Hire in Bosnia and Herzegovina with Confidence

Employment Laws

In Bosnia and Herzegovina, both employment and independent contractor relations are regulated by the country’s Labor Code (Zakon o radu Federacije BiH), as well as unique terms and conditions specified in employment contracts. Employment conditions may be subject to a  Collective Bargaining Agreement (CBA, a written legal contract between an employer and a union representing the employees). 

There are two types of employment contracts in Bosnia and Herzegovina: 

• Open-ended, or indefinite (ugovor o radu na neodređeno vrijeme)
• Fixed-term (ugovor o radu na određeno vrijeme, for up to 3 years)

Both types of agreements must be concluded in writing. If a contract does not specify the duration of an agreement, it is considered to be an indefinite one. 

There is no requirement to draw up contracts in Bosnian.

Hiring Practice

Candidates are recruited externally through job boards and advertising. An applicant must submit their CV to the employer.

Selected applicants are entitled to receive a written contract or an offer letter (pismo ponude za posao) within 15 days of the date when the decision to hire was made by the employer. Such a document must specify the duration of employment. If an offer/contract is not provided during this period, then a contract is considered indefinite. 

The following aspects must be collected and included:

• Full name
• Residence information
• Employment duration
• Date of commencement
• Place of work
• Nature of work and short job description
• Average weekly and daily working hours;
• Basic salary and bonuses (including payment date)
• Holiday entitlement
• Notice period

Employers reserve the right to perform background checks during the hiring process, but they must not request any information that is not related to the nature of the work.

Tax Documents

Employers are obliged to submit monthly income and social security tax reports to a local tax office on the same day as the salary payment and no later than by the end of the following month for the previous month.

In Republika Srpska, the deadline is the 10th day of each month. 

There is no universal method of submission – employers are encouraged to contact a local tax office for guidance.

Payer's Tax Withholding & Reporting Requirements

Employers must withhold:

• 6% – retirement and disability insurance contribution
• 4% – mandatory health insurance contribution
• 0.5% – mandatory unemployment insurance contribution
• 0.5% – mandatory contribution for protection of water
• 0.5% 0 mandatory contribution for protection from natural disasters
• 10% – personal income tax (flat rate irrespective of the income size)

Remuneration

Employers are expected to pay their staff via automatic monthly payroll deposits in Bosnia-Herzegovina Convertible Markas (BAM) to their bank accounts.

Workers’ Rights

In BiH, employees enjoy the following rights:

• Paid annual leave – 20 days, available after first six months of employment
• Sick leave – 5 days
• Injury leave (for damages inflicted at work) – 42 days, paid by an employer
• Maternity leave (all regions except Republica Srpska) – 1 year granted to female employees, with a right to work part-time post-maternity until the child turns two years old
• Maternity leave in Republica Srpska – 1 year granted to female employees, increased to a year and a half for twin births or any subsequent births after a second child
• Paternity leave – 7 days
• Marriage leave – 7 days
• Bereavement leave – 7 days
• Severance pay (excluding cases when an employee is fired for misconduct or has worked less than 2 years) – according to the contract or CBA, can’t be less than one-third of the average monthly wage for the preceding three months
• Premium payment rate for overtime work (cannot exceed 8 hours/week, determined by a CBA)
• Termination notice – 14 days

Benefits

All employees must have unemployment insurance, which the employer is required to pay for. Pension and health insurance contributions are deducted from employees’ salaries and are paid by employers. Employees may be granted additional internal benefits not otherwise governed by labor laws.

Employees are generally entitled to a Christmas holiday bonus payment – 78% of an employee’s average monthly salary.

When Paid

Determined by the contract or CBA.

Salary must be paid at least once a month.

Employment Laws

In BiH, independent contractors are defined as “service providers” (pružaoci usluga). 

Service providers work under a service contract as exclusive agents.

Bosnian legislation does not define any sub-types of a service contract with an independent contractor. It can be bilateral (binding for both parties) or unilateral (binding for only one party).

Hiring Practice

Freelancers are hired through professional employer organizations or directly.

Contractors can be hired directly or via a third party, such as a staffing agency. Contractors may be found via word-of-mouth, job boards, social networks, industry bodies, or other forums. Although hiring practices vary, the contractor may be asked to provide a CV, portfolio, and references, and possibly sign an NDA.

There is no limitation on the use of independent contractors. BiH Labor Code does not define any guidelines for concluding a service contract. Generally, the process of hiring a contractor is identical to the one of hiring an employee.

Tax Documents

Contractors file annual tax reports (poreski izvještaj) to a local tax authority. They are also subject to pension and mandatory health and unemployment insurance contributions.

Payer's Tax Withholding & Reporting Requirements

Independent contractors must pay the following taxes themselves in all regions except Republika Srpska:

• 17% – retirement and disability insurance contribution
• 12.5% – mandatory health insurance contribution
• 1.5% – mandatory unemployment insurance contribution
• 10% – personal income tax (flat rate irrespective of the income size)
• VAT – 17% (if gross annual income exceeds BAM 50,000 (EUR 25,000))

In Republica Srpska:

• 18.5% – retirement and disability insurance contribution
• 12% – mandatory health insurance contribution
• 0.6% – mandatory unemployment insurance contribution
• 1.7% – child protection contribution
• 10% – personal income tax
• VAT – 17% (if gross annual income exceeds BAM 50,000 (EUR 25,000))

Payer’s Withholding / Reporting Requirements for Independent Contractors:

N/A

Remuneration

There is no obligation to pay independent contractors monthly. Employers are responsible for providing consistent compensation in Bosnia-Herzegovina Convertible Markas (BAM). There are no standard payment terms. Remuneration frequency is to be agreed upon between the contractor and the employer. Payments become due after the contractor issues an invoice.

Workers’ Rights

Independent contractors do not enjoy any of the benefits granted to employees, unless internally agreed otherwise.

There is also no protection from a sudden termination of the contract. 

Benefits

No benefits are granted to contractors. Third-party benefits granted by professional employer organizations may apply when an independent contractor is hired through such organizations (i.e. umbrella company) and is considered their employee. 

Mandatory health insurance coverage is provided by the state.

When Paid

Typical contractor invoices are issued monthly on net 30-day terms. Each invoice usually includes the following details:

• Invoice number and date
• The client’s name and address
• The contractor’s bank details
• Agreed payment terms and due date