What Severance Pay Rules Must Employers Follow in Croatia?

Which Employees Qualify for Severance Pay?

• Employees whose employment is terminated by the employer for business-related or personal reasons not caused by the employee.
• Employees with at least two years of continuous service with your company at the time of termination.
• Employees on open-ended or fixed-term contracts where you end the contract before its agreed expiry for reasons not attributable to the employee.
• Employees who are not dismissed for misconduct, serious breach of duty, or other justified reasons attributable to the employee.
• Employees who do not qualify for an old-age pension at the time of termination, unless a more favorable right is agreed by contract or collective agreement.
• Employees whose contracts or collective agreements provide more generous severance terms than the Labour Act, in which case those improved terms apply.

What Are the Legal Timelines for Paying Severance?

Under the Croatian Labour Act, severance must be paid at the time the employment relationship actually ends, not when notice is first given. In practice, you should pay severance together with the employee’s final salary and any unused annual leave payout on or before the regular payroll date following termination. Many employers choose to pay on the last working day to avoid disputes. Whatever timing you choose, document it clearly in the termination decision and proof of payment. Late or staggered payments increase the risk of labour inspector fines and court-ordered default interest.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay severance correctly in Croatia, you risk both administrative fines and civil claims from the employee. Labour inspectors can sanction non-compliance with the Labour Act, and employees can sue for unpaid severance, interest, and costs. Disputes often focus on whether the dismissal reason was valid and how the severance base was calculated, so documentation is critical.

• Administrative fines may be imposed on the company and responsible managers for breaches of severance obligations.
• Employees can claim unpaid severance, default interest, and reimbursement of legal costs before Croatian courts.
• Labour inspectors may order corrective payments and monitor your future compliance more closely.
• Non-compliance can damage your reputation with employees, unions, and local authorities.
• Repeated or serious violations can influence future inspections and negotiations with social partners.

Does Outsourcing Employment via an EOR Change Severance Liability?

Using an Employer of Record (EOR) such as the service described at https://www.playroll.com/employer-of-record does not remove the need to follow Croatian severance rules, but it can shift who is the formal employer of the worker. In a typical EOR model, the EOR entity in Croatia is the legal employer responsible for issuing notices, calculating severance, and making payments under the Labour Act. Your company, as the client, usually bears the economic cost through service fees and indemnities agreed in the EOR contract. Croatian authorities will primarily look to the legal employer of record for compliance, but co-employment or joint liability can arise if you effectively control key employment decisions. A well-drafted EOR agreement should clearly allocate who decides on terminations, who funds severance, and how disputes with employees are handled.

Be 100 Percent Compliant in Offering Severance with Playroll

Croatian severance rules are detailed, and mistakes often happen around eligibility, length of service, and the wage base used for calculation. Playroll’s team tracks updates to the Croatian Labour Act and local case law so your company does not have to decode every amendment. We help you classify the termination correctly, confirm whether severance is due, and apply the right formula and caps for each employee. With structured workflows and local legal input, you reduce the risk of underpayment claims and inspector scrutiny.

When you hire in Croatia through Playroll’s global employment infrastructure, we can coordinate with local experts and, where relevant, an Employer of Record to implement compliant terminations end-to-end. That includes drafting notices, aligning with statutory and contractual rights, and ensuring severance is paid on time and properly documented. Your team gets clear cost estimates before action is taken, and employees receive a transparent breakdown of their entitlements, helping you protect both your brand and your legal position.