Hire in Croatia
with Confidence

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

Croatia
Capital City
Zagreb
Local Time
CET (UTC+02:00)
Currency
Croatian Kuna (HRK)
Official Language(s)
Croatian
Population
4.047 Million (2020)
Economic Region
European Union
GDP
Billion USD ()
GDP Growth rate
% ()

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.

Worksuite Insights

Ease of Hiring Employees Normal
Ease of Hiring Independent Contractors Hard
Average Time-to-Hire Up to 4 Weeks
Labor Laws Complex
Regulatory Risk High Risk

Contractor Classification

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.

Factors

Employee

Independent Contractor

Employment Laws

The Labor Act; State Inspectorate (supervised employment law).

Companies Act; Crafts Act; Foreigners Act.

Hiring Practice

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:

 

  • Self-employed freelancer

Operating as a company (obrt, d.o.o, or j.d.o.o – see below)

Tax Documents

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.

Payer's Tax Withholding & Reporting Requirements

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.

Other Tax Filing Requirements

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

Remuneration

Employees are paid on an hourly, weekly, or monthly basis.

Independent contractors typically submit an invoice on a monthly basis.

Workers’ Rights

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.

Benefits

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.

When Paid

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.

Employee

Employment Laws

The Labor Act; State Inspectorate (supervised employment law).

Hiring Practice

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.

Tax Documents

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.

Payer's Tax Withholding & Reporting Requirements

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.

Other Tax Filing Requirements

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.

Remuneration

Employees are paid on an hourly, weekly, or monthly basis.

Workers’ Rights

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.

Benefits

All employee benefits are paid by the employer. Employees make mandatory pension and healthcare contributions.

When Paid

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 Contractor

Employment Laws

Companies Act; Crafts Act; Foreigners Act.

Hiring Practice

Croatia law does not stipulate the practices for hiring independent contractors.

 

The most common independent contractor categories are:

 

  • Self-employed freelancer

Operating as a company (obrt, d.o.o, or j.d.o.o – see below)

Tax Documents

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.

Payer's Tax Withholding & Reporting Requirements

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.

Other Tax Filing Requirements

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

Remuneration

Independent contractors typically submit an invoice on a monthly basis.

Workers’ Rights

Labor laws do not apply to employees performing work on the basis of civil contract, and thus cannot be infringed upon by the employer.

Benefits

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.

When Paid

Independent contractors are paid upon completion of the contract or task(s) and following submission of an invoice by the contractor.

Looking to Employ or Engage Contractors in Croatia
Look no further.

Talk to an Expert

Who classifies as an Independent Contractor in Croatia?

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:

  • Are paid for the performance of a specific task within a specific timeframe.
  • Work independently and do not have a clearly defined superior-subordinate relationship with the employer.
  • Are able to substitute someone else to perform the work (e.g. an employee of the contractor or a subcontractor).
  • Can determine their own working time, schedule, and place of work.
  • Provide their own equipment (or most of their own equipment) and are not dependent on the hiring company’s resources.

Contracting Models

Independent contractors in Croatia work under one of two main categories: self-employed freelancer, or operating as a company. 

  • Self-employed freelancer: Independent contractors can work as freelancers without establishing their own company. This provides a quick route to self-employment in Croatia. However, when a client hires an independent contractor who is operating as a freelancer without their own company, the client is responsible for deducting the contractor’s taxes, pension, and healthcare contributions from their payment, which adds additional administrative burdens on the client.
  • Operating as a company: independent contractors can establish their own company and work under this company as a legal entity. This model makes it easier for clients to engage with the independent contractor, as the client only has to pay the contractor’s invoices, rather than handling their tax and other deductions (see above). For some professions, the independent contractor will need to acquire the relevant certification for their company. Opening a trade company, known as an orbt, is a common route for many independent contractors who don’t have additional employees. Other options include limited liability company (d.o.o) and a simple limited liability company (j.d.o.o).

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.

Engagement Models

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. 

  • Service contract (ugovor o djelu): Under this type of contract, the independent contractor (izvođač) carries out a particular task or job for a client for a fee. Importantly, this type of contract allows the client to inspect and supervise the contractor’s work, and even to give instructions for the contractor to follow. Once the client has formally accepted the work, the contractor has no further contractual obligation to make changes.
  • Author’s contract (autorskopravni ugovor or autorski ugovor): This contract is similar to the provision of ‘liberal professions’ services in other countries. It covers the provision of original intellectual and creative work by the independent contractor, generally in the arts, sciences, and literature. The work must be creative and original, and is therefore subject to copyright laws including the Copyright and Related Rights Act (Zakon o autorskom pravu i srodnim pravima). However, the copyright will pass from the independent contractor to the client upon completion of the work.

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.

  • Umbrella company: Here, the hiring company engages with an umbrella company, which has a license to supply its own contractors to deliver the contracted services. The client company pays the umbrella company directly, in accordance with the terms of the contract. The umbrella company then pays the contractor through a separate contractual arrangement. Under this model, the contract itself is between the client company and the umbrella company.
  • Hiring partner: The client company can also work with a hiring partner who helps them vet potential independent contractors, set up contracts, ensure the contractor is properly classified, onboard and manage contractors, and pay contractors.

Contractor Payment

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.

Contractor Taxes

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.

Employment in Croatia

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.

  • Quickly find, hire, and onboard talent in Croatia without setting up your entity
  • Prevent expensive legal, contractual, or tax mistakes in Croatia
  • Manage contracts, payroll, and global tax forms all in one Worksuite

 

Explore other countries in the region