Amendments to the Labor Law: Employers’ Salary Costs Increase from January 1

Among the many new regulations that come into force and apply from January 1, 2023, are the amendments and supplements to the Labor Law. For some employers, the news regarding the right to salary is particularly important as it will bring them additional costs starting from the salary for January 2023. The amended Labor Law regulates the obligation of employers and workers to agree, determine, or set the salary in gross amounts. Until now, salary was considered to be in gross amounts, but there was no obligation to contract it in gross amounts, so it was permissible under mandatory law to agree on a salary in net amounts.

The minimum wage, according to a special law, has had to be agreed or determined in gross amounts since 2022, and from the beginning of 2023, this obligation applies to all salaries. Acting contrary to this obligation is sanctioned with high misdemeanor fines: for legal entity employers from 8,090 to 13,270 euros, and for individual employers and responsible persons in legal entities from 920 to 1,320 euros. The Labor Law also defines the components of gross salary, just as gross salary is defined by tax regulations.

Different Bases for Supplements

The provisions on mandatory salary supplements have been expanded. Employers are obliged to pay workers an increased salary for overtime work, night work, work on Sundays, work on public holidays and non-working days prescribed by special law, as well as for work performed in difficult working conditions. These supplements are calculated on a base determined by the source of labor law that regulates salaries with the employer, but must not be calculated on a base lower than the minimum wage. The minimum wage for 2023 is 700 euros gross per month. All five listed supplements are not included in this minimum amount but must increase it.

Other supplements to which a worker is entitled under a collective agreement, work regulations, or employment contract, such as a shift work supplement, Saturday work supplement, or for completed years of service, are calculated on the base as prescribed by the act regulating the right to the respective supplement with the employer. This will, in practice, result in some employers calculating, for example, the supplement for years of service on a base lower than the minimum wage, which is permissible, while the Sunday work supplement and the other four mandatory supplements are calculated on a base equal to the minimum wage.

More Expensive Sunday Work

The Labor Law prescribes the minimum supplement for Sunday work. Until now, the supplement for Sunday work in applicable sources of labor law was predominantly set at 30 or 35 percent of the worker’s basic salary. From January 1, employers may not calculate a supplement for workers who worked on Sunday at an amount lower than 50 percent. This right applies to all workers in Croatia, in both the private and public sectors, unless otherwise specified by a special law. Otherwise, the Labor Law as a general provision of labor law does not limit the number of working Sundays. A limitation of a maximum of sixteen working Sundays in a calendar year is proposed to be introduced by amendments to the Trade Law. The proposal has passed the first reading in the Parliament but has not yet been accepted.

Influenced by experiences from the crisis caused by the coronavirus, the amended Labor Law regulates the amount of salary compensation during work interruptions due to extraordinary circumstances caused by disease epidemics, floods, earthquakes, ecological incidents, and similar phenomena caused by force majeure. If work is interrupted due to these influences, the worker is entitled to a salary compensation of 70 percent of the average salary earned in the previous three months. This amount can be more favorably determined for the worker by collective agreement, work regulations, and employment contract.

No Waiving of Salary

From January 1, 2023, the obligation to pay salaries to the worker’s transaction account is introduced, and only receipts that are permitted under tax regulations can be paid in cash. This means that in employment relationships, assignment, cession, and other accounting methods of settling the employer’s monetary obligations to the worker are no longer permitted. Set-off is still allowed under prescribed conditions, and wage garnishment is carried out according to a special law. A new provision is the prohibition of waiving the right to salary payment; such an agreement between the worker and the employer is no longer permitted.

The circle of receipts for which employers are obliged to issue documents on the paid amount after payment to the worker is expanded. In addition to salary, salary compensation, and severance pay, the employer is obliged to provide the worker with a calculation of the paid compensation for unused annual leave. In the case of non-payment of compensation, the worker should be provided with an enforcement document regarding the unpaid receipt.

There is no longer the possibility that a collective agreement or employment contract (as bilateral regulations) can agree on a later deadline for salary payment than the fifteenth of the month for the salary for the previous month. A new provision is that collective agreements for union members who are parties to that agreement may allow some material rights to be agreed upon in a greater amount than for non-members of that union.