Termination in Croatia: notice, severance and the grounds you need

An employer in Croatia can give ordinary notice (otkaz) only for a justified reason, and Article 115 of the Labour Act (Zakon o radu) recognises four kinds. The first is business reasons (poslovno uvjetovani otkaz), where the employer no longer needs the job done. The second is personal reasons (osobno uvjetovani otkaz), tied to the employee as a person rather than to anything he or she did wrong. The third is misconduct (otkaz uvjetovan skrivljenim ponašanjem). The fourth is failing probation.

The employee, by contrast, may resign with notice and give no reason at all. That asymmetry is the core of Croatian dismissal law: the worker can leave freely, while the employer has to explain itself and, if challenged, prove the reason in court.

A short list of reasons can never justify dismissal. Under Article 117, temporary absence through sickness, a complaint to the authorities about the employer, and a good-faith report of suspected corruption are not valid grounds. Separate rules protect pregnant employees and parents on leave, covered further down.

A contract can also end without anyone giving notice: on the death of the employee, at the end of a fixed term, by written agreement, by court decision, or once the employee turns 65 and has 15 years of pension service behind him or her, if nothing different has been agreed. Those routes avoid the notice rules but have their own conditions. A fixed-term contract, for instance, ends on its stated date without notice, but only if the term was lawful in the first place; a fixed term that breached the three-year limit is treated as open-ended, and ending it then needs a reason and notice like any other dismissal. Check the contract history before relying on an expiry date.

A dismissal that is right in substance can still fail on procedure, so the steps matter as much as the reason. Notice must be given in writing, must state the reasons in writing, and must actually be delivered to the employee (Article 120). A conversation or an email without the formal document does not start the clock.

For misconduct, the employer must first warn the employee in writing and point out that a repeat could lead to dismissal, then give the employee a chance to put his or her side, except where asking for that would not be reasonable (Article 119). A dismissal letter that arrives with no earlier warning on file is therefore exposed from the start.

Employers with 20 or more workers face extra steps. Where a works council (radničko vijeće) exists, it must be consulted before any dismissal and gets 8 days to give its view (5 days in the case of a summary dismissal); a decision taken without that consultation is void. Where jobs go for business reasons, such an employer must also take into account length of service, age and the employee’s maintenance obligations when choosing who goes.

A business-reason dismissal carries one more restriction. The post stays closed to outside recruits for six months. Should the work be needed again inside that half-year, the dismissed employee gets first refusal.

The minimum notice period (otkazni rok) depends on the length of unbroken service with that employer. Article 122 sets these floors for an ordinary dismissal:

• with less than a year behind them: 2 weeks
• after a full year: 1 month
• after two years: 1 month plus 2 weeks
• after five years: 2 months
• after ten years: 2 months plus 2 weeks
• after twenty years: 3 months, with 2 more weeks for an employee aged 50 or over, or an extra month from age 55

Where the reason is misconduct, the employee is entitled to half of those periods. During probation, notice is at least one week. When it is the employee who resigns, the same minimums apply, though a contract or collective agreement may set a shorter period for the employee, and someone with a particularly important reason never has to give more than one month.

Notice runs from delivery. It pauses during sick leave and during pregnancy and parental leave, but keeps running through annual leave and paid leave, so timing a dismissal around a holiday does not stretch it. Throughout the notice period the employee is entitled to at least four hours a week of paid time off to look for new work, and an employer that releases the employee from working keeps paying full salary and benefits until the end.

For an employer used to at-will termination, these periods are the biggest adjustment. For the contrast in detail, read US at-will employment versus Croatian dismissal rules.

The employer owes severance (otpremnina) when it ends the employment of an employee who has worked for it continuously for at least two years, unless the dismissal is for misconduct or the employee is 65 with 15 years of pension service (Article 126). Resignation does not trigger it.

The law sets the floor at a third of the employee’s average monthly pay, measured over the latest three months, multiplied by the number of full years worked for that employer. The total is capped at six average monthly salaries unless the law, a collective agreement or the contract sets a higher amount.

A worked illustration helps. An employee on €3,500 a month with five completed years would be owed at least five thirds of a month’s pay, which is about €5,833. Severance on a business- or person-related dismissal carries no tax or contributions on the first €960 for each year of service, so here €4,800 can be paid with no tax or contributions, and the remaining €1,033 or so is taxed like salary.

Two other payments arise at the end of most employments. Any annual leave the employee has not used is paid out, since cash in place of leave is permitted only on termination. And salary for the notice period itself is owed in full, whether the employee works it or is sent home.

Notice is void when it reaches someone who is pregnant or away on maternity, paternity, parental or adoption leave; the same protection covers part-time work under the linked parental rights and the 15 days after any of these ends (Article 34). Narrow exceptions apply, such as the employer going into liquidation. An employee on sick leave following a work injury or occupational disease is also protected (Article 38).

Larger reductions bring their own procedure. If, within a 90-day period, the employer foresees that 20 or more jobs may go, of whom at least 5 by business-reason dismissal, the works council has to be consulted and the Croatian Employment Service (HZZ) informed that consultation is under way (Article 127). A small foreign employer with a handful of Croatian staff will rarely reach those thresholds, but a restructuring across several teams can.

Summary dismissal (izvanredni otkaz) sits outside the notice rules. It is reserved for a particularly serious breach of duty, and it must be used no later than 15 days after the employer learns of the facts (Article 116). Miss that window and the option is gone, even if the conduct was serious.

Several obligations survive the dismissal decision and are easy to overlook in the weeks that follow. The first is leave. An employee who leaves part-way through the year is entitled to leave for that year in proportion to the months worked, and whatever has not been taken is paid out with the final salary. The last payslip, like every other, has to be issued within 15 days of payment.

Post-employment restrictions need a fresh look. A contractual non-compete (ugovorna zabrana natjecanja) lapses if the employer dismisses without a justified reason, unless the employer confirms within 15 days that it will pay the agreed compensation (Article 104). If keeping the restriction matters, decide that before the notice is delivered, not after.

Non-EU employees bring two extra duties under the Aliens Act (Zakon o strancima). The employer has to tell the police within 5 working days that the employment has ended. And where a promissory note was lodged for a visa national hired through the employment service route, its amount, one average monthly gross wage, is payable to the state budget if the person is dismissed within the first three months for a reason other than misconduct.

Finally, keep the file. The limitation period for employment claims is five years, so the notice, the proof of delivery, the warning letter where relevant and the final pay calculation should be stored for at least that long.

Before any court claim, an employee who considers the dismissal unlawful has to write to the employer within 15 days of the decision and request that the breach be corrected. An employer that lets those 15 days pass in silence opens a second 15-day window, during which the employee may file the claim in court (Article 133). Claims for money or damages can go straight to court without that first step, and employment claims in general are time-barred after five years.

If the court finds the dismissal unlawful, the standard remedy is reinstatement. If going back would not be workable, the judge may close the employment instead and order compensation of three to eight monthly salaries (Articles 124 and 125).

For a foreign business, the practical lesson is to treat every dismissal as a file that may be read by a judge. Record the reason, the warning where one is needed, the delivery date and the notice calculation. With an employer of record, those steps are prepared with you, because the legal employer signs and delivers the notice. Our guide to Croatian employment contract terms explains how probation and fixed-term clauses affect the options at the end.

Dismissal handling, from the first sign of trouble through to the last payslip, is worth raising with every provider on your shortlist; it features among the points in our guide to selecting a Croatian EOR. If you already employ through Employer of Record Croatia and a situation is developing, speak to us early, before any letter is drafted. The full statute is published in the Official Gazette at narodne-novine.nn.hr.

Q01Does a Croatian employer have to give a reason for dismissal?+

A.No. The employer needs one of four justified reasons under Article 115 of the Labour Act: the job is no longer needed, a reason tied to the person, misconduct, or an unsuccessful probation. An employee who resigns needs no reason.

Q02What is the minimum notice period in Croatia?+

A.Two weeks for service under one year, rising to three months at 20 years, with extra time for employees aged 50 or 55 and over. Misconduct dismissals carry half the period, and probation dismissals at least one week.

Q03How is otpremnina calculated?+

A.The floor is a third of the employee’s average monthly pay, taken over the last three months, for every full year worked, provided the employee has at least two years’ unbroken service. It is limited to six months’ pay, unless a higher figure has been agreed.

Q04Is severance taxed in Croatia?+

A.Severance on a business- or person-related dismissal is free of tax and contributions for the first €960 per year of service. Any amount above that is taxed like salary.

Q05What happens if a Croatian court finds a dismissal unlawful?+

A.The court orders reinstatement or, if continuing the employment is unacceptable, ends it and awards between three and eight monthly salaries in compensation.