Compliantly Engage Contractors in Serbia

Our workforce compliance guide to Serbia covers everything you need to compliantly hire, onboard, manage and pay independent contractors in Serbia.

Serbia
Capital City
Belgrade
Local Time
UTC+01:00
Currency
Serbian Dinar (RSD)
Official Language(s)
Serbian
Population
6.908 Million (2020)
GDP
52.96 Billion USD (2020)
GDP Growth rate
-1% (2020)

Worksuite offers a whole range of professional services and compliance tools, making it easy to compliantly engage independent contractors in Serbia.

We work with the best legal partners in Serbia 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 questionnaires will help you determine the worker status in compliance with Serbian 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.

Independent Contractor Classification in Serbia

Any business hiring in Serbia should understand the important legal distinction between who classifies as an independent contractor and who can be hired as an employee. While only a handful of disputes have ever reached Serbian courts, the popularity of being an independent contractor is increasing at pace and so employers must understand the issues at play.

In Serbia, an employee is defined by having a written employment agreement with an employer before they start work. This definition is provided under the 2005 Labor Law, which also sets employee rights. A written service agreement (or consultancy agreement) can be used to engage workers outside of traditional employment. Both parties have significant freedom to decide between themselves on the terms and conditions of any service agreement. Serbian law has not yet developed precise specifications for the terms of a service agreement.

Whether you are engaging with employees or independent contractors in Serbia, it is important to work with a partner like Worksuite to ensure you have an engagement framework that complies with Serbian law. Alternatively, Worksuite can automatically alert you when freelance talent must be engaged directly as payrolled employees, or contractors.

Factors

Employee

Independent Contractor

Employment Laws

Employees in Serbia enjoy a range of employment benefits. Most of these are outlined in the terms of the 2005 Labor Law.

Independent contractors do not enjoy the same employment-related laws as employees. Service agreements are generally defined by the Obligations Act.

Hiring Practice

Employment agreements in Serbia must be written in Serbian. Thirteen mandatory elements must be covered, including the names and addresses of both parties, job title and responsibilities, place of work, and the salary.

Independent contractors in Serbia must formally enter into a written service agreement (or consultancy agreement) with the principal (client). This contract outlines the work to be completed, the agreed fees, and the timescale in which the work must be done.

Tax Filing Documents

The tax year in Serbia runs from 1 January through to 31 December. Employees must complete the monthly PPP-PD form to report tax and social insurance payments. An annual PPP-PO form must also be completed and submitted to the Tax Administration department in the Ministry of Finance

Annual personal income tax returns must be filed by 15 May. Independent contractors must complete the PPDG-2R form and submit it to an online portal operated by the Ministry of Finance.

Payer's Tax Withholding & Reporting Requirements

Employees only pay income tax in Serbia if their income exceeds three times the average annual salary for a given tax year. Employers use a PAYE (pay-as-you-earn) system to deduct income tax, social security, and public health insurance payments. For most employees, personal income tax is 10%.

Independent contractors need to register for VAT if their income exceeds RSD 8,000,0000 (approximately $70,000).

 

An independent contractor formally registered as an entrepreneur with the Serbian Business Registers Agency (SBRA) must pay 10% income tax and 37.8% social security contributions.

Other Tax Filing Requirements

Residents must declare their full global income if they have any income generated outside of their main employment.

Independent contractors in Serbia can operate through their own limited company. Companies are registered with the Serbian Business Registers Agency (SBRA). This costs RSD 4,900 for paper applications or RSD 4,500 for online applications. In all cases, a further fee of RSD 1,000 is paid to cover the registration and publication of a memorandum of association.

Alternatively, an independent contractor must register as an entrepreneur with the SBRA.

Remuneration

Employees are paid on an hourly or monthly basis.

Independent contractors charge a fixed fee and submit an invoice after the completion of the work.

Workers Rights

Employees in Serbia have various rights enshrined in law under the 2005 Labor Act, including:

  • A minimum of 36 and a maximum of 40 working hours per week
  • Overtime (maximum eight hours per week) paid at a minimum of 26% more than basic salary
  • A minimum of 20 working days’ annual leave
  • Five days’ bereavement leave
  • 65% salary for up to 30 days of sick leave
  • 365 days’ paid maternity leave
  • A minimum of 15 and a maximum of 30 days’ notice period

Independent contractors do not enjoy the same employment-related rights as employees. Rights must be negotiated and agreed as part of the service agreement.

However, independent contractors are entitled to paid pregnancy and childcare leave. The amount of paid maternity leave is equal to the average covered income in the last 3 months. This benefit is also available to adoptive and foster parents.

Benefits

Employers must make contributions to an employee’s pension insurance (11.5%) and health insurance (5.15%).

An independent contractor registered as an entrepreneur in Serbia must pay 10% income tax and 37.8% social security contributions.

 

However, a large proportion of contractors opt to operate under Serbia’s lump-sum taxation model. This enables the contractor to pay a fixed amount for tax and social security. This amount is often lower than that paid by employees in similarly-paid roles.

When Paid

Employees in Serbia are paid in arrears and must be paid at least once a month.

Independent contractors are paid once they have completed their task and submitted an invoice. Invoices in Serbia must be paid within 60 days, and within 45 days if the debtor is a public authority

Employee

Employment Laws

Employees in Serbia enjoy a range of employment benefits. Most of these are outlined in the terms of the 2005 Labor Law.

Hiring Practice

Employment agreements in Serbia must be written in Serbian. Thirteen mandatory elements must be covered, including the names and addresses of both parties, job title and responsibilities, place of work, and the salary.

Tax Filing Documents

The tax year in Serbia runs from 1 January through to 31 December. Employees must complete the monthly PPP-PD form to report tax and social insurance payments. An annual PPP-PO form must also be completed and submitted to the Tax Administration department in the Ministry of Finance

Payer's Tax Withholding & Reporting Requirements

Employees only pay income tax in Serbia if their income exceeds three times the average annual salary for a given tax year. Employers use a PAYE (pay-as-you-earn) system to deduct income tax, social security, and public health insurance payments. For most employees, personal income tax is 10%.

Other Tax Filing Requirements

Residents must declare their full global income if they have any income generated outside of their main employment.

Remuneration

Employees are paid on an hourly or monthly basis.

Workers Rights

Employees in Serbia have various rights enshrined in law under the 2005 Labor Act, including:

  • A minimum of 36 and a maximum of 40 working hours per week
  • Overtime (maximum eight hours per week) paid at a minimum of 26% more than basic salary
  • A minimum of 20 working days’ annual leave
  • Five days’ bereavement leave
  • 65% salary for up to 30 days of sick leave
  • 365 days’ paid maternity leave
  • A minimum of 15 and a maximum of 30 days’ notice period
Benefits

Employers must make contributions to an employee’s pension insurance (11.5%) and health insurance (5.15%).

When Paid

Employees in Serbia are paid in arrears and must be paid at least once a month.

Independent Contractor

Employment Laws

Independent contractors do not enjoy the same employment-related laws as employees. Service agreements are generally defined by the Obligations Act.

Hiring Practice

Independent contractors in Serbia must formally enter into a written service agreement (or consultancy agreement) with the principal (client). This contract outlines the work to be completed, the agreed fees, and the timescale in which the work must be done.

Tax Filing Documents

Annual personal income tax returns must be filed by 15 May. Independent contractors must complete the PPDG-2R form and submit it to an online portal operated by the Ministry of Finance.

Payer's Tax Withholding & Reporting Requirements

Independent contractors need to register for VAT if their income exceeds RSD 8,000,0000 (approximately $70,000).

 

An independent contractor formally registered as an entrepreneur with the Serbian Business Registers Agency (SBRA) must pay 10% income tax and 37.8% social security contributions.

Other Tax Filing Requirements

Independent contractors in Serbia can operate through their own limited company. Companies are registered with the Serbian Business Registers Agency (SBRA). This costs RSD 4,900 for paper applications or RSD 4,500 for online applications. In all cases, a further fee of RSD 1,000 is paid to cover the registration and publication of a memorandum of association.

Alternatively, an independent contractor must register as an entrepreneur with the SBRA.

Remuneration

Independent contractors charge a fixed fee and submit an invoice after the completion of the work.

Workers Rights

Independent contractors do not enjoy the same employment-related rights as employees. Rights must be negotiated and agreed as part of the service agreement.

However, independent contractors are entitled to paid pregnancy and childcare leave. The amount of paid maternity leave is equal to the average covered income in the last 3 months. This benefit is also available to adoptive and foster parents.

Benefits

An independent contractor registered as an entrepreneur in Serbia must pay 10% income tax and 37.8% social security contributions.

 

However, a large proportion of contractors opt to operate under Serbia’s lump-sum taxation model. This enables the contractor to pay a fixed amount for tax and social security. This amount is often lower than that paid by employees in similarly-paid roles.

When Paid

Independent contractors are paid once they have completed their task and submitted an invoice. Invoices in Serbia must be paid within 60 days, and within 45 days if the debtor is a public authority

Who classifies as an Independent Contractor in Serbia

In Serbia, independent contractors are self-employed workers who operate outside of the traditional PAYE system. Most independent contractors formally register as entrepreneurs. They record and pay their own income tax and social security contributions (often using Serbia’s lump-sum taxation model) and file annual personal income tax returns.

As yet, there are no firm guidelines as to what constitutes a service agreement in Serbia. However, it is advisable to adopt some baseline criteria to ensure the agreement does not resemble an employment contract, such as avoiding terms like ‘salary’, ‘working time’ or ‘vacation’. This helps to avoid the risk of reclassification from independent contractor to employee.

  1. Autonomy. A contractor should have the freedom to decide how and where the work is completed, with their only obligation to provide a final product by a specified deadline. 
  2. Fixed fees. The service agreement should not mention a salary or paying a monthly wage. Instead, jobs should be priced and invoiced individually. 
  3. Flexibility. An independent contractor should have the freedom to choose when the work is completed, as long as the agreed deadline is met. 

Equipment. Wherever possible, a contractor should use their own equipment and premises to complete the work.

Contracting Models

Independent contractors in Serbia work under one of two main categories: entrepreneur (sole trader) or limited company.

  • Entrepreneur: Independent contractors registered as entrepreneurs with the Serbian Business Registers Agency are in effect operating as sole traders. This means they can quickly begin to accept work as an independent contractor. Entrepreneurs must file annual income tax returns and make social security contributions, although they can opt for  Serbia’s lump-sum taxation model. 
  • Limited company: For RSD 4,500, independent contractors can set up a company by incorporating it with Serbian Business Registers Agency. Limited companies must also file an annual corporation tax return.

 

Engagement Models

There are two primary engagement models for working with independent contractors in Serbia:

A. Direct engagement of the independent contractor, either under their personal name (if they are registered as an entrepreneur) or under the company’s name (if operating as a limited company). Under these arrangements, the contractor agrees to provide a set service for a specified fee. They invoice the client when the work is complete and must legally receive a payment within 60 days (45 days if working for a public authority).

 

B. A contractor can also be hired through an umbrella company, which formally acts as the contractor’s employer. The client pays the umbrella company for the completed work, and the umbrella company deducts its fees and any necessary tax and social security deductions before paying the contractor.

 

Contractor Payments

In the vast majority of cases, independent contractors in Serbia are paid directly (without deductions) once they have completed their work and issued a relevant invoice. The fee is fixed in the agreed contract between the two parties. Invoices must legally be paid within 60 days.

Contractor Taxes

Independent contractors hired on a direct engagement are not on a company’s payroll. Their fees are paid without any deductions at source towards tax or other benefits. In Serbia an independent contractor is entirely responsible for reporting and paying taxes, as well as making social security contributions.

For most independent contractors registered as entrepreneurs, income tax is paid at 10% and social security is paid at 37.8%. However, entrepreneurs can also register for Serbia’s lump-sum taxation model, which often delivers lower overall tax bills for the registered payees.

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