On 6 December, 2019 the National Assembly of the Republic of Serbia adopted the Law on Agency Employment, as well as amendments to the Law on Pension and Disability Insurance, Law on Contributions for Mandatory Social Insurance and Personal Income Tax Law.
Please see below a brief overview of the most important novelties that the mentioned laws introduce.
LAW ON AGENCY EMPLOYMENT
After years of doing business in the “grey area” the Law on Agency Employment finally provides the legal framework for engagement of persons through agencies for temporary employment (the Agency, i.e. the Agencies). The mentioned law enters into force on 14 December 2019, and shall be applied starting from 1 March 2020. The Law stipulates that Agencies have to harmonize with its provisions until 1 January 2020. Until 31 December 2019, the Minister in charge of labour affairs shall render the by-laws that will regulate the work of the Agencies. The Law regulates the rights and obligations of the Agencies, as well as the employers who use their services (the Employer), but also of the rights and obligations of the “leasing employees”.
The most important novelty stipulated by the Law on Agency Employment is surely the obligation of the Employer to provide the leasing employee with the work conditions that are equal to those that comparative employee engaged at the Employer has. Therefore, the Employer is obliged to determine which one of his employees represents comparative employee for the person who is engaged through Agency (i.e. “leasing employee”) and to provide him with equal work conditions. Equal work conditions refer to the duration and schedule of working hours, overtime work, night work, rest during work, daily rest, weekly rest and annual leave, absence with remuneration, elements for the calculation and payment of salary, wages and reimbursements, safety and health at work, protection of pregnant women and nursing mothers, protection of youth, as well as the prohibition of discrimination on all grounds. Having the said in mind, the communication between the Employer and the Agency is crucial, since the Employer has the obligation to provide the Agency with the accurate data on the work conditions that are being provided to the leasing employee.
In line with the Law, the Employer is jointly liable for the obligations of the Agency in regard to the payment of the salary, reimbursement of the salary and reimbursement of the costs to the leasing employee. In the event of damage that leasing employee suffers from the injury at work or occupational disease, Employer is obliged to compensate the damage, while the Agency is subsidiary liable.
The Law prescribes also the limitation in regard to the numbers of persons who may be engaged through an Agency on definite period. Namely, on the date of executing the employment transfer agreement, the number of leasing employees cannot be higher than 10% of the total number of employees at the Employer. This limitation applies to the Employers who engage 50 or more employees. For the Employers who have less than 50 employees on the date of executing the employee transfer agreement, thresholds are set in regard to the number of leasing employees. In regard to the engagement of the leasing employees on definite period, relevant rules for work on definite period, stipulated by the Labour Law, are applied.
Having in mind that the aforementioned limitations apply only to the leasing employees that have executed employment agreement on definite period with the Agency, there are no limitations for the Employers in regard to the number of leasing employees engaged on indefinite period.
However, in situations prescribed by the Law, the Employer may not engage persons through Agencies during the strike (except for the purpose of ensuring the minimum work process), for leasing to another Agency, etc.
In regard to the termination of the employment of the leasing employees, the Law prescribes that the Agency conducts the termination procedure for the reasons which occurred at the Employer and on the basis of the facts and proofs Employer is obliged to submit to the Agency without delay. What is also specific about the Law is that the maximum amount of the damage compensation in case of unlawful termination of the employment of the leasing employee is limited up to the amount of 18 salaries.
AMENDMENTS TO THE LAW ON PENSION AND DISABILITY INSURANCE, LAW ON CONTRIBUTIONS TO THE MANDATORY SOCIAL INSURANCE, AS WELL AS THE PERSONAL INCOME TAX LAW
The amendments to the laws that refer to taxes and contributions introduce the benefits for the employers - newly established companies engaged in innovation activities, for the employers who established employment with a qualified new employee, as well as for the employers who establish the employment with employees that are new taxpayers in the Republic of Serbia and are considered as persons with specific expert knowledge who are needed on the labour market in Serbia.
The benefits refer to the possibility on exercising the right on exemption from payment of all or certain contributions, as well as a reduction of the tax base on which the salary tax is paid. Amendments to the Law on Pension and Disability Insurance introduces the novelty that the insurance based on the independent activity is also applied to the person who works in the Republic of Serbia, for a foreign employer, that does not have a registered representative office in our country and from which entity he is compensated for his work, under condition that he is not insured on another basis.
Amendments to the Law on Contributions for Mandatory Social Insurance stipulate the decreased rate of the contribution for pension and disability insurance paid by the employers on the basis of salary, by 0.5%, from 12% to 11.5%. Amendments to the Personal Income Tax Law introduce the so-called test of independence for the entrepreneurs. The purpose of the introduced test of independence is to determine the (in)dependence of the entrepreneur from the purchaser. If the entrepreneur is found to be dependent from the purchaser, i.e. if the entrepreneur does not pass the test of independence, then the entrepreneur’s income generated from that purchaser, shall be taxed as other income, at a tax rate of 20%.
If the entrepreneur generates the income from another person, for which he is not deemed as a dependent, for that part of the income he shall be taxed as lump-sum entrepreneur, i.e. it shall be included in the taxable tax base for income on independent activity.
The non-taxable amount of salaries is increased from RSD 15,300 to RSD 16,300.
Finally, against numerous remarks of the employers, the opinion of the Ministry of Finance was provided with legal ground, meaning that in order for the right on tax exemption to be exercised, the costs of transportation of the employees for commuting to and from work have to be documented.
By Jelena Nikolic, Partner, Olivera Brkovic, Senior Associate, JPM Jankovic Popovic Mitic