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Employment Agreement Essentials

Understand the key elements of employment contracts in Croatia

Types of employment agreements

In Croatia, employment agreements are typically categorized into three main types: Worker's Contract (Ugovor o Radu), Service Contract (Ugovor o Djelu), and Author's Contract (Autorski Ugovor). Each of these agreements has its own unique characteristics and legal implications.

Worker's Contract (Ugovor o Radu)

The Worker's Contract is the most common type of employment agreement in Croatia. It is suitable for standard employment relationships between an employee and an employer within a company. The Labour Act of Croatia outlines the key aspects of a worker's contract, including mandatory elements that must be included in the written agreement. These elements include names and personal identification details of both parties, place of work, specific job title or job description, start date of employment and contract type, gross salary and payment schedule, benefits and paid leave entitlements, work hours, and termination procedures and notice periods. Worker's contracts offer employees various protections and benefits under Croatian labor law, such as minimum wage requirements, social security contributions, and regulations regarding working hours, vacation time, and sick leave.

Service Contract (Ugovor o Djelu)

A Service Contract is different from a Worker's Contract. It is applicable when a client hires a contractor to complete a specific task or service, rather than employing them on an ongoing basis. A contractor under a service contract has more autonomy in how they complete the work and is typically not subject to the same regulations regarding work hours, vacation time, and sick leave that apply to employees under a worker's contract. Payment under a service contract is often based on the completion of the specific task, rather than a fixed salary.

Author's Contract (Autorski Ugovor)

An Author's Contract is a specialized agreement used for the creation of original intellectual property in fields such as literature, science, and art. This type of contract outlines the terms under which an author creates a work for a client, typically a publisher or producer. The agreement specifies aspects like ownership rights, compensation for the work, and publication or distribution details.

Essential clauses

Croatian Labour Law requires certain clauses in all written employment agreements to ensure clarity, transparency, and legal compliance in the employer-employee relationship.

Parties to the Agreement

The full names, addresses, and Croatian personal identification numbers (OIB) of both the employer and employee must be clearly stated.

Work Details

The specific job title or a detailed description of the employee's duties and responsibilities should be outlined. The primary place of work or, if the role involves variable locations, a description of potential work locations should be specified.

Contract Duration and Commencement

The official start date of employment should be clearly stated. The agreement must specify whether the contract is permanent (indefinite) or fixed-term.

Compensation and Benefits

The gross salary amount and payment frequency (e.g., monthly) must be clearly defined. Any additional benefits offered by the employer, such as bonuses, health insurance, or company car, should be outlined. The agreement should specify the employee's entitlement to paid leave, including annual vacation days, sick leave, and other forms of leave mandated by law.

Work Hours

The agreement should detail the employee's daily and weekly working hours, including any overtime expectations.

Termination Procedures

The agreement should specify the required notice period for either party wishing to terminate the contract.

Additional Considerations

Some employers may choose to include additional clauses in their employment agreements to address specific company policies or industry practices.

Probationary period

In Croatia, the Labour Act recognizes the probationary period as a tool for employers to evaluate an employee's suitability for a role before establishing a permanent employment relationship.

Key Points on Probationary Periods

The legal maximum for a probationary period in Croatia is six months. This applies to all employment contracts, regardless of the position or industry. During the probationary period, a shorter notice period applies for both employers and employees wishing to terminate the contract. The minimum notice period is at least seven days. This can be extended through collective agreements or internal company regulations. If an employee experiences a justified absence during the probationary period, such as sick leave or maternity leave, the probationary period can be extended by the duration of the absence. However, the total duration, including the extension, cannot exceed the six-month limit.

Purpose and Benefits

The probationary period serves a dual purpose. It allows employers to assess the employee's skills, work ethic, and suitability for the specific role. This helps employers make informed decisions about continuing the employment relationship. The probationary period also provides employees with an opportunity to evaluate the work environment, company culture, and whether the position aligns with their expectations.

Termination During Probation

Unlike regular terminations, employers can terminate an employment contract during the probationary period without a specific reason as long as proper notice is provided. This simplifies the termination process for employers if the employee's performance falls short of expectations. Even during probation, employees retain certain rights. Employers cannot terminate based on discriminatory reasons or in retaliation for exercising legal rights.

Confidentiality and non compete clauses

Confidentiality and non-compete clauses are not mandatory in Croatian employment agreements, but they can be valuable tools for employers seeking to protect sensitive information and legitimate business interests. Croatian law imposes specific limitations on these clauses to ensure a balance between employer protection and employee rights.

Confidentiality Clauses

Confidentiality clauses aim to safeguard an employer's trade secrets, confidential information, and other intellectual property from unauthorized disclosure by employees. These clauses typically outline:

  • Specific Information: The type of confidential information the employee is obligated to protect (e.g., client lists, formulas, marketing strategies).
  • Non-Disclosure Obligations: The employee's limitations regarding sharing or using confidential information during and after employment.
  • Exceptions: Permissible uses of confidential information, such as disclosures required by law.
  • Reasonable Scope: The information protected by the clause must be clearly defined and constitute legitimate business secrets. Overly broad restrictions on employee knowledge or future career opportunities may be deemed unenforceable by courts.
  • Time Limits: Confidentiality obligations can extend beyond the termination of employment, but Croatian courts generally disfavor overly long restrictions. A period of two to three years is considered reasonable.

Non-Compete Clauses

Non-compete clauses restrict an employee's ability to work for a competitor or engage in similar activities for a certain period after leaving the company. These clauses are designed to protect an employer's customer base, relationships, and know-how.

Croatian law places stricter limitations on non-compete clauses compared to confidentiality clauses:

  • Eligibility: Non-compete clauses can only be included in employment agreements with employees receiving a salary above the Croatian average wage. This aims to prevent undue hardship on employees with limited financial resources.
  • Maximum Duration: The maximum enforceable duration of a non-compete clause is two years after employment terminates.
  • Proportionality: The clause's restrictions must be proportionate to the employer's legitimate business interests and not excessively limit the employee's future career opportunities.

Financial Compensation

For non-compete clauses to be legally enforceable in Croatia, the employer must compensate the employee financially during the restricted period. The amount of compensation is not explicitly defined by law, but courts generally consider factors like the employee's salary level and the scope of the restrictions.

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