Law

The Foreign Investor's Guide to Serbian Labor Law

November 24, 2017 by Nebojša Stanković

The old labor law is a bit problematic for the foreign investors who decide to invest in Serbia. Luckily, the government is actively working on passing new law acts that put investors in a much better position.

Let’s take a look at some of the labor law problems that investors should know of.

What are the Labor Law flaws?

In Serbia today, the cost of having an employee is quite high, but the bigger problems are deeply rooted in how the system functions. There are two different ways in which a person can leave their workplace.

  • Being fired and voluntarily leaving – This is the usual way of how things should be handled. However, if the employer wants to fire someone, the situation can become quite complicated.
  • Redundancy – if an employee is made redundant, the employer is in a position to pay off interest for all of the working years of the employee.

The second approach is where a lot of employees are trying to abuse the system and force the employer to make them redundant. Many employers decide to pick this course of action, as it is an easier and shorter process than simply firing an employee.

However, the expenses for making someone redundant can be quite high, and when you have a whole system of people wanting to abuse this rule, foreign investors think twice before making the decision of opening a business in Serbia.

The new Labor Law in the works?

Due to the fact that Serbia wants to attract foreign investments to its doorstep, the government is passing new acts that will protect employers from abusive employees looking to benefit from the redundancy interest.

An employee in Serbia will not be able to be paid a redundancy commission for periods of time that he has already been paid for. This is a very important step that prevents an employee from abusing the system.

To better explain the whole situation, let’s use an example of an employee with 10 years of working experience, who carries redundancy interest for that period of time. Even though this hypothetical employee may have only been working for a new employer for 6 months or 1 year before he was made redundant, the employer would have to pay interest for the previous 10 years of working experience as well. There are many who would repeat the whole process several times, taking the benefits of this redundancy system.

The new law in development removes this possibility, as the employer only pays for the length of time the employee has worked for them. This will greatly reduce redundancy expenses for foreign investors and prevent the system from being abused.

Serbia is actively working on improving labor laws, making the whole country a better place for those who are interested in investing. Therefore, those who are considering to make an investment should definitely do so, as the labor law is becoming much better for the employers, and any loopholes that both employers and employees can take advantage of are being removed.