Work of Students and Pupils: Total Non-Taxable Income Can Reach 9556.18 Euros

Due to the shortage of workers in the Croatian labor market, employers are increasingly interested in employing students through authorized intermediaries. Moreover, there is also a growing interest in employing high school students, who can only work during school holidays, through schools and student dormitories that have obtained permission for employment mediation. This is also facilitated by tax regulations, as amendments to the income tax regulations as of January 1, 2023, have increased the non-taxable income for students and pupils working through authorized intermediaries.

The non-taxable income has increased from 15,000 kuna (1990.84 euros) to 3185.38 euros per year per student or pupil. Additionally, a student or pupil working through an intermediary can utilize the right to an annual basic personal deduction on their earned income, which in 2023 amounts to 6370.80 euros, allowing their total non-taxable earnings to reach up to 9556.18 euros.

At least 4.38 euros per hour

The law regulating student work prescribes the method for determining the minimum hourly wage for regular and part-time students; this year it amounts to 4.38 euros per hour. The employer as the job requester and the student can freely agree on a higher hourly wage, and higher recommended hourly rates are suggested on the websites of student centers depending on the jobs for which the requester employs the student; these can amount to up to nine euros per hour. If a student works at night, on holidays and non-working days specified by special law, on Sundays, or overtime, the agreed hourly wage increases by 50 percent. The law does not define which hours are considered overtime for students, so by applying labor law regulations analogously, it follows that work lasting longer than 40 hours per week is considered overtime for students. To determine the increase in hourly wage for night work, labor law regulations should also be applied, according to which night work is considered work from 10 PM to 6 AM the next day, and in agriculture between 10 PM and 5 AM the next day.

A student working at least six hours a day is entitled to a paid 30-minute daily break. During the break, they are entitled to the same earnings as for the periods in which they perform contracted work. Additionally, a tripartite agreement between the job requester, the student, and the intermediary can stipulate the student’s right to reimbursement for transportation costs to and from work, a hot meal, or other means of sustenance during work, as well as other additional rights for the student. For pupils working through an authorized intermediary, there are no prescribed minimum wages, but the obligations of the secondary school institution to protect the pupil are prescribed, such that the secondary school institution is jointly liable for the financial obligations of the requester towards the pupil.

The job requester does not pay compensation directly to the student or pupil. After the work is completed, typically monthly, but it can be for shorter or longer periods, the completed work and the number of hours worked are confirmed on a prescribed form, which is the basis for the intermediary to issue an invoice. The intermediary issues an invoice to the requester for the work performed, which includes not only the earnings of the student or pupil but also mandatory contributions at a rate of 5.5% and their commission. The commission for student centers amounts to 12.5%, while the commission charged by intermediaries for employing pupils is a maximum of 10%.

The same obstacle for parents

This year, the amount of earnings that does not prevent a parent or other taxpayer from claiming an increase in their personal deduction for a dependent student or pupil has not changed – earnings up to 3185.40 euros annually do not prevent the use of the relief. For students and pupils who earn more than 3185.40 euros during the year through authorized intermediaries, the parent or another person does not have the right to an increase in their personal deduction. The amount of 3185.40 euros includes only the earnings of the student or pupil, not the contributions paid on the earned income, which are normatively regulated as an obligation of the intermediary. If a parent or other taxpayer has used the right to an increase in their personal deduction for the student or pupil during the year (e.g., when paying wages), and from the data on the annual income of the dependent member it appears that they have lost that right, the tax authority will determine the difference for income tax payment in a special procedure for the annual income tax calculation for the parent or other taxpayer who has used the reduction of the tax base for the dependent member during the year.

Students and pupils working through authorized intermediaries do not have the right to pension insurance. During their work period, they are insured against the consequences of work-related injuries and occupational diseases, but their insurance period relevant for future pensions does not accrue. This distinguishes Croatian regulations from those of most EU member states, where students can only work during school holidays, and if they are employed for a fixed term, that period counts towards their pension insurance.