The long-awaited changes to the Serbian labour law (“Labour Law”) were finally adopted by the Serbian Parliament and will become effective on 29 July 2014. The Government hopes that these changes will improve the employment rate and attract investments, as most of them are employer-friendly and intended to reduce the cost of labour.

The amended Labour Law expands the list of statutory reasons for dismissal of employees and introduces several disciplinary measures for less serious violations of work duties or work discipline. Many impractical rules that were either unclear or deemed unreasonable are finally specifically and effectively set out.

Here are a few examples of some of the newly introduced provisions:

  • Accrued vacation entitlement can no longer be transferred to a new employer
  • The vacation notice and salary slip can be delivered electronically
  • Employment-related documents can be signed by an authorized person who is not employed with the same employer
  • Lawsuits must be initiated within 60 days (instead of 90)
  • If there was a valid reason for dismissal but the employer made a procedural error, the employee has no claim to reinstatement and is entitled only to damages (up to 6 times his/her monthly salary)
  • Severance pay and seniority allowance are now calculated based on the number of years of service with the current employer (i.e. do not include years of employment with previous employers)
  • Paid leave is now calculated on the basis of the average salary in the past 12 months
  • No mandatory additions to the base salary for shift work

The amendments also bring more flexibility when hiring, for example by extending the maximum validity period for fixed-term employment contracts from 12 to 24 months (and in some cases to 36 months and even up to 5 years), or introducing the possibility of flexible working hours.

Once the amended Labour Law comes into force, employers are given 60 days to adjust employment contracts and internal rules to it. After this deadline, the amendments will automatically replace conflicting rules. However, it is important to note that some of the new provisions will not automatically replace existing rules set in employment contracts or other internal employment rules, unless these provisions are more generous, as the Labour Law does not specifically preclude employers from offering more than the minimal statutory conditions. For example, existing internal rules on remuneration, if more favourable to the employee, will continue to apply until they are formally brought in line with the new provisions. Therefore, employers should consider adjusting employment contracts and internal employment rules as soon as possible in order to take advantage of the favourable changes to the employment regulatory framework.