It is often claimed in the public space that Croatia is at the top of the EU rankings in terms of the share of fixed-term employment contracts, with an alleged share of such contracts at the level of 20-25 percent, using the methodology of the Croatian Institute of Pension Insurance (HZMO).
However, internationally comparable data from Eurostat shows that in 2023, the share of fixed-term employment contracts was 9.6 percent in the age group of 15 to 64 years, which is below the EU average of 11.5 percent. Nevertheless, both relevant sources (Eurostat, HZMO) indicate a significant downward trend in such contracts from 2016 to the present, as reported by the Croatian Employers’ Association (HUP) in its weekly analyses. The specificities of the domestic market should also be taken into account in discussions about fixed-term contracts, they add.
Due to the seasonality of the Croatian economy, the high share of tourism (19% of GDP) and trade (24% of GDP), and the need for temporary work, the number of fixed-term contracts increases by 18 percent during the season. Thus, despite the pronounced seasonality of the economy, the number of fixed-term contracts is lower compared to the EU average.
Some companies, typically micro or smaller employers faced with numerous administrative burdens, are delayed in entering changes in the forms for reporting employment relationships when transitioning from fixed-term to indefinite contracts, as indicated by HZMO. Additionally, the increased influx of foreign workers with residence and work permits for one year increases the practice of entering into fixed-term contracts.
HUP questions whether the statistics on fixed-term employment are truly a benchmark for the success of an economy or the quality of a labor market. Namely, the least developed EU members, Bulgaria and Romania, are among the five countries with the lowest share of such contracts, while many more developed economies such as the Netherlands (22.9%), Spain (14.6%), France (13.6%), Finland (13.5%), Italy (12.9%), Sweden (12.7%), and even developmentally similar Poland (12.2%) have a higher share of fixed-term contracts than Croatia.
According to our findings, this indicates a greater supply of more flexible forms of employment and a growing number of those who find holding several part-time jobs more lucrative. It would be paradoxical to conclude that Bulgaria and Romania have better protection of workers’ rights, they state in their analyses.
Considering that Croatia has already achieved the second largest relative decline in the share of fixed-term contracts after Poland, with a drop of 10 percentage points from 2016 to 2023, and a significantly better score in relation to the goals from the National Recovery and Resilience Plan (NPOO), is it not time to consider a life adjustment of the current provisions of the fixed-term employment contract institute in the Labor Law, which includes limiting fixed-term contracts to a maximum of three consecutive contracts, HUP asks.
The goal of the Labor Law must be a higher employment rate
Legal restrictions should focus on isolated and rare cases where consecutive fixed-term contracts are excessively and unjustifiably used, rather than limiting all employers and workers who occasionally enter into fixed-term contracts due to the nature of the work (e.g., project occupations, professional services, tourism). We believe that the inclusion of ‘objective reasons’ in all fixed-term employment contracts is an excessive limitation and that at least the first fixed-term contracts should be exempt from such obligations. Moreover, the legislator does not specify who is authorized to interpret ‘objective reasons’ except for courts in case of disputes, which poses an unacceptable legal risk, HUP writes in its weekly analyses.
