The obligation to display salaries in kuna and euros begins on September 5

The Law on the Introduction of the Euro as the Official Currency will come into effect after the EU Council announces the decision on Croatia’s accession to the eurozone. According to the fundamental provisions of the Law, the introduction of the euro is based on the principle of continuity of all legal instruments in which the kuna is mentioned, which implies that all legal documents in which the kuna is mentioned remain in force under the same conditions as if there had been no change in the national currency.

In this regard, amounts specified in these legal documents in kuna are considered amounts in euros converted at the fixed conversion rate that the Government is expected to announce in July 2022. This rule also applies to legal instruments in the field of labor relations: general and special regulations, employment contracts, collective agreements, work regulations, and other internal acts.

Contracts and Deadlines

The legal provision remains in force in its unchanged monetary amount, only the amounts specified in kuna are considered amounts in euros, converted at the fixed conversion rate, rounded to two decimal places according to the prescribed rounding rules. The following rounding rules are prescribed: if in the process of converting kuna to euros the third decimal is five or more, the second decimal is rounded up to the next number, and if the third decimal is a number from one to four, the second decimal remains unchanged.

Employment contracts in which the amount of the employee’s salary is stated in kuna do not need to be adjusted to the new monetary unit after the introduction of the euro. Due to the introduction of the euro, it is not necessary to change the employment contract. The contract remains in force, is legally valid, and only the agreed salary amount is considered the amount agreed in euros. If the amount of salary is not specified in the valid employment contract, but the parties instead referred to the work regulations or collective agreement that binds the employer, the contract remains in force because the salary amounts in the work regulations and collective agreement are considered valid, only converted to euros according to the prescribed conversion rate. In employment contracts that will be concluded from January 1, 2023, or from the date of the introduction of the euro if that is a later date, the amount of salary and any other monetary rights must be agreed in euros.

During the prescribed period before and after the start of the application of the euro as the official currency, business entities have the obligation to dual display monetary amounts contained in documents and information they provide to consumers. In this context, during the dual display period, certain obligations are also prescribed for employers. If the expected date for the introduction of the euro is realized on January 1, 2023, the dual display period will last from September 5, 2022, to December 31, 2023. Starting from the salary for August, if the salary is paid on September 5, 2022, or later, employers are required to display the net salary amount in two currencies, in kuna and euros, indicating the fixed conversion rate in the payslip provided to the employee.

What Must Be Dual Displayed and What Does Not

The obligation of dual display also applies to severance payments, for which employees are also provided with a document on the calculated and paid amount. If other receipts are also stated in the documents, such as transportation allowances, meal allowances, they also need to be dual displayed.

Deductions from the net salary that the employer carries out according to the Enforcement Act or based on instructions received from the employee do not need to be dual displayed. For example, it is not necessary to dual display wage garnishments, deducted union membership fees, union loans, and other deductions from the net salary.

Only amounts that are paid to the employee are dual displayed. If a certain monetary amount is directed to two accounts (i.e., a regular checking account and a protected account on which enforcement on monetary funds is not carried out), each amount must be dual displayed. If in the same document, in addition to salary and salary compensation, other receipts are also stated, the total amount of receipts paid to the employee must be dual displayed. It is not necessary to state each individual receipt mentioned in the same document in two currencies, but rather the total amount intended for payment to the employee.

Gross Salary and Contributions

The gross amount of salary and public contributions that are calculated and paid from and on the salary (contributions from salary, contributions on salary, income tax, and surtax) contained in the document on paid salary, salary compensation, and in the document on paid severance does not need to be dual displayed. For salaries paid until the end of December 2022, these amounts will be displayed in kuna, and for salaries paid from January 1, 2023, in euros.

This implies that the salary for December 2022, which most employers pay in January 2023, must be calculated in euros, and only the net amount should be dual displayed in the payslip: in euros and kuna. The JOPPD form in January 2023 will be submitted to the Tax Administration with financial data stated in euros. The salary for December 2022 is a business expense for 2022 and is recorded in the business books and financial statements of the employer as an expense for 2022, in kuna.