eliminates the possibility of utilizing the exemption.
The exemption can be utilized for a worker who is employed on an indefinite basis and for a worker who is employed on a fixed-term basis, whether full-time or part-time, but for a maximum of one year. If the employer enters into multiple consecutive fixed-term contracts with the same worker, the exemption is used as long as the one-year period has not expired. The period of exemption is tied to the duration of the employment relationship, not to the number of contracts concluded between the same parties. However, if the fixed-term employment relationship changes to an indefinite one, it will be more favorable for the employer to replace that exemption with the exemption for a young worker, provided the conditions are met.
Excluded Young Officials
Another very attractive exemption for the employer is the exemption from contributions on salaries for employing workers under thirty years of age (young workers). An employer who hires a young worker is exempt from paying contributions on that worker’s salary for five years. The assumption for utilizing the exemption is the fulfillment of the following cumulative conditions: that on the day of registration for pension and health insurance, i.e., on the day the employment relationship begins, the worker is under thirty years of age (can be a maximum of 29 years, 11 months, and 29 days); that the worker is employed on an indefinite basis, whether full-time or part-time, and that the worker has not previously been employed by that employer on an indefinite basis, but may have been employed on a fixed-term basis and may have been in training without an established employment relationship.
