Following the turbulent debate inside and outside the Serbian Parliament, the amendments to the Labour Law were adopted on 18 July 2014, and come into force on 29 July 2014. The amendments, although numerous and some of them significant, do not modify the fundamentals of the employer – employee relationship.

Those amendments which surpass mere refinement and clarification of the existing provisions can be divided into several categories. The first group consists of the amendments which make engagement of work force more flexible and simplify staff transfers. It is regrettable that the concept of staff leasing remains unregulated, despite the fact that it has gained ground in practice.  

The second group of amendments modernises the provisions on annual leave and paid leave.

The third group of amendments is related to salary and other mandatory payments.

The fourth group of amendments relates to dismissal other sanctions in cases of violation of work duty or discipline. The dismissal procedure is modestly simplified compared to earlier provisions.

The fifth group of amendments introduces additional rights for pregnant women and breastfeeding mothers.

At the end of this text, we shall also refer to some other important amendments, which do not belong to any of the mentioned categories.

Flexible employment

Fixed-term employment

Fixed-term employment is significantly liberalized. Maximum duration of fixed-term employment agreement is extended from 12 months to 24 months, while in specific cases fixed-term employment can last even longer. For example, fixed-term employment with a newly established employer can be concluded for up to 36 months. Newly established employer is an entity which was established not more than one year prior to the commencement date of the employment relationship in issue. Project work can last until the project completion, no matter how long the project is foreseen to last. Finally, unemployed persons who lack up to five years until mandatory retirement may enter into a fixed-term employment contract for the entire period.

Transfer to another work post and assignment to another employer

The amendments allow transfer of employee to another suitable work post within the same employer in case this is necessary in order to perform certain work without delay. There is no need to conclude an amendment to the employment agreement in this case. Such transfer can last up to 45 working days in a 12-month period. During the transfer period, the employee retains his/her basic salary applicable to the old post, if such salary is higher than the salary applicable to the new work post.

Employer may also assign an employee to work for another employer if the need for the employee’s work has temporarily ceased, or if this is part of an arrangement for lease of business premises or another form of business cooperation between the two undertakings. Such transfer may last up to one year without the employee’s consent and longer subject to the consent. The amendments abolish the requirement that the new employment agreement be on terms no less favorable than the existing employment agreement.

Remote work

The term “remote work” has been introduced. This is, however, not a novel concept since this type of employment was possible even before the amendments. The amendments merely abolish the employer’s obligation to register each employment agreement providing for remote work with the local authorities.  

Annual leave and paid leave

Abolition of the mandatory “carry forward” of holiday accrued with a previous employer is a significant novelty.

Prior to the amendments, in the event of employment termination, the employer was obliged to issue to the employee a certificate stating the number of accrued but unspent annual leave days. Based on such certificate, the employee was able to use the unspent days of annual leave at his/her new employment. In addition, a first-time employee, as well as a person who has had a pause between two employments of more than 30 working days, became entitled to full annual leave in the first year of his/her first / new employment already after six months of continuous work. If the employee worked less than six continuous months in the relevant year, he/she acquired one twelfth of his/her annual leave entitlement for each month of the work, and could not use any annual leave before the expiry of the six month-period of continuous work.

Pursuant to the amendments, employees will no longer be entitled to full annual leave after only six months of work in a specific calendar year, but will be entitled to one twelfth of annual leave for each month of work in the year in which the employment relationship is established or, as the case may be, terminated. In case of new employment, the employee is entitled to use annual leave after one month of continuous work for the new employer, but cannot use the unspent annual leave earned with the previous employer. In case of employment termination, the employee is entitled to a compensation for unused annual leave accrued at the terminating employer. The amount of compensation shall be calculated based on the employee’s average salary in the three-month period preceding the termination (excluding rewards, bonuses and other earnings based on the employee’s contribution to the employer’s business success).

Annual leave can be used in more than two installments, subject to an agreement with the employer. Such agreements were common in practice even before the amendments, despite the old statutory provision according to which annual leave could have been used in maximum two installments. The minimum duration of the first holiday installment is at least two continuous weeks, down from three weeks under the previous law. The remaining days of holiday entitlement must be used until 30 June of the following year.

The amendments reduce the minimum duration of paid leave in cases of wedding, childbirth (for fathers), and serious illness of an immediate family member, to a total of five working days within a calendar year, on all mentioned grounds taken together. Additional days can be obtained only in case of death of an immediate family member or voluntary blood donation.

Salary, compensation of salary and severance pay

The amendments leave intact a complicated system of salary calculation. Salary still includes several categories: basic salary, performance-based part of salary and salary increment. In addition, employer is obliged to pay meal allowance, the costs of public transportation to and from work and holiday allowance. These mandatory payments must be accounted for separately from other salary components, although in essence all these payments represent payroll cost to the employer. The amendments now make it clear that meal allowance and commuting costs are mandatory only if the employer has not provided meals during work-time and transport to and from work, respectively.

For the purpose of calculating the so-called salary increase based on past years of employment (in an amount equal to no less than 0.4% of the basic salary for each full employment year), only the years of employment with the current employer are to be taken into account, and not the years spent with any of the previous employers. This is a reasonable amendment, although it would have been even more reasonable if the obligation to pay increased salary for past employment had been entirely abolished. The length of past employment does not necessarily transform into additional experience that increases the value of the employee’s work, and it should be up to the employer to assess to what extent the passage of time contributes to better work results.

The amendments abolish mandatory salary increase for work in shifts. This also seems reasonable because shift work does not necessarily involve disadvantageous work regime. Mandatory salary increase for night shift work remains intact.

Retirement severance payment has been reduced from three to two average salaries in Serbia, in accordance with the latest available statistical data.

Severance payment in case of redundancy is significantly reduced.  The amendments provide that severance payment cannot be lower than the sum of one third of the employee’s salary for each full year of past employment with the terminating employer. Prior to this change, a laid-off employee was entitled to a severance pay based on the total duration of his/her past employment, including the years spent working for other employers. Moreover, before the amendments, laid-off employee was entitled to severance pay for the total number of years of past employment even if he/she had already been made redundant and received severance on that basis.

The base for salary compensation in case of, inter alia, holiday is changed. From now on, employee’s average salary in the previous 12 months shall be used as a benchmark. Previously, the reference period for calculation of the average salary was three months, which in practice often led to senior employees taking annual leave immediately after the receipt of bonus.

Minimum wage must be set by each 15 September. Employer paying a minimum wage to any of its employee must provide a justification to that effect in its general enactment or in the employment agreement. In case the employer keeps paying minimum salary for more than six months, it is obliged to inform the representative trade union of reasons for the continuation of minimum wage payments.

Termination of employment and other sanctions

The amendments introduce many novelties when it comes to termination of employment and other sanctions for violation of work duties and work discipline

Under the previous version of the law, it was entirely up to the employer to precisely define the catalogue of violations of work duties and discipline which could have served as grounds for dismissal. Employer was unable to dismiss an employee for breach unless a specific violation was explicitly prescribed in the employment agreement or the employer’s Work Rules as a ground warranting dismissal. The amendments simplify the matters for f “forgetful” employers, by envisaging a catalogue of basic violations of work duty and work discipline which can trigger dismissal. Employers may expand this catalogue and thus the grounds for dismissal, by stipulating for additional breaches in the Work Rules and/or individual employment agreements.

The previous legislation also made it difficult for employers to prove certain violations of work discipline because there was no mechanism to compel a recalcitrant employee to undergo an examination. Pursuant to the amendments, employee’s refusal to undergo appropriate medical examination at the employer’s expense, aimed at verifying whether sick leave was abused or whether the employee was under the influence of alcohol or narcotics at work, is a stand-alone breach of work discipline warranting dismissal.

Besides warning and dismissal, the amendments introduce two new sanctions for violation of work duty or discipline and for underperformance:

  • Temporary unpaid suspension from work, which may last from one to 15 working days; 
  • Monetary penalty in the amount of up to 20% of the employee’s basic salary in the month in which this sanction is imposed, which may apply for a period of up to three months.

In case an employee fails to achieve work results or lacks necessary knowledge and ability required for his/her job, the employer may impose one of the above measures or terminate the employment relationship, but only if the employee does not improve within a reasonable period and in the manner specified in the employer’s written instruction.

Suspension from work of an employee against whom criminal proceedings have been initiated for a crime alleged to have been committed at work or in relation to work is no longer limited to three months but may last until the final judgment is rendered. Having in mind the average length of criminal proceeding in Serbia, the old rule practically made it impossible for employers to suspend the indicted employee for the entire period until the final judgment was rendered.

Delivery of warning on the existence of grounds for dismissal remains obligatory only in cases where termination results from the violation of work duty or discipline, and the employee must be given at least eight days (as opposed to five under the old rule) to respond to the warning. The duty of employer to deliver the warning to the trade union is abolished. Employee may procure and deliver the opinion of the trade union to the employer along with his/her response to the warning, in which case the employer is required to consider but is not obliged to follow the opinion.

The period during which the laid-off employee enjoys the right of first refusal with respect to the work post from which he/she was dismissed, is reduced from six months to three months from the date of termination.    

In addition, the statute of limitations for terminating employee on grounds of violation of work duty, breach of discipline or underperformance is extended from three to six months from the day the employer becomes aware of the relevant facts (subjective statute of limitations), and from six months to one year from the day of the occurrence of the relevant facts (objective statute of limitations).

Termination notice period owed by the employer to the employee in case of termination for underperformance cannot be shorter that eight or longer than 30 days. Previously, such notice period lasted between one month and three months, depending on the employee’s total years of past employment.

Time period for initiation of court proceedings against the employer for violation of employment-related rights, including unlawful dismissal, is reduced from 90 to 60 days from the date of the delivery of the relevant termination decision or, as the case may be, from the date the employee becomes aware of a violation of his/her right. 

Under the old law, courts were allowed to reinstate an unlawfully dismissed employee even where the ground for dismissal was justified but the dismissal was found to be unlawful for a procedural overstep by the employer. As a result of the amendments, the court shall not be able to order reinstatement where the substantive ground for termination is found to have merits but the dismissal is declared unlawful for procedural breach. In that case, the employee shall be entitled to compensation of damages in the amount of up to six salaries paid in the month prior to the dismissal.

Employee may terminate employment agreement subject to a notice period of 15 days. This statutory notice period may be extended to up to 30 days. Before the amendments, there was no upper limit to the employee’s notice period.

Protection of motherhood

The amendments do not affect the provisions affording protection from dismissal during pregnancy, maternity leave, childcare leave or special childcare leave. Employers remain prohibited from terminating employees belonging to any of these categories, even for violation of working duty, violation of discipline or incompetence.

The amendments bring about additional protection to mothers. Prohibition of work assignment which is, according to the findings of a competent medical institution, harmful for the health of a pregnant woman and the child, has been expanded to breastfeeding employees. If the employer is unable to assign such employee to an adequate work position, it is obliged to allow her to take paid leave. The law does not specify the maximum period during which this protection of breastfeeding mothers may last, nor does it specify the minimum amount of salary compensation payable during the mandatory paid leave.  

According to the amendments, a female employee may not work overtime or at night during her pregnancy and while she is breastfeeding, if the relevant medical institution deems that such work would be harmful to her health and the health of the child. Earlier, this protection was limited to the period of pregnancy.

Finally, a pregnant employee is entitled to paid leave during the day in order to undergo medical examination related to her pregnancy, as required by her physician. Employee using this right is obliged to timely inform her employer of such absence. 

Other important changes

Extended application of collective agreements

To the disappointment of many employers, the Government remains permitted to extend the application of industry-wide collective agreements to the companies which are not members of the employers’ union that signed the industrial agreement. It is of little comfort that the conditions for such administrative extension of industrial collective agreements to non-signatories have been made somewhat stricter. Namely, the Government may extend the application of a collective agreement to non-signatories provided that such collective agreement is already binding on the employers employing more than 50% of total work force engaged in the relevant industry (up from 30%).

Administrative duties

The amendments envisage that the employer may authorise not only its employees to decide on rights and duties arising from employment, but also other persons, such as external lawyers. Previous rule according to which the authorisation could have been given only to an employee was unreasonably narrow and it often led to a deadlock in situations where the rights and duties of a single director were at stake.  

The Rules on Systematisation of Work Posts are now obligatory only for employers with more than ten employees (previously, the obligation was imposed on employers having more than five employees). The new rule, difficult to comprehend, also states that the Rules on Systematisation of Work Posts can set maximum two alternative and sequential levels of educational degree as a condition for work on a specific work post.

Delivery of salary pay-slips can be done electronically. Electronic delivery is also permitted with respect to decision on annual leave, although the employee may demand a hard copy. It remains unclear whether the competent authorities will consider electronic delivery of these documents to be lawful without usage of qualified electronic signature of the employer. The decision on termination of employment must still be delivered personally (or published on the employer’s bulletin board if personal delivery has failed).

Salary pay-slip, the contents of which is to be regulated by a decree, will from now on represent a directly enforceable title, thus enabling the employees to initiate collection proceedings against the employer without having to litigate first.  

Succession of employers

Due to the inarticulate legal definition of the notion of “change of employer” in the Labour Law, it has been so far unclear whether direct or indirect change of ownership over the employer’s capital requires notification of employees and has as its effect mandatory continuation of the collective agreement or the employer’s Work Rules for at least one year following the change.

The amendments specify that a change of ownership over the employer does not represent “change of employer”, so the above mentioned duty of notification and mandatory continuation of collective agreement or the Work Rules apply only in cases involving genuine change of status (e.g. merger or spin-off).

Deadline for harmonisation with the amendments

Employers are obliged to harmonize their employment agreements and the Rules on Systematization of Work Posts with the amendments to the Labour Law within 60 days from the entry into force of the amendments, i.e. until 27 September 2014. The deadline for harmonisation of the Work Rules and the collective agreements with the amendments is six months, i.e. until 29 January 2015.  

Misdemeanor sanctions

Maximum amount of monetary penalty envisaged for misdemeanors foreseen by the Labour Law has been increased from RSD 1,000,000.00 to RSD 2,000,000.00 (approx. EUR 17,400).