Hire Contractors In Serbia

Serbia is a compelling destination for multiple companies worldwide seeking to expand their business in Europe. 

It boasts a highly educated workforce that is available at comparatively low costs. Over the years, the government has made great strides in ensuring universal access to Serbia's pre-primary, primary, and lower-secondary education. 

The result? Enrollment in primary education has crossed 95%, and this country's overall education quality has also improved over time. 

All these have resulted in increased opportunities for companies to hire skilled contractors in Serbia. Well-educated individuals are more likely to possess the necessary skills and knowledge required by businesses. 

Additionally, workers with higher levels of education foster critical thinking and creativity, both of which are necessary for driving business growth.

In this article, we will take you through a step-by-step guide on how to hire contractors in Serbia and ensure a smooth contractor onboarding process.

How to Hire Contractors in Serbia

Hiring contractors in Serbia can be done in two main ways:

• You can either hire directly, or
• You can partner with an AOR, such as Skuad, to help you with hiring.

To hire contractors directly, you have to set clear project guidelines, source and hire contractors, negotiate payments, and take on full responsibility for contractor management and contractor payments in compliance with local laws.

A simpler alternative is to leverage Skuad AOR services for contractor management.

Hiring Contractors Through Skuad AOR

• As an AOR, Skuad simplifies the entire contractor onboarding process, enabling you to focus better on the other essential aspects of your business. 
• With legal experts worldwide, Skuad helps you draft country-specific contracts that comply with all local labor laws and regulations. 
• Skuad also helps avoid the many common mistakes associated with employing contractors in Serbia, such as the risk of misclassification, and protects your business from all possible legal pitfalls. 
• With Skuad’s built-in IP protection, you can always guarantee that your company’s IP is always safeguarded under the laws of Serbia.

How to Pay Contractors in Serbia

While paying a Serbian contractor directly may seem cost-effective at first glance, you must realize that it comes with risks. In addition to understanding the payroll management system, you also need to manage other aspects, such as single-handedly. 

• Payment in local currencies
• Providing timely payments or
• Tracking hours worked. 

Many businesses leverage contractor management software or an AOR to avoid these administrative burdens and, most importantly, ensure on-time and accurate payments. 

With Skuad AOR, the entire payroll processing system gets hassle-free and streamlined. It features some robust capabilities, such as,

• Consolidate all your payroll needs under one roof so you do not have to juggle multiple banking systems in each country.
• Guarantees accuracy and reliability in your payroll processing.
• Empowers financial teams with streamlined payroll data consolidation and
• Manages payments in over 100 currencies. 

Challenges of Hiring Contractors in Serbia

Hiring contractors instead of full-time employees offers companies a series of benefits, from increased staffing flexibility and efficiency to reduced costs.

However, while Serbia does provide a business-friendly environment for global expansion, it also has its share of unique challenges. 

1) Complex Labor Laws

The primary regulation governing labor relations in Serbia is the Serbian Labor Law. It upholds various contractual relationships other than employment, one of the most popular being the ‘consultancy agreement.’ 

If you wish to hire contractors (commonly referred to as entrepreneurs in Serbia), you need to draft a proper written agreement highlighting the work to be completed, the agreed fees, and the duration by which the work needs to be completed. 

Several other legal frameworks exist, such as the Law of Contracts and Torts. You need to carefully review and evaluate the various provisions set forth by these regulations, to avoid any potential legal penalties. 

However, without proper contractor management software, all these can become extremely difficult and overwhelming to manage. 

2) The Lump-Sum Tax Regime

Tax and social security regulations vary greatly depending on the type of engagement parties enter. 

For example, in an employment relationship, the employer must calculate tax at a flat rate of 10% and social security contributions at 37.8%. The same applies to independent contractors in Serbia. 

The main difference between the tax treatment of employees and contractors in Serbia is that the latter are included in the lump-sum taxation regime. 

For a contractor to be eligible for lump-sum tax, they must fulfill the following criteria: 

• Their annual turnover does not exceed RSD 6,000,000.
• They do not receive investment from others. 
• They do not operate in the following businesses: accounting, retail, marketing, or tax advising. 
• They are not registered as a value-added tax payer. 

Understanding these different requirements while simultaneously maintaining compliance can get tricky for businesses. You need a proper payroll solution to help you navigate these intricate payroll processes in Serbia. 

However, to achieve this, you must invest quite a hefty amount of money and other resources, which can often be difficult for small businesses with budget constraints.

3) The Emigration Challenge

The countries globally face immigration issues with 3.6% of the population migrating to different countries. This has not left Serbia untouched. Every year, around 10% of the Serbian population takes birth outside the country. 

Over the years, the percentage of medium-skilled workers going abroad for better opportunities has increased drastically compared to low-skilled workers. 

This has led to a severe emigration problem, as most individuals are eager to accept temporary work opportunities instead of focusing on longer-term positions.

Hiring Contractors Directly vs Hiring Contractors via Skuad

Here is a detailed comparison of the two main ways by which you can hire contractors in Serbia. 

Cost of Hiring Contractors in Serbia

Truthfully, there is no fixed cost to hire contractors in Serbia. Unlike full-time employees, contractors in Serbia are not paid every month. Instead, their wages depend on the number of hours worked or the project's scope. 

The cost also differs depending on the industry you are hiring for or the experience and specialization level of the contractors themselves. 

For example, workers in the healthcare industry usually earn around 62,331 RSD per month, whereas those employed in the IT sector earn 90,000 RSD per month. 

Similarly, an independent contractor in Serbia with many years of experience or specialized training in Serbia is likely to charge you more for their work than someone who has just begun their career as an entrepreneur. 

How to Convert a Contractor into an Employee in Serbia

Converting a contractor to a full-time employee in Serbia can prove highly advantageous, both for you and the contractor. However, the process can quickly become complex if you do not follow the necessary steps: 

• Verify employee classification: Carefully evaluate whether the contractor can become an employee based on the nature of their role. For example, determine if the contractor is assigned tasks related to the core business activities or whether they are hired for specific projects only. This will help you avoid the possibility of misclassifying workers.

• Make an offer: Make an employment offer to your contractor, including top competitive salary packages and other mandatory benefits such as health insurance and pension. 

• Research the employment laws: Thoroughly review and understand Serbia's employment laws, including rights and obligations, duties, and responsibilities, and convey the same to your contractor-turned-employee. For example, the minimum wage requirement in Serbia is currently set at 67,566.33 RSD per month.

• Onboard and Add Payroll: Once the contractor accepts the employment contract, add them to your company’s payroll and set up proper withholdings and contributions by Serbia's payroll policies and tax laws.

Additionally, do not forget to learn the differences between 1099 and W2 classifications, their significance, and the pros and cons of each. This will help you to ensure a smooth transition from contractors to employees in Serbia.

Hire Contractors in Serbia with Skuad

With Skuad by your side, the entire process of employing contractors in Serbia becomes seamless and hassle-free. 

Skuad features automated invoicing creation, which means you no longer have to deal with loads and loads of paperwork when you can simplify your billing and distribution tasks. 

Skuad also helps you easily navigate international compliance by ensuring adherence to regulations such as 1099s, IR35, and more. 

With robust capabilities, such as an in-house legal team to mitigate the risk of worker misclassification and built-in IP protection you can safeguard your company’s IP under Serbian laws.

‍Book a demo today and experience the difference with Skuad!

FAQs

Q1: What is the contractor tax in Serbia?

Ans: Similar to employees, independent contractors or entrepreneurs in Serbia are subject to 10% tax and 37.8% social security contributions.

Q2: Can I hire a contractor overseas?

Ans: Yes, hiring contractors overseas is a common strategy most companies apply to expand their business worldwide. It offers several benefits, such as reduced training and onboarding time, increased business flexibility, and a wider hiring pool. 

Q3: How much does employment cost in Serbia?

Ans: Currently, the employer cost in Serbia is set at 17% on an annual salary of USD60,000. However, the employment cost in Serbia usually varies depending on various factors, such as company registration fees, payroll taxes and benefits, and onboarding and training costs. 

Q4: How do I hire contractors in Serbia with Skuad?

Ans: With Skuad as your AOR, you can easily and hassle-free hire contractors in Serbia. The platform boasts robust capabilities such as drafting locally compliant contracts, running payroll in 100+ currencies, and bullet-proof privacy and data security. 

Q5: How do I pay contractors in Serbia?

Ans: The traditional way of paying a Serbian contractor involves utilizing international payment platforms such as PayPal or Wise. You can also partner with contractor management software, such as Skuad, to facilitate the payment process in Serbia. With Skuad by your side, you can access automated invoice management, multi-currency support, and compliance monitoring, among other things.