The new Ordinance on the content of calculation of salary, salary compensation, severance pay and compensation for unused annual leave (Official Gazette, No. 68/23, hereinafter: the Ordinance) entered into force on July 1, 2023. On the date of entry into force of the new Ordinance, the Ordinance on the content of calculation of salary, salary compensation or severance pay ceased to be valid (Official Gazette, No. 32/15-35/17).
Employers are required to harmonize calculation documents with the new Ordinance by October 1, 2023.
Article 93 of the Labor Act (Zakon o radu) (Official Gazette, No. 93/2014-64/2023, hereinafter: ZOR, stipulates that the employer is obliged to deliver to the employee a calculation of the paid salary, salary compensation, severance pay and compensation for unused annual leave within 15 days from the payment.
The new Ordinance prescribes the content of the calculation from Article 93 of ZOR:
- paid salaries, paid severance pay and paid compensation for unused annual leave
- unpaid salaries, unpaid severance pay and unpaid compensation for unused annual leave or part of it that is unpaid
1. According to the new Ordinance, the calculation of the paid salary should contain (IP1 form):
1. information about the employer:
a) for a legal entity: company, headquarters, personal identification number (OIB) and IBAN account number (new: the name of the bank is not required any more)
b) for a natural person: first and last name, address, OIB and IBAN account number (new: the name of the bank is not required any more)
2. information about the employee: first and last name, address, OIB, IBAN number, i.e. account numbers and the name of the bank
3. period, i.e. the month for which salary or salary compensation is paid
4. information on hours worked and other information which the amount of salary depends on and the amount of salary based on these, i.e. data on hours for which the employee is entitled to compensation and the amount of this compensation 5. information on the types and amounts of payments and the date set for the payment of other receipts which are considered salaries in terms of the Labor Act and which the employer pays out to the employee in cash or in kind
6. material rights that are not considered salaries according to the Labor Act, but are considered salaries according to tax regulations
7. material rights that are paid out as tax-exempt receipts.
Information on working hours and other information which the amount of salary depends on
include:
1. realized hours of work, hours of regular work according to the working hours schedule with separate hours of work on Sundays, holidays or non-working days and work at night; hours of overtime work with separate hours of such work on Sundays, holidays or non-working days and night work
2. hours of standby and hours of work on call from standby
3. hours for which the employee is entitled to compensation, with separately stated hours of annual leave, holidays, non-working days, paid leave, hours in which the employee has refused to work due to unimplemented workplace health and safety measures, interruption of work caused by the employer’s fault or due to other circumstances for which the employee is not responsible, interruption of work due to extraordinary circumstances, hours in which the employee does not work for other justified reasons, hours in which the employee did not work for reasons they are responsible for, and (new) temporary incapacity for work due to illness (at the expense of the employer, i.e. at the expense of the Croatian Health Insurance Fund
4. hours of unjustified absence from work due to the employee’s fault
5. other prescribed, determined or contracted allowances and receipts
6. information on the basis for calculation of contributions
7. types and amounts of contributions for the I. and II. pillar of pension insurance
8. information on income
9. amount of tax advance and income tax surcharge, information on personal allowance, tax base and rates
10. the determined amount of salary or salary compensation based on points 1, 2, 3 and 5
11. the determined amount and type of suspension
12. the amount determined for payment and the date set for the payment of salary
13. types and amounts of contributions for mandatory insurance determined from the basis (new).
2. In accordance with the new Ordinance, the calculation of paid severance pay, i.e. compensation for unused annual leave, should contain (IO1 form):
- employer and employee information (same as for IP1)
- information on severance pay
- information on compensation for unused annual leave.
Information on severance pay should include:
1. criteria for determining severance pay, if its amount depends on certain criteria (e.g. the number of years of work for which the employee was entitled to severance pay and the amount of the average gross salary earned by the employee in the three months before the termination of the employment contract, i.e. other contracted or determined criteria)
2. the total amount of gross severance pay, including the non-taxable and the taxable amount
3. information on the basis for the calculation of contributions
4. types of contribution amounts for I. and II. pillar of pension insurance
5. information on income
6. amount of tax advance and income tax surcharge, information on personal allowance and tax base
7. the amount of severance pay, i.e. the sum of the non-taxable and the net taxable amount of severance pay
8. types and amounts of contributions for mandatory insurance determined from the basis
9. the date set for the payment of severance.
Information on compensation for unused annual leave should contain:
1. the total number of days of annual leave that the employee is entitled to
2. number of days of annual leave that the employee has not used
3. the amount of compensation
4. information about the calendar year for which the annual leave was not used, i.e. it was not used entirely
5. information on the amount of calculated public charges from compensation for unused annual leave
6. the date set for payment.
Mandatory additional information for certain employees (Article 7 of the Ordinance):
- For employees who work at a separate place of work, the calculation should contain information
on the reimbursement of expenses paid by the employer to the employee. - For employees sent to work abroad, the calculation should contain information on the basis on which mandatory contributions are calculated, if that basis is different from the amount of salary which the employee is entitled to for the period of work abroad, and data on the monetary unit in which the salary is paid.
The employer is required to deliver to the employee the calculation of the unpaid salary, severance pay and compensation for unused annual leave by the end of the month in which the payment is due.
If the employer does not pay out the salary, severance pay, i.e. compensation for unused annual leave or does not pay them out in full on the due date, they are required to deliver two calculations to the employee:
a) total calculation of salary, salary compensation, severance pay or compensation for unused annual leave in the prescribed content, signature of an authorized person of the employer: IP1 form, i.e. IO1 form. The IP1 form and IO1 form are given in the Annex to the Ordinance, but are not mandatory, i.e. the employer can independently create the arrangement of information in the form, but the document must contain the prescribed content.
b) calculation in the prescribed content, which has the force of an enforceable document (NP1 form, i.e. NO1 form)
3. In case of non-payment of salary or part of salary, i.e. salary compensation or part of salary compensation, the employer is required to deliver a statement (NP1 form) with information on:
a. the recipient, the IBAN number of the account and the reference number of the recipient for the contribution to the I. and II. pillar of pension insurance
b. the recipient, the IBAN number of the account and the reference number of the recipient for the advance tax and income tax surcharge, the calculation day is entered (in the form of the number of the JOPPD form report) as the third mark in the reference number of the recipient
c. the recipient, the IBAN number of the account and the reference number of the recipient for other suspensions from the salary.
4. In case of non-payment of severance pay or part of severance pay and in case of non-payment of compensation for unused annual leave or part of compensation for unused annual leave, the employer is required to deliver a calculation (NO1 form) with information on:
a. the recipient, the IBAN number of the account and the reference number of the recipient for the contribution to the I. and II. pillar of pension insurance, the calculation day is entered as the third mark in the reference number of the recipient
b. the recipient, the IBAN number of the account and the reference number of the recipient for the advance tax and income tax surcharge, the calculation day (the number of the JOPPD form report) is entered as the third mark in the reference number of the recipient.
The employer is required to keep calculation documents for six years. In case of initiation of a labor dispute, they are required to keep them until the final conclusion of the dispute, and they are required to permanently keep analytical records of salaries and other receipts for which mandatory contributions are paid.
A supervision by the State Inspectorate / Labor Inspection includes controls of:
- whether the calculation was delivered to the employee and whether the calculation was delivered within the prescribed period
- whether the calculation contains the prescribed content
If the labor inspector determines that the calculations have not been delivered to the employee or that they have been delivered but do not contain the prescribed content, they issue a decision ordering the employer to deliver the calculations with all the prescribed information.
OFFENSE PENALTIES (from ZOR):
- for the employer, a legal entity – from EUR 8,090.00 to 13,270.00
- for a responsible person in a legal entity – from EUR 920.00 to 1,320.00
- for the employer, a natural person – from EUR 920.00 to 1,320.00
■■■
Please keep in mind that legislation is subject to frequent change. This newsletter is therefore necessarily based on our understanding and correct interpretation of the law and practice at the time of publication of this newsletter. This newsletter will not be updated due to changes in legislation that occur after the issuance of this letter.