Compliantly Engage Contractors in Croatia
Our workforce compliance guide to Croatia covers everything you need to compliantly hire, onboard, manage and pay independent contractors in Croatia.
Integrate the apps you’re already using.
Our methodology is based on forming a true partnership with the customer.
Gain visibility into your most critical workforce metrics
AI-powered identity verification and KYC solution
Ensure complete and ongoing IC compliance and mitigate the risks of employment misclassification.
Our workforce compliance guide to Croatia covers everything you need to compliantly hire, onboard, manage and pay independent contractors in Croatia.
Worksuite offers a whole range of professional services and compliance tools, making it easy to compliantly engage independent contractors in Croatia
We work with the best legal partners in Croatia to create contract templates that are compliant with local laws to protect you and your contractors from fines and penalties.
Our bespoke onboarding workflows and screening questioners will help you determine the worker status in compliance with the Croatian law, based on which you can decide to engage a worker as a contractor or full-time worker—all without needing to set up your business entity.
Any business hiring in Croatia should understand the important legal distinction between who classifies as an independent contractor and who can be hired as an employee. Fines or penalties may be issued to businesses that are hiring contractors under the guise of employment.
In Croatia, merely describing an individual as an independent contractor has no legal significance. Instead, various factors are taken into account to determine the true legal status of the individual. Therefore, understanding the distinctions between employees and independent contractors is critical to compliantly engaging workers in Croatia.
It is important to work with a partner like Worksuite to ensure that you have an engagement framework that properly classifies freelancers able to work as independent contractors. Alternatively, Worksuite can automatically alert you when freelance talent must be engaged directly as employees, or contractors on the payroll.
The Labor Act; State Inspectorate (supervised employment law).
Companies Act; Crafts Act; Foreigners Act.
Hiring practices generally involve the employer preparing a job description, advertising the role (e.g., online), conducting job interviews and other candidate tests, and then making an offer to the candidate. Candidates may also undergo background checks. In Croatia, employers can also require that potential employees take a medical exam. Employers must issue a written contract and this must be in Croatian (i.e., no other languages). All salary amounts must be provided in HRK currency.
Croatia law does not stipulate the practices for hiring independent contractors.
The most common independent contractor categories are:
Operating as a company (obrt, d.o.o, or j.d.o.o – see below)
Employees pay their income tax, health contributions, and other social security contributions directly from their salary payments. Employees do not need to file their own tax returns.
Employees may also have to pay a municipal tax depending on where they live. This can range from 0% to 18% and is levied as a surtax.
Independent contractors who operate as self-employed freelancers have their income tax deducted by the hiring company or client.
Independent contractors who operate under their own company pay their own income taxes and other social security contributions. Tax filing can be made online via the e-Porezna page.
The annual tax return filing deadline is the end of February of the current year for the previous calendar year.
The tax return will show any difference between the annual tax liability and tax prepayments made during the tax year. If there is a difference, the taxpayer will either be entitled to a tax refund, or required to make an additional tax payment.
The Ministry of Finance provides more information on its income tax page.
In Croatia, hiring companies withhold the independent contractor’s income tax and social security contributions if the contractor is operating as a self-employed freelancer.
However, if the contractor is operating as their own company (see below), the hiring company simply pays the contractor’s invoice.
Pension contributions are taken from an employee’s salary. Health insurance, insurance at work, and unemployment work is paid by an employer on top of the gross salary.
Independent contractors operating as a company must register with the Croatian Institute of Pension Insurance and the country’s Health Insurance Institute in order to pay their own pension and insurance contributions
Employees are paid on an hourly, weekly, or monthly basis.
Independent contractors typically submit an invoice on a monthly basis.
These are set out in the Labor Protection Act and the Labor Act. Worker’s Rights include: agreed working times; minimum rest periods; limits on maximum working hours; overtime agreements; premiums for unsocial hours and heavy-duty work
paid leave; sick pay; agreed termination mechanisms; severance pay; rights to representation.
Labor laws do not apply to employees performing work on the basis of civil contract, and thus cannot be infringed upon by the employer.
All employee benefits are paid by the employer. Employees make mandatory pension and healthcare contributions.
Independent contractors are not entitled to benefits beyond what is stipulated in their specific contract. Employers are not responsible for delivering any benefits to independent contractors.
Employees are paid in arrears on or before the last day of the month for which payment is due, and no later than the 15th day of the following month.
Independent contractors are paid upon completion of the contract or task(s) and following submission of an invoice by the contractor.
The Labor Act; State Inspectorate (supervised employment law).
Hiring practices generally involve the employer preparing a job description, advertising the role (e.g., online), conducting job interviews and other candidate tests, and then making an offer to the candidate. Candidates may also undergo background checks. In Croatia, employers can also require that potential employees take a medical exam. Employers must issue a written contract and this must be in Croatian (i.e., no other languages). All salary amounts must be provided in HRK currency.
Employees pay their income tax, health contributions, and other social security contributions directly from their salary payments. Employees do not need to file their own tax returns.
Employees may also have to pay a municipal tax depending on where they live. This can range from 0% to 18% and is levied as a surtax.
The annual tax return filing deadline is the end of February of the current year for the previous calendar year.
The tax return will show any difference between the annual tax liability and tax prepayments made during the tax year. If there is a difference, the taxpayer will either be entitled to a tax refund, or required to make an additional tax payment.
The Ministry of Finance provides more information on its income tax page.
Pension contributions are taken from an employee’s salary. Health insurance, insurance at work, and unemployment work is paid by an employer on top of the gross salary.
Employees are paid on an hourly, weekly, or monthly basis.
These are set out in the Labor Protection Act and the Labor Act. Worker’s Rights include: agreed working times; minimum rest periods; limits on maximum working hours; overtime agreements; premiums for unsocial hours and heavy-duty work
paid leave; sick pay; agreed termination mechanisms; severance pay; rights to representation.
All employee benefits are paid by the employer. Employees make mandatory pension and healthcare contributions.
Employees are paid in arrears on or before the last day of the month for which payment is due, and no later than the 15th day of the following month.
Companies Act; Crafts Act; Foreigners Act.
Croatia law does not stipulate the practices for hiring independent contractors.
The most common independent contractor categories are:
Operating as a company (obrt, d.o.o, or j.d.o.o – see below)
Independent contractors who operate as self-employed freelancers have their income tax deducted by the hiring company or client.
Independent contractors who operate under their own company pay their own income taxes and other social security contributions. Tax filing can be made online via the e-Porezna page.
In Croatia, hiring companies withhold the independent contractor’s income tax and social security contributions if the contractor is operating as a self-employed freelancer.
However, if the contractor is operating as their own company (see below), the hiring company simply pays the contractor’s invoice.
Independent contractors operating as a company must register with the Croatian Institute of Pension Insurance and the country’s Health Insurance Institute in order to pay their own pension and insurance contributions
Independent contractors typically submit an invoice on a monthly basis.
Labor laws do not apply to employees performing work on the basis of civil contract, and thus cannot be infringed upon by the employer.
Independent contractors are not entitled to benefits beyond what is stipulated in their specific contract. Employers are not responsible for delivering any benefits to independent contractors.
Independent contractors are paid upon completion of the contract or task(s) and following submission of an invoice by the contractor.
Self-employment as an independent contractor is a popular income model for many individuals. The Covid pandemic has prompted an even greater increase in the number of Croatia individuals working as self-employed independent contractors.
As in many countries, there are no strict definitions of who is an employee and who is an independent contractor in Croatia. That said, there are six main criteria that are weighed when evaluating whether a worker is classified as an employee or an independent contractor. In general, the individual is considered an independent contractor if they:
Independent contractors in Croatia work under one of two main categories: self-employed freelancer, or operating as a company.
Independent contractors can register their business via the e-Građani portal after obtaining an electronic identity card (osobna iskaznica) or a digital certificate from the country’s Financial Agency. In order to register, independent contractors may also need to provide additional information including: evidence they have the right to use a given space (this applies to certain businesses), proof of professional qualifications, and a residency certificate.
There are two primary engagement models for working with independent contractors in Croatia:
A. Direct engagement of the independent contractor as self-employed or registered via their own limited company.
B. Third party: These firms come in two forms and both are specially designed to vet and engage freelancers compliantly as either contract employees or independent contractors on your behalf.
Companies hiring independent contractors in Croatia should avoid making payments directly through their payroll system. Beyond these guidelines, there are no specific lawful requirements related to paying independent contractors in Croatia. The contract should stipulate the preferred payment method agreed upon by both parties.
Independent contractors earning up to HRK 300,000 per year can pay their income taxes via the self-employment (paušalni obrt’) system. Independent contractors who operate as freelancers (i.e., without their own company – see above) have their income tax, pension contributions, and healthcare contributions deducted by the client company. Independent contractors who operate through their own company are responsible for paying their own taxes, pension, and healthcare contributions.
Taxation levels vary depending on the municipality where the independent contractor is registered, and also on the type of contract. For example, author’s contracts (see above) incur additional tax rates to account for the copyright transfer to the client. Additionally, in January 2021 a Digital Nomad Visa came into effect, which allows foreign independent contractors to work temporarily in Croatia while only paying income tax in their country of residence. However, they cannot work for Croatian clients.
We can simplify hiring full-time workers in Croatia by acting as the Employer of Record (EOR) on your behalf, handling everything from contracts, onboarding, documentation, payroll, benefits, and workforce management. Reduce your time-to-hire by 90%, slash your overheads, and remain fully compliant.