Employment termination in Croatia is highly regulated and notably employee-protective. For international companies used to at-will employment or simpler notice-and-pay frameworks, Croatia can feel like unfamiliar territory. Understanding the rules before you need them is essential.

This is a practical overview of how the process works.

The Legal Basis for Termination

Under the Croatian Labor Act (Zakon o radu), an employer cannot simply decide to end an employment relationship without a valid, documented reason. There are three recognized categories:

Economic reasons: The employee’s role is no longer needed due to business restructuring, decline in workload, technological changes, or similar operational factors (redundancy).

Personal incapacity reasons: The employee is persistently unable to fulfill their contractual duties. For example, due to a long-term medical condition that prevents them from performing their role.

Conduct-related reasons: The employee has committed a breach of their employment obligations, ranging from regular disciplinary violations to gross misconduct.

Each category carries different procedural requirements. For conduct-related terminations, in particular, the employer must issue a written warning before proceeding with dismissal, unless the conduct is sufficiently serious to qualify as gross misconduct. Skipping this step can invalidate the termination entirely.

Notice Periods

Croatian law sets minimum notice periods based on the employee’s length of service. These are statutory minimums, employment contracts or collective agreements may provide for longer notice, but not shorter.

Length of service	Minimum notice period
Less than 1 year	2 weeks
1 to 2 years	1 month
2 to 5 years	6 weeks
5 to 10 years	2 months
10 to 20 years	2.5 months
Over 20 years	3 months

For employees aged 50 and over, notice periods are extended by an additional two weeks. For employees aged 55 and over, the extension is one month.

During the notice period, the employee continues to work (unless the employer opts to pay out the notice period in lieu of service, which is permitted).

Severance Pay

Severance pay (otpremnina) is mandatory for employees whose employment ends for economic or personal incapacity reasons, provided they have completed at least two years of continuous employment with the same employer. It does not apply to terminations for gross misconduct.

The statutory calculation is straightforward: one-third of the employee’s average monthly gross salary (averaged over the three months prior to termination) for each full year of service, up to a maximum of six times that average monthly salary.

Worked example: An employee who has worked for six years with a gross monthly salary of €2,400 (and whose last three months averaged €2,400 gross) would be entitled to:

• 1/3 × €2,400 = €800 per year of service
• 6 years × €800 = €4,800 in severance pay

If they had worked for nine years, the amount would be capped at six times €800 = €4,800 regardless, because the six-times-monthly-average cap applies.

Severance pay in Croatia is tax-exempt up to an amount equal to six times the average monthly gross wage in Croatia. Amounts above this threshold are subject to income tax.

Deregistration and Final Settlement

When an employee’s employment ends, the employer must deregister them from HZMO and HZZO within specific timeframes. The final payslip must include all owed salary, unused annual leave compensation, and severance pay if applicable.

Failing to complete these steps correctly, even after what was otherwise a clean termination, can expose the employer to administrative penalties and claims from the departing employee.

What This Means in Practice

The employee-protective nature of Croatian termination law is not a reason to avoid hiring in Croatia, but it is a reason to ensure you have the right administrative infrastructure in place before you make your first hire.

When you hire through EOR Partner, all of this is handled by Lugera Talent Solutions. We make termination notices in compliance with the Labor Act, apply notice periods correctly, and file deregistrations on time. If there is a conduct issue that requires a formal warning process, EOR Partner manages that documentation as well.

This is one of the areas where the value of an experienced local EOR is most tangible. Getting a termination wrong in Croatia is much more costly than getting it right from the start.

If you’re facing a termination situation or want to understand your obligations before making a hire, contact EOR Partner.