What Severance Pay Rules Must Employers Follow in Bosnia & Herzegovina?

Which Employees Qualify for Severance Pay?

• Employees with at least two years of continuous service whose employment is terminated for business, economic, or technological reasons.
• Employees on open-ended contracts who are dismissed for redundancy and not for misconduct or other fault-based reasons.
• Employees whose termination is initiated unilaterally by the employer and not by resignation or mutual agreement without severance terms.
• Employees who have not already received severance for the same period of service under a previous restructuring or privatization program.
• Employees who meet any additional conditions set by the applicable entity or cantonal labor law and any binding collective agreement.
• Employees who raise a timely challenge to an unlawful termination may also claim unpaid statutory severance as part of their court claim.

What Are the Legal Timelines for Paying Severance?

In Bosnia & Herzegovina, severance is typically due at the time the employment relationship ends, and best practice is to pay it together with the employee’s final salary and unused vacation payout. Entity labor laws expect severance to be paid no later than the regular payday for the last month of work, and delays can be treated as wage arrears. Your company should document the severance calculation in the termination decision and obtain written acknowledgment of receipt from the employee. Where a collective agreement or internal rulebook sets a shorter deadline, you must follow the stricter timeline. If a dispute is pending, courts may order you to pay statutory severance with interest from the date it should have been paid.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay severance correctly in Bosnia & Herzegovina, labor inspectors and courts can impose financial and operational consequences. Liability usually sits with the legal employer, and penalties can stack with wage arrears, interest, and damages, especially if the termination itself is found unlawful.

• Labor inspectors can issue fines for non-payment or underpayment of severance.
• Courts can order back payment of severance with statutory default interest.
• Unlawful termination findings can lead to reinstatement or substantial damages.
• Repeat or serious breaches can trigger higher fines and closer inspection of your company.
• Non-compliance can damage your reputation with unions, staff, and regulators.

Does Outsourcing Employment via an EOR Change Severance Liability?

Using an Employer of Record (https://www.playroll.com/employer-of-record) in Bosnia & Herzegovina does not remove the underlying statutory severance obligations; it changes who is the formal employer on paper. The EOR is typically responsible for calculating and paying severance in line with local labor laws and any agreed policies. However, your company usually bears the economic cost through your service fees and may be contractually required to fund any severance owed. If the EOR mishandles a termination, both the EOR and your company can face claims, especially where joint-employer arguments arise. Clear contracts, approval workflows, and documented instructions are essential to keep liability and costs under control.

Be 100 Percent Compliant in Offering Severance with Playroll

Managing severance correctly in Bosnia & Herzegovina means tracking different entity-level rules, collective agreements, and evolving case law, which can be challenging for a small HR team. Playroll helps your company standardize termination workflows, so you know when severance is triggered, how to calculate it, and what documentation to issue. Our local experts monitor legal changes and market practice, helping you align statutory minimums with competitive, fair packages.

With Playroll, you can hire in Bosnia & Herzegovina through a compliant structure and let us handle contracts, payroll, and severance execution end-to-end. We coordinate with you on business reasons for termination, prepare compliant notices, and ensure severance is paid on time and correctly taxed. That way, your team can focus on business decisions while we reduce the risk of disputes, inspections, and unexpected termination costs.