6 August 2014: Labour Law, Pension Law and Disability Insurance Amendments in Serbia

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Information about recently adopted amendments to the Labour Law and the Law on  Pension anDisability Insurance has been provided by our Employment Service Partners in Serbia*. 

The adopted amendments to the Labour Law and the Law on Pension and Disability Insurance

In order to create a better economic and business climate beneficial for both employees and the employer, the Assembly of the Republic of Serbia adopted the proposed amendments to the Labour Law on July 18th 2014. The amendments will enter into force 8 days after its publication in the “Official Gazette” of the Republic of Serbia.

General Assembly adopted the Law on Pension and Disability Insurance on the same day 18.7.2014.

Changes to the Labour Law

Amendments to the Labour Law of the Republic of Serbia introduce a number of changes in legal regulation of labour relations.

Increased earnings:

Years of Service
One of the innovations introduced is in the definition of work performed in the past, and the right of workers to increased earnings on the basis of years spent in service. An employee is entitled to increased pay for each full year of employment with the current employer ONLY, in the amount of at least 0.4% of the base salary. This change ignores the years of service spent at the previous employer(s).Therefore, reflects the change in the calculation of earnings and the structure of the labor contract.

Night and Shift-Work
Within the framework of Article 108 of the Labour Law, the employee is entitled to increased earnings during night shift work, in the percentage of 26% of the base salary, but no longer entitled to increased compensation for regular daily shift work.

Severance Pay
The adopted change to the Article 158 of the Labour Act reduces the amount of severance pay employee is entitled to in case of termination of employment contract based on the redundancy. Severance pay in case of redundancy termination grounds can not be less than the sum of one third of the employee’s salary for each completed year of service with the current employer. When calculating severance pay, years of employment with the previous employers shall not be taken into the account (Except in case of employer status change in accordance with Article 147 of the Labour Law, as well as related parties with the employer and in accordance with the law). Under Article 158 of the Act, introduced is restriction for employee not being able to qualify for severance pay for the period for which he has already received severance pay with the same or different employer.
In case of retirement the employee is entitled to severance pay of two average salaries, instead of the three regular salaries as previously defined in the old Law.

Limited term employment contracts and probation period
Limited term employment contracts may be established for a period no longer than 24 months of continuous or non-continuous employment. Employment contract must specify the reason for employment for a definite period of time. Exception is newly established businesses with registration old lest then a year in BRE in which case limited term employment contracts can be established for a period no longer that 36 months.
Probation period remained the same – up to 6 month but new Law require from employer to explain detail and in writing reasons for termination during the probation period.

Paid Leave

Employee is entitled to annual paid vacation after one month of continuous service and not after six months as it was previously defined in old Labour Law.
During the vacation employee is entitled to compensation in the amount of average earnings preceding twelve months while currently vacation pay is calculated based on the average gross earnings in the past three months prior to the absence.
New Labour Law changes propose loss of compensation rights for unused vacation days, with one exception – termination of employment contract by employer. In that case employee is entitled to reimbursement for unused vacation days in the amount of the average salary in the previous twelve months, in proportion to the unused days of vacation.

Paid leave
The total duration of the employee right to paid leave is reduced from the current seven to five days in a calendar year (marriage, birth of a child, serious illness of a family member or other case described in employer rulebook).
In addition, employee gets two paid days for blood donation, and five days in case of death of close family members.

Forced vacation leave
During the forced vacation leave an employee is entitled to compensation in the amount of 60% of average salary compensation in the past twelve months. Current law calculates the compensation based on the average salary compensation paid in the previous three months.

Short term disability and injuries at work
During the temporary disability employee is entitled to compensation in the amount of 65% of base salary in the past twelve months plus years of service, and 100% for occupational and work injuries. Under the current law employee is entitled to the average wage paid in the three months prior to the commencement of incapacity for work.

Minimum Wage
The Employer shall have an obligation to formally announce through internal act or labour contract the reasons for the decision on the introduction of the minimum wage. Employer shall inform the union representative of the reasons for the continued payment of the minimum earnings six months after the decision on the introduction of the minimum wage. In the current law this obligation is not defined.

Other salary expenses
New law introduces changes to the provisions to mandatory compensation of other salary expenses:
• If an employer provide their own transportation for commuting to and from work the employee is not obliged to pay compensation cost equal to the price of public transport;
• If the employer provides food during the work in any other way, it does not have to be paid in the amount of the employee’s account.
The change of residence of the employee after the conclusion of the employment contract can not affect the increase of transportation costs, without employers consent.

Employment contract Annex
Introduces a new Article giving possibility to employer to temporary transfer employee to other more suitable job position up to 45 working days, over a period of 12 months, without the offer of Annex contract, with the right to keep the same salary if that is more favourable to the employee.

Termination of employment
Regarding the termination of employment contracts, changes in the law further specified the grounds for termination of employment, with more reasons needed to be specified, employer prior to termination of employment, must warn employee, give him instructions on how to do the job and leave a reasonable amount of time for improvement of work or to offer employee different position in the company.
In terms of redundancy, new law shorter the period of time in which the employer after terminating employee in a specific position on redundancy reasons to hire new employee in same position. Period is shortening from six to three months.
New legislation allows employer to define by internal act or employment contract notice period longer than 15 days but not longer than 30 days.

Redistribution of working time
New legislation provides possibility to have collective agreements defining that the redistribution of working time does not have to be linked to the calendar year, and last more than six and a maximum of nine months.

Remote work
For the first time new legislation defines remote work and work from home, introducing possibility that by mutual consent of employer and employee portion of the agreed working hours can be performed from home.

Job classification
An employer who has more than ten employees is obliged to make rules for the organization and job classification. Before the changes, this obligation was applicable to all employers with more than five employees.

The rights of pregnant women and nursing mothers
New legal provision protects the rights of pregnant women and nursing mothers and prevents the employer to declare them redundant.

Amendments to the Law on Pension and Disability Insurance

New legislation increase retirement age for women additional six months starting from January 2015 with a minimum years of service of fifteen years. According to the planned trend in 2032 retirement for women will be sixty-five years of age.

Amendment of the Law introduces the possibility of early retirement for those with forty years of service. Forfeiture of the missing years will be charged 0.34% penalties and pensions diminished maximum 20.4%.

The woman, who gave birth to one child, is entitled to an additional six months of service, the two children a year, and three or more children two years ago.

We and our Service Provider Partners for Serbia would like to use this opportunity to propose the synchronization of the employment contracts, the Rules of Procedure, Job Classification and Collective Agreements with the new legal requirements, as well as to offer technical assistance and assessment of the impact of changes to the current salary structure and other compensation payments in your organization.

For more information…
Contact Compandben – John Tinsley or visit Compandben Main Website – Serbia Payroll & PEO Services

* Serbian Language Text PDF: Usvojene izmene Zakona o radu i Zakona o penzijskom i invalidskom osiguranju

John Tinsley

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