What Severance Pay Rules Must Employers Follow in Serbia?

Which Employees Qualify for Severance Pay?

• Employees whose employment is terminated as redundant for technological, economic, or organizational reasons, provided they have at least two years of continuous service with your company.
• Employees who are retiring and whose employment ends because they meet legal conditions for old-age retirement, where a special retirement severance is due.
• Employees on indefinite-term contracts who are dismissed for redundancy, as fixed-term contracts normally end without statutory severance unless converted or otherwise agreed.
• Employees whose severance rights are enhanced by a collective agreement, branch agreement, or individual employment contract beyond the Labour Law minimums.
• Employees who have worked for you in Serbia, regardless of nationality, as long as they have an employment contract governed by Serbian law.
• Employees who do not fall under exclusion grounds such as serious misconduct or other justified reasons for dismissal where the Labour Law does not grant severance.

What Are the Legal Timelines for Paying Severance?

In Serbia, severance must generally be paid at the time the employment relationship ends, and in practice you should pay it together with the employee’s final salary and unused vacation payout. The Labour Law requires that all monetary entitlements be settled no later than the termination date stated in the decision on dismissal or agreement on termination. If you are implementing redundancies, the severance amount should be clearly stated in the written termination decision and paid on or before the last working day. Any delay can expose your company to default interest and potential labour inspection scrutiny. To stay safe, align internal payroll cutoffs so severance is processed in the same pay cycle as the termination.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay severance correctly in Serbia, you risk both financial and administrative consequences. Labour inspectors can investigate based on employee complaints or routine audits, and courts can order back payments with interest and costs. Non-compliance can also damage your reputation with staff and unions, and complicate future restructuring plans.

• Administrative fines can be imposed on the company and responsible managers for breaches of the Labour Law.
• Courts may order payment of outstanding severance plus statutory default interest.
• Employees can claim damages and legal costs if they successfully challenge an underpayment or non-payment.
• Labour inspectors can order corrective measures and follow-up inspections to verify compliance.
• Persistent non-compliance can increase the risk of collective disputes and union action.

Does Outsourcing Employment via an EOR Change Severance Liability?

Using an Employer of Record (EOR) such as https://www.playroll.com/employer-of-record does not remove the underlying obligation to respect Serbian severance rules. In a compliant EOR setup, the EOR is the legal employer in Serbia and is responsible for calculating and paying statutory severance. However, your company typically funds these costs through service fees or pass-through charges, so you still carry the economic burden. You should ensure your EOR contract clearly allocates responsibility for terminations, documentation, and dispute handling. Close coordination is essential so that business decisions you make about redundancies or retirements are implemented in line with Serbian labour law.

Be 100 Percent Compliant in Offering Severance with Playroll

Managing severance in Serbia means tracking service length, salary bases, and the legal grounds for each termination, which can be easy to misinterpret if you do not work with the Labour Law every day. Playroll helps your team structure compliant termination workflows, from identifying when severance is triggered to calculating the correct amount and timing. You stay in control of business decisions, while we translate them into legally sound steps on the ground.

With Playroll as your global employment partner, you can standardize your offboarding process across countries without missing local nuances like Serbian redundancy and retirement rules. Our experts coordinate with your HR and finance teams, prepare compliant documentation, and ensure severance is paid on time and correctly through local payroll. That way, you reduce legal risk, protect your employer brand, and keep restructuring projects moving without surprises.