US vs Croatia dismissal: what replaces at-will for your Croatian staff

At-will employment has no Croatian counterpart: a Croatian employer may end an open-ended contract only for a reason the Labour Act (Zakon o radu) accepts, in writing, with notice, and often with severance. A US manager used to ending employment with a short conversation and a final paycheck needs a different playbook for a Zagreb or Split colleague.

In most US states the default runs the other way. An employer can part ways on a Tuesday afternoon without stating why, and the limits arrive only as exceptions: anti-discrimination and retaliation statutes, an express contract, public-policy claims. A US employee’s protection is the list of things an employer may not do. A Croatian employee’s protection is the short list of things an employer may do.

That reversal shapes everything after the hire. Performance management in Croatia is partly evidence-gathering, because the employer may have to show a court why the reason was justified. Employing through an employer of record does not change those rules, since the EOR holds the Croatian contract and the Labour Act applies to it in full; it does mean the paperwork is prepared by people who run Croatian dismissals routinely. The decisions that stay with you are listed in our guide to how a Croatian EOR works.

Ordinary dismissal needs one of four justified reasons, listed in Art. 115(1) of the Labour Act:

• Business reasons (poslovno uvjetovani otkaz): the job is no longer needed in the business.
• Personal reasons (osobno uvjetovani otkaz): the employee is unable to perform the job properly for reasons connected with the person.
• Misconduct (otkaz uvjetovan skrivljenim ponašanjem): the employee breaches obligations from the employment.
• Failed probation: up to the last day of an agreed probation period, which may not exceed 6 months.

Cutting a role for business reasons ties the employer’s hands for half a year: no replacement may be taken on for that job during those 6 months, and should the work come back, the person let go gets first refusal (Art. 115(5) and (6)). Where the headcount is 20 or more, choosing who goes also means taking account of each candidate’s years of service, age and duty to support dependants.

For a particularly serious breach, summary dismissal (izvanredni otkaz) ends the contract without notice, and the clock is tight: Art. 116 allows just 15 days from the moment the employer knows what happened. Waiting a month to decide closes that door.

Probation deserves a word, because US managers sometimes treat it as a trial at-will period. It is narrower than that. A failed probation has to be decided and communicated before the period’s final day. Sickness or paid leave can push the end date back, yet never beyond 6 months of probation actually served, and a second contract for a job the person already held on probation cannot open a fresh trial.

Art. 117 then closes a few doors completely. Being temporarily off sick is not a valid reason, and neither is complaining to the authorities or reporting corruption in good faith.

A valid reason is not enough on its own; the dismissal must also follow the statutory steps, and missing one can undo it. Before an ordinary dismissal for misconduct, the employer must normally have warned the employee in writing (Art. 119). Before a misconduct decision the employee should also be heard, an obligation the employer can skip only where asking would be unreasonable.

The decision itself must be in writing, must give the reasons, and must be delivered to the employee (Art. 120). Notice runs from delivery, so a decision emailed into a holiday inbox can leave the dates in doubt. Agree the delivery method in advance. Hand delivery with a signed receipt, or registered post to the address in the contract, leaves far less room for argument than a chat message.

Where a works council (radničko vijeće) exists, which is possible only at employers with 20 or more workers, the employer must consult it before deciding. Its reply is due within 8 days (5 for summary dismissal), and skipping the consultation makes the decision void under Art. 150.

For a US manager, the practical lesson is to document as you go. Dated feedback, written objectives and any warning letter make the reason provable later. A file that starts on the day the decision is made rarely survives a challenge.

Croatian notice (otkazni rok) is set by Art. 122 of the Labour Act and grows with continuous service at the same employer. These are minimums; a contract or collective agreement can give more:

• 2 weeks when the person has been with you less than a year
• a month once the first anniversary has passed
• 6 weeks (1 month and 2 weeks) from two years in
• 2 months from five years in
• 10 weeks (2 months and 2 weeks) from ten years in
• 3 months from twenty years in, with 2 weeks more at age 50 or a month more at 55

Misconduct dismissals carry half these periods, and a failed probation needs at least 1 week. Notice does not run while the employee is on sick leave or on pregnancy and parental leave, with some exceptions, but it does run during annual leave and paid leave.

Job hunting is built into the period: the person may take at least 4 paid hours off each week to look for new work. The employer can release the person from work for the rest of the notice period, but must keep paying full salary and providing all other rights until the end. Budget for the whole notice period at full pay, even if the person stops working on day one.

Art. 126 grants severance (otpremnina) to anyone the employer lets go after 2 or more unbroken years, with two exceptions: dismissal for misconduct, and an employee aged 65 with 15 years of pension service. US companies often have no statutory equivalent, so budget for it from the start.

The formula takes the average monthly pay of the final 3 months, divides it by three, and multiplies by the number of full years served. Unless a statute, a collective agreement or the contract is more generous, the result cannot exceed six times that monthly average. On top of severance, any unused annual leave is paid out.

A worked case: an employee on €3,500 a month with 5 complete years is owed at least 5 × €1,166.67, so approximately €5,833. Where the dismissal is for business or personal reasons, the first €960 per year served is exempt, so €4,800 of this payment escapes tax and contributions and only the rest is treated as pay. That is our arithmetic on the 2026 limits; your EOR’s payroll will confirm the final figure.

Not every exit is a dismissal. Fixed-term employment simply runs out on the date written into it, and Art. 112 also ends employment automatically at 65 for someone with 15 years of pension service, if nothing different was agreed. Neither triggers the notice scale. A fixed-term contract that breaches the 3-year or 3-contract limits, however, is treated as open-ended, which brings the full dismissal rules back into play.

Several groups are protected outright. A dismissal is void during pregnancy, maternity, paternity, parental and adoption leave and related part-time work, and for 15 days after these end, except in cases such as liquidation (Art. 34). An employee on sick leave after a work injury or occupational disease cannot be dismissed either (Art. 38).

Challenges move on a 15-15-15 rhythm under Art. 133. A written demand to the employer to put things right comes first, inside 15 days of the decision; the employer then has 15 days to comply; and if it does not, the employee gets another 15 days to file suit. Claims purely for money or damages skip the internal step, and employment claims generally become time-barred after 5 years.

Larger cuts trigger a separate process. A plan that could end 20 or more jobs inside a 90-day window, 5 or more of them for business reasons, counts as collective redundancy: the works council is consulted and HZZ, the employment service, is told about the consultation (Art. 127). Most first Croatian teams are far below that line, but it matters for anyone planning a site of scale.

Reinstatement is the starting remedy once a court rules against the employer. If going back is no longer realistic, the judge may terminate the contract instead and order compensation worth 3 to 8 average monthly salaries (Arts. 124 and 125). For a €3,500 salary, that range alone runs from €10,500 to €28,000, our arithmetic.

Our full guide to ending employment in Croatia goes deeper on collective redundancy, resignations and retirement.

With a Croatian hire on an EOR contract, you keep managing performance and the EOR carries out the employer’s legal steps. A workable sequence looks like this:

• Raise the concern early and in writing, with dated examples and a clear expectation.
• Tell the EOR as soon as dismissal becomes a real possibility, not once it is decided.
• Agree which of the four reasons applies, and whether a written warning is needed first.
• Give the employee a chance to respond before any misconduct decision.
• Let the EOR issue the written, reasoned decision and confirm delivery.
• Budget the notice, any severance and unused leave, and plan handover during notice.

Resignations are simpler: the employee can resign with notice without giving a reason, and the same minimum periods apply, unless a contract or collective agreement sets a shorter period for the employee. Planning a team in Croatia with Employer of Record Croatia starts with a contract that fixes these terms from day one; our summary of Croatian employment contract rules covers probation and fixed terms, which shape your options before notice rules ever apply.

Q01Can a Croatian contract be made at-will by agreement?+

A.No. Whatever the contract says, a Croatian employer needs one of four justified reasons for ordinary dismissal, namely the role disappearing, a lasting inability to do the job, misconduct, or a probation that did not work out. The decision must be in writing with reasons and delivered to the employee.

Q02What notice does a Croatian employee receive?+

A.Below a year of service the minimum is 2 weeks; this rises to 1 month once 1 year is completed, to 2 months at 5 years and to 3 months at 20 years, with more for older long-serving staff. Misconduct dismissals carry half.

Q03When is severance owed in Croatia?+

A.After 2 years of continuous service, when the employer dismisses for reasons other than misconduct. Each completed year earns at least a third of a month’s average pay, and the total stops at six monthly salaries unless something more generous was agreed.

Q04Can I pay in lieu of notice in Croatia?+

A.You can release the employee from work during notice, but full salary and all other rights continue until the notice period ends, so plan for the whole period at full cost.

Q05What happens if a Croatian dismissal is found unlawful?+

A.The court normally orders reinstatement. If continuing is unacceptable, it can end the employment and award 3 to 8 average monthly salaries.