- Phase
- Labour Act 93/2014, 127/17, 98/19 and 151/22; The Book of Rule on the Law on Personal Income Tax 10/17, 128/17, 106/18, 1/19, 80/19, 1/20, 74/20, 1/21, 102/22, 104/22, 112/22, 156/22, 1/23, 3/23, 56/23
- Native name
- Zakon o radu 93/2014, 127/17, 98/19 and 151/22; Pravilnik o porezu na dohodak 10/17, 128/17, 106/18, 1/19, 80/19, 1/20, 74/20, 1/21, 102/22, 104/22, 112/22, 156/22, 1/23, 3/23, 56/23
- Type
- Severance pay/redundancy compensation
- Added to database
- 08 May 2015
Article
Labour Act: Article 126, 137; The Book of Rule on the Law on Personal Income Tax: Article 7
Description
According to the Labour Act, Article 126, severance pay is the amount of money paid by the employer to a worker who was dismissed after two years of continuous work as a means of securing income and mitigating the adverse consequences of the dismissal. Severance pay shall not be obtained by a worker who was dismissed due to his or her misconduct and by a worker who at the time of dismissal is at least 65 years old and has 15 years of pensionable service.
An employee whose employment contract is terminated after two or more years of continuous service has the right to severance pay, unless the notice is due to the employee's misconduct, in which case no right to severance pay holds. Under the provisions of the Labor act, in the event of a business transfer, the years of service with the previous employer are added to the transferred employment contracts, which are considered to be continuing contracts from the previous employment.
The severance pay amount is determined by the length of service. The minimum severance pay amount for each year of service is one-third of the average monthly salary earned by the employee in the three months prior to the termination of the employment contract. Unless otherwise specified by law, collective agreements, employment regulations or employment contracts, the total severance pay amount may not exceed six times the average monthly salary earned in the three months prior to the termination of the employment contract (Article 126, Paragraph 4).
In accordance with the Book of Rule on the Law on Personal Income Tax, severance pay due to business reasons is exempt from taxation up to the amount of EUR 821.71 for each year of service with the same employer. Severance pay due to injury or occupational illness is exempt from taxation up to the amount of EUR 1,061.78 for each year of service with the same employer. In this case, the payment of the amount is above the non-taxable part, this part of severance payment is considered the worker's salary. Therefore, social insurance contributions as well as income tax and surtax should be paid on that sum.
Citation
Eurofound (2015), Croatia: Severance pay/redundancy compensation, Restructuring legislation database, Dublin,
https://apps.eurofound.europa.eu/legislationdb/severance-payredundancy-compensation/croatia