Taxes and payrolls: the labour market in Bosnia and Herzegovina
Each labour market has some peculiarities. It may be tricky for foreigners to understand fully the payment methods, the taxes and other benefits related. In TalentUp we are starting a series of different blog articles, one for each country. This article analyses the labour market in Bosnia and Herzegovina.
Even if the national currency is the Bosnia-Herzegovina Convertible Marka (BAM), the whole article is in EUR to compare easily across countries and exchange rates
General data about the Bosnian labour market
| Minimum wage | 305.05€ |
| Payment basis | Monthly |
| Maximum working hours a week | 40h |
| Maximum overtime hours a week | No overtime work shall be ordered for pregnant women, a mother of a child of up to three years of age, and single parents or single adoptive parent of a child under six years of age. |
| Working hours compensation | According to collective agreement for RS, overtime work is paid at a salary rate of 130%. Work on public holidays and other days on which no work is done by law is paid at a salary rate of 150%. |
Some working conditions change by region.
Payroll taxes in Bosnia and Herzegovina
Social security contributions are made by the employer and the employee and are used for funding unemployment, pension, maternity/paternity leave, and sickness or injury.
They depend on the region:
- Federation of Bosnia and Herzegovina (FBiH)
| Contingencies | Employer % | Employee % |
| Pension and Invalid Insurance | 6% | 17% |
| Health Insurance | 4% | 12.5% |
| Unemployment Insurance | 0.5% | 1.5% |
| Contribution for protection from natural and other disasters | 0.5% | |
| Water protection charge | 0.5% | |
| Total | 11.5% | 31% |
Once contributions are paid, employees need to pay a flat income tax of 10%.
- Brčko District
| Contingencies | Employer % | Employee % |
| Pension and Invalid Insurance | 6% | 17% |
| Health Insurance | 12% | |
| Unemployment Insurance | 1.5% | |
| Total | 6% | 30.5% |
Once contributions are paid, employees need to pay a flat income tax of 10%.
- Republika Srpska
| Contingencies | Employer % | Employee % |
| Pension and Invalid Insurance | 18.5% | |
| Health Insurance | 10.2% | |
| Unemployment Insurance | 0.6% | |
| Child Protection | 1.7% | |
| Total | 0% | 31% |
Once contributions are paid, employees need to pay a flat income tax of 8%.
Contingencies from self-employees
Self-employed need to pay 4% as a health insurance contribution and 10% income tax.
Example of net salary in Bosnia and Herzegovina
As a reference, we use the average salary of a software engineer. In Bosnia and Herzegovina, on average, software engineers earn annually 29,200€.
| FBiH | Brčko District | Republika Srpska | ||||||||||
| Employer | Employee | Employer | Employee | Employer | Employee | |||||||
| % | € | % | € | % | € | % | € | % | € | % | € | |
| Gross salary (annually) | 29,200 | |||||||||||
| Pension and Invalid Insurance | 6% | 1,752 | 17% | 4,964 | 6% | 1,752 | 17% | 4,964 | 18.5% | 5,402 | ||
| Health Insurance | 4% | 1,168 | 12.5% | 3,650 | 12% | 3,504 | 10.2% | 2,978.4 | ||||
| Unemployment Insurance | 0.5% | 146 | 1.5% | 438 | 1.5% | 438 | 0.6% | 175.2 | ||||
| Contribution for protection from natural and other disasters | 0.5% | 146 | ||||||||||
| Water protection charge | 0.5% | 146 | ||||||||||
| Child Protection | 1.7% | 496,4 | ||||||||||
| Total | 11.5% | 3,358 | 31% | 9,052 | 6% | 1752 | 30.5% | 8906 | 31% | 9,052 | ||
| Income tax | 10% | 2,014.8 | 10% | 2,029.4 | 8% | 1,611.84 | ||||||
| Net salary (annually) | 18,133.2 | 18,264.6 | 18,536.16 |
Unemployment regulation in Bosnia and Herzegovina
Employers have the authority to terminate a fixed-term contract for reasons such as business needs, personal reasons, or misconduct by the worker. This termination process necessitates providing notice and a written explanation for the decision. In the case of misconduct, the employee must be given a warning and an opportunity to explain their actions.
Prior to termination due to misconduct, the employee should receive one written warning and two verbal warnings. If another violation occurs within 12 months of the third warning, the employer has the right to dismiss the employee without notice or severance pay. The dismissal must be communicated in writing.
In Bosnia and Herzegovina, employees must provide a notice period ranging from seven to 30 days, while employers are required to give notice ranging from 14 days to three months. During the probationary period, either party can terminate with seven days’ notice.
In Republic Srpska, the minimum notice period for termination by the employer is 30 days, and for termination by the worker, it is 15 calendar days. During probation, either party can terminate with seven days’ notice.
Regarding severance pay, employees in Bosnia and Herzegovina with a minimum of two years of service are generally entitled to a payment determined by the collective agreement. The amount is typically at least 1/3rd of the average monthly salary per year of employment, up to a maximum of six average salaries.
In Bosnia and Herzegovina, probationary periods cannot exceed six months.
Different kinds of leaves in Bosnia and Herzegovina
The annual leave lasts for 20 working days. It should be divided into two parts, with one of the parts being at least 12 working days long.
Moreover, employees have 4 days of leave (two of which are paid) to meet their religious or tradition-related meeds.
There are 21 public holidays.
There first month of sick leave is paid by the employer. After that, the sick leave is paid by the Social Security with no time limit.
Paid parental leave
Maternity leave can last for a year. The minimum maternity leave is 42 days after the birth.
In Bosnia and Herzegovina, a woman working full working hours after having used her maternity leave shall be entitled to be absent from work twice daily for a duration of one hour each time for the purpose of nursing the child until the child reaches one year of age.
One of the parents is able to work half-time until the children are two years old. And they also get a minimum of three days per year after that.
Other common Bosnian benefits
| Benefit | % of companies with this benefit |
| Disability leave | 29 |
| Health Insurance | 29 |
| Work-life balance | 13.6 |
| Cutting edge technology | 13 |
| Flexible working hours | 12.8 |
How to employ a Bosnian worker
To hire someone in Bosnia and Herzegovina, you need to have a legal entity registered in the country.
Some platforms (Papaya Global among them) offer the Employer of Record (EoR) service helping companies hire countries where they do not have any office.
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