Understanding Payroll in Bosnia & Herzegovina: What Global Companies Need to Know About Bosnia & Herzegovina’s Payroll
Oct 4, 2018 | Topic: Country Payroll
Renowned for its stunning natural environment and rich cultural heritage, which derives from no less than six historical civilizations, Bosnia and Herzegovina is an enticing modern country that is full of history. The country has gained a reputation amongst travelers for its Western and Eastern influences that have been preserved for centuries. Sarajevo, in particular, has appeared on many top 10 travel lists, noted for both its beauty and cultural value. Supporting a population of 3.5 million and a national GDP of approximately $16.5 billion, Bosnia’s economy is largely export-based, with metals, textiles, and energy being the primary earners.
Although Bosnia and Herzegovina has struggled with their economy for a number of reasons, they have become very welcoming to entrepreneurs of every variety. They recognize the inherent value of business, which is just one of the reasons they offer an attractive corporate tax rate of just 10%. However, the economy and tax laws have been known to change often, making an international payroll solution a must for companies who want to conduct business with little hassle.
The exact registration requirements for companies in Bosnia & Herzegovina vary based on the district in which they choose to operate. However, all companies must draft an act of establishment stating their information and intentions, which must be notarized. Businesses will register with the municipality courts and tax administration, then visit the Municipality Bureau of Economic to collect the official service permission.
Companies are required to open a local bank account, which can take up to five weeks to establish. Business owners will need their registration from both the court and tax administration, ID documents, and the signatures of those who will be allowed to access the account.
Employment Law & Employee Rights
Companies in Bosnia and Herzegovina typically follow a standard Monday to Friday, 40-hour work week. Overtime is allowed but cannot exceed eight hours per week. The premium rate at which an employer pays overtime is decided by collective agreement and can vary by the industry. Probation periods are allowed but cannot last longer than three months. Should an employer choose to terminate the employee, they must give seven days’ notice. Written contracts are required between employee and employer. As mentioned, collective bargaining is allowed in Bosnia and Herzegovina, though the exact influences will vary per industry. Many employees have weak relationships with their unions, which can lead to confusion and strife for employers if they are unfamiliar with the organizational structure.
Compensation & Severance
The monthly minimum wage in Bosnia is 410 convertible marks, or KM, approximately €209; however, collective bargaining agreements may stipulate additional compensation for specific employees. Christmas bonuses are customary in Bosnia, but they are not required by the federal government. The bonus amount is usually a percentage of the basic salary, which will vary by industry. Employees who are terminated after two years of employment are entitled to severance pay, with the amount dictated by collective agreement and the employment contract. Severance cannot be less than one-third of the monthly wages (averaged over the preceeding three months) for each year of employment worked.
Tax Requirements & Withholding
Taxes in Bosnia and Herzegovina typically account for less than 30% of the country's GDP, including both national and local taxes. The corporate tax rate and personal income tax rate are just 10%, but employees typically pay about 33% of their gross salary for various fees and local taxes. Employers are also expected to contribute additional taxes, with amounts varying based on location. VAT is a standard 17%. Tax laws are known to change frequently in Bosnia, making an experienced payroll partner a necessary asset to keep up with any new regulations.
Time Off & Unpaid Leave
Bosnia celebrates four national holidays and 19 regional holidays. The amount of time off allotted to employees for these holidays depends on their location within the country. Bosnians are entitled to 18 days of leave per year and up to seven days of absence from work. Unlike holiday leave, an absence from work is used for illness or for major events in an employee's life, such as a marriage or death. Any additional requests or concessions are to be stipulated in the employment contract. Expectant mothers are required to begin their maternity leave at least 28 days prior to giving birth and continue leave for 42 days after. However, women may take up to 12 months of uninterrupted maternity leave, or up to 18 months for multiple births.
A Land of Opportunity
While global payroll and local taxes may present something of a challenge to companies expanding into Bosnia, there are also plenty of opportunities to be found. Many existing businesses are rooted in older traditions, leaving plenty of room for companies to introduce modern solutions. However, between shifting payroll regulations and changing local tax laws, engaging a partner with global payroll experience is an important step toward success in Bosnia and Herzegovina. Having help not only reduces the chances of legal hassle, but also ensures that employees are treated fairly and paid according to their expectations.