Posted workers and calculating payroll – part 2
We recently wrote about posted workers and about the process that you as an employer must go through if you send employees to work in another country. To make the story complete, we bring instructions on what to look out for when it comes to calculating payroll.
Posted workers
In short, a posted workers are people that work for their company and offer services in another country for a certain period, but during that work remains in the statutory insurance system of the home country (in this case the Croatia).
Posting a worker is always temporary and during that time, the worker is employed by his/her domestic company.
To get A1 Certificates from HZMO posting mustn’t be longer than two years. And the person mustn’t be posted as a substitution for another worker. Furthermore, the legislation of the home country (in this case Croatia) has to be applied for the person at least one month before posting. Secondly, the employer must regularly perform activities in the foreign country where the worker is being posted. Finally, both the worker and employer are in direct contact during the posting period.
According to Labour Law, (NN 93/14, 127/17, 98/19, the employee must give the worker a written employment contract or a written confirmation where the duration of posting, working hours, free days, currency in which the worker will be paid and other benefits that the worker is entitled to while being posted, and the conditions of the worker’s return are stated.
Calculating payroll for posted workers
Any income from work for posted workers are elements determined as mandatory according to the national law or a contract and is therefore applicable. They are applied in accordance with article 3 paragraph 8 of the Directive 96/71/EZ. Salary base and contributions are a standard basis for calculating payrolls for a worker. Regarding posted workers, The Law of Contribution, article 37 states that “monthly salary base for calculating contributions determined by the employee starting form the highest monthly salary amount that the posted worker would realize, i.e., for similar activities in Croatia according to the Labour Law, work ordinance, collective agreement, or a specific regulation, increased by 20%”.
In effect, that means that if, for example the worker’s salary is 10,000.00 kn, the contribution base is 12,000.00 kn (10,000.00 x 20%). Contributions are calculated based on prescribed rates, whereat it is 16,5% to the salary, and pension insurance contributions for I. pillar is 15 % and 5% for II. pillar. The same Law of Contribution prescribes the specific contribution for healthcare. Though, not for countries that are in contract with Croatia regarding health insurance. Or EU countries and others that have been previously mentioned.
Other possibilities
When a worker is being posted in countries that are not members of the EU, i.e., countries that Croatia doesn’t have contracts on social insurance with, paying the contribution to the prescribed base salary at a 10% rate in the case of illness or accident, is mandatory. In that case, the worker himself/herself bears the cost, and HZZO refunds it later. Another option is that the employee ensures the worker at an insurance company in the foreign country where the worker is being posted. In that case, there are no contributions being paid to HZZO.
It is important to mention that other costs, such as travel, food and accommodation can’t be deducted from the worker’s salary. They are being paid out with work incomes. Also, posted workers are entitled to non-taxable daily allowances for field work, as any other non-taxable incomes that the worker is entitled to in his ‘home field’. Non-taxable incomes also entail ad-hoc aids in the case of death in the family. As well as invalidity, rewards, accommodations, food etc.
Calculating payroll doesn’t have to be a nightmare
Calculating payrolls is a complex process, especially in the case of posted workers. Adapting the system to complex legal requirements with always limited time is stressful. And that is why the right tools are necessary. Luckily, there are digital solutions that can make this process easier. Also, they decrease the need for tables, charts, calculations, and constant following of complex legal processes.
HR.PAYROLL.APP is designed for the Croatian market and it enables the visibility of all data. It is adjustable and appropriate for all companies, regardless of the size. The main features of HR.PAYROLL.APP are ease of use and transparency of all data, and parametric settings allow independent monitoring of legal changes. What does that mean? More savings, less worries and time optimization. Contact us!
