Payroll services in Serbia
Calculation of salaries is a very sensitive issue because taxes and contributions are very significant revenue of the state. From the employer perspective human resources the most important resources of every company. In addition to the above, the calculation of salaries is a part of finance and accounting that differs significantly from country to country. Knowing the specifics of payroll services in Serbia will allow you to choose the appropriate provider of payroll services in Serbia or to evaluate the work of the existing one.
Because of all the above, one of the most important financial and accounting issues is to choose a reliable provider of payroll services in the country where you have or plan to establish a business. If you have or plan to start a business in Serbia, this text will help you get to know the specifics of payroll in more detail.
Salaries from the angle of regulations governing labor relations
The basic law that regulates all elements regarding labor relations, including salaries, in Serbia is the Labor Law. In accordance with the mentioned law, the total salary of an employee consists of:
- salaries for work performed and time spent at work,
- salaries based on the employee’s contribution to the employer’s business success (rewards, bonuses, etc.) i
- other income on the basis of labor relation, in accordance with the general act and labor contract.
Other incomes are all benefits from labor relation, except:
- employee’s share in the company’s profit,
- fees for the usage of assets for work owned by the employee,
- fees for other labor costs such as:
- costs for arrival and departure from work, if the employer did not provide its own transport,
- business travel expenses in the country and abroad
- accommodation and food costs for field work, if the employer has not provided accommodation and food
Salaries in the sense of the Labor Law are considered to be one that includes taxes and contributions paid from salaries (gross I).
It should be noted that in Serbia, the law defines the minimum salary, which currently amounts to about 260 EUR net, or 400 EUR gross (total cost).
Salaries from the angle of income tax
The issue that probably interests employers and employees the most is the taxation of salaries in a particular country. In accordance with the mentioned law, the subject of taxation is:
- salary earned on the basis of labor relations, defined by the Labor Law,
- agreed compensation and other income earned by performing temporary and periodical jobs,
- paid personal salary of the entrepreneur,
- employee income earned by working with a domestic employer and paid by party who is considered to be related to the employer
- employee benefits such as income.
Income benefits are:
- securities, except for shares acquired in the process of ownership transformation;
- cash receipts;
- achieved by making or providing benefits, debt forgiveness, as well as covering the taxpayer’s expenses with monetary compensation or direct payment.
Such other benefits are:
- usage of an business vehicle and other means of transport for private purposes;
- usage of residential buildings and apartments that are owned by the employer or at the disposal of the employer on the basis of lease or other basis;
- premiums for certain types of voluntary insurance, as well as pension contributions to the voluntary pension fund, which the employer pays for employees
The payroll tax rate is 10% of gross 1 salary as defined. The rate is linear to any amount of earnings.
In addition to the regular tax, employees who earn a net annual income of more than EUR 23,000 are liable for the annual personal income tax. Annual tax is paid at the rates of:
- 10% on a base over a non-taxable amount of EUR 23,000 (increased by personal deductions and for dependent family members) for an annual salary up to EUR 70,000 and
- 15% on the part of the annual salary over 70,000 EUR
The law prescribes appropriate tax exemptions, tax reliefs and non-taxable amounts for certain compensations that are paid, or benefits that are provided to employees. Also, there are tax reliefs for certain categories of employers and employees, which were discussed more in one of the previous texts.
Salaries from the angle of social contributions
There is a legal obligation to calculate and pay contributions for mandatory social insurance.
In Serbia, the following types of contributions are mandatory:
- for mandatory pension and disability insurance – 25.5%;
- for mandatory health insurance – 10.3%;
- for unemployment insurance – 0.75%.
Unlike tax, which is paid linearly, contributions can only be paid up to the maximum contribution base, which currently stands at € 3,140 per month.
If the salary is below the maximum base, the basis for calculating the contribution is gross 1 salary as stated above.
As with taxes, the law prescribes appropriate exemptions and reliefs for certain benefits that are paid, or benefits that are provided to employees. Also, there are reliefs and exemptions for certain categories of employers and employees, which were discussed more in one of the previous texts.
Unlike the tax, whose taxpayer is an employee, but is calculated and paid by the employer who is the payer, for a part of the contribution, slightly less than half, the taxpayer is the employer. For the other part the taxpayer is an employee. As with taxes, the calculation and payment of all contributions is done by the employer who is the payer of income.
For income for which the payer has no obligation to calculate and pay, the obligation to calculate and pay has an employee.
Preparatory actions for the payroll services in Serbia
After defining salaries and rules for their taxation, or calculation of contributions, we will deal in more detail with the payroll service in Serbia.
In order to establish an efficient system of calculating salaries, it is necessary to perform certain preparatory actions, which include the following:
- Precise definition of all elements of salaries with the employee
- Concluding labor relations contracts
- Employee registration for mandatory social insurance
- Opening a company account in the appropriate accounting program
- Establishment of a register of employees with all the necessary data on each employee, and in particular:
- Name and surname
- Identification number
- Start of labor relation
- Total years of service
- Current account number in the bank
- Address of residence
- Basic salary
- Food compensation
- Vacation compensation
- Compensation for arrival and departure from work
- Completion and registration of authorizations for the use of electronic services of the tax administration (PEP form)
- Obtaining authorization from the bank to import the file for payment in e-banking (optional)
After the preparatory work is done, when the time comes, the calculation of salaries is started.
Payroll services in the narrow sense
Payroll services in Serbia in the narrow sense include the following activities:
- Obtaining records from the employer,
- Calculation of salary and related taxes and contributions based on the obtained data
- Calculation of compensation for arrival and departure from work
- Control of the calculation by the controller
- Obtaining confirmation from the controller that the calculation is OK or that something needs to be corrected
- Delivery of the invoice for inspection to the employer
- Obtaining confirmation from the employer that the calculation is correct or that something needs to be corrected
- Generating and sending payroll sheets for each employee
- Preparing and submission of tax returns and
- Sending instructions for paying taxes and contributions to the employer
Obtaining records from employer include:
- possible changes in contractual terms
- time spent at work
- used annual leave
- used paid leave (wedding, birth of a child, blood donation, relocation, etc.)
- time and type of sick leave used
- eventual rewards, bonuses, etc.
- possible reductions in earnings
- employee benefits to be included in payroll
Payroll services in a broader sense
In addition to the calculation of salaries and submission of tax returns, that is usually done as part of the calculation of salaries, payroll services in Serbia in a broader sense includes the following activities:
- Registration and deregistration of employees
- Calculation of compensation for persons with disabilities and submission of applications
- Preparation of certificates of labor relation and the amount of income at the request of the employee
- Preparation of a certificate of annual income for each employee
- Preparation of documentation for tax and contribution returns for employees for whom benefits are used
- Preparation of documentation for the return of sick pay at the expense of the health insurance fund
- Calculation of the annual personal income tax and preparation and submission of tax returns
- Preparation and posting of documentation for business trips, tax calculation and submission of tax returns
- Issuance and changes related to health cards
- Preparation of payment orders and export of payment files to e-banking application
- Preparation, amendments to the employment contract
- Obtaining a work and residence permit for employed non-residents
- Obtaining TIN for employed non-residents
- Tax, legal and financial advice regarding salaries
- Representation of the employer and employees before the tax administration and other competent institutions
- Calculation of taxes and contributions on benefits based on other non-employment contracts
Payroll services for employees sent from Serbia to work abroad and from abroad to work in Serbia
As a consequence of the development of digital technologies and globalization, it is increasingly common, especially in multinational companies that employees are sent from their home country to work in other countries.
When it comes to Serbia, referrals to work in other countries are regulated by a special law, which is reflected in a number of specifics both related to payroll services, as well as to the employment relationship and taxation. In addition to domestic laws, double taxation treaties need to be taken into account.
Considering all the above, in this case it is necessary to pay special attention when choosing a payroll service provider, because the practice in Serbia is still not at an enviable level and very few companies provide quality services in this segment.
When it comes to sending employees from other countries to Serbia, it is also regulated by a special law, which is reflected in a number of specifics related to payroll services and taxation. Here, too, special attention should be paid to double taxation treaties.
The practice of calculating salaries in Serbia for such employees is even less developed, and that is why it is necessary to choose an appropriate provider of payroll services.
Calculation of taxes and contributions on income outside labor relations
According to the legislation of Serbia, individuals are liable for taxes and contributions on other incomes that they earn outside of labor relations. Taxpayers of calculation, declaration and payment of taxes and contributions can be payers of income or recipients, depending on the specific case.
Regardless of whom the taxpayer is, taxes and contributions must be calculated, declared and paid within the legal deadline, for which it is necessary to choose the appropriate payroll service provider.
Working days and hours tracking
For the salary calculation the company should provide full records about working time of employees during month. That is usually tracked manually or with time tracking software.
If you have any further questions regarding this topic or you are in need of appropriate payroll service in Serbia, please contact our consulting and payroll team.