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10 April 2020

Croatia: COVID-19 information on financial support for employers

Financial support for job retention in sectors affected by coronavirus

To help employers disrupted by the coronavirus pandemic to retain their employees, the Government of Croatia has decided to provide aid for a maximum period of three months from the beginning of March.

The aid will amount to HRK 3,250 for March 2020 and HRK 4,000 for April and May 2020 per month per full-time employee or a proportional part per employee according to the number of part-time working hours, or a proportional part per employee per month for non-working hours determined by the Decision of the National Civil Protection Committee. The employer should, however, continue to calculate the salary based on the contractually agreed amount. Changes to the amount of the salary during the respective period (e.g. reducing it to HRK 3,250 / 4,000 net) would be possible, but only if the provisions of the collective agreement are changed (if the salary is regulated under a collective agreement), or only if the employer and employee agree on a reduction of the salary (if the salary is regulated under an employment contract). The Government of Croatia has also decided to cover public levies (income tax and social security contributions) for the financial support in April and May of approximately HRK 1,460. In addition, the Government has made changes to the tax laws allowing employers to defer payment of public levies for up to three months without being subject to penalty interest.

The aid is targeted at employers in the accommodation and food and beverage sectors, transportation and storage, manufacturing (textiles, clothing, footwear, leather, wood and furniture), employers who are unable to perform their activities in accordance with the decisions of the National Civil Protection Committee, and other employers who can demonstrate the impact of special circumstances. Aid will not be given to owners, co-owners, founders, members of the management, directors, procurators, etc., except for employers employing up to 10 employees, and sole traders regardless of the number of employees.

Employers from eligible sectors must file the relevant documentation ( in which they must describe why they are seeking support for job retention and provide evidence and an affidavit (given under material and criminal liability). Examples of acceptable reasons include: (i) decrease in revenue; (ii) cancellation of reservations, events, congresses, seminars; (iii) cancellation of already contracted works and orders; (iv) inability to deliver finished goods or contracted and paid raw materials, production materials, machines, tools; or (v) inability to make new orders for raw materials, production materials, tools and machines necessary for work. The employers should also state the measures they have implemented to retain jobs.

If the employer performs several activities and is unable to perform some of them due to a decision of the Civil Protection Committee, and is otherwise experiencing a decline in business activities or some other justified reason and wishes to obtain aid for all its activities, it must submit separate requests for each justified reason.

The employer must attach the following documentation to the request for aid:

  • evidence of cancelled contracts, contracted jobs, problems in the transportation and delivery of goods or procurement of raw materials, etc.
  • explanation of decrease in revenue: a tabular comparison of revenue by the end of the month in which the request was filed with the same month of the previous year, with a revenue forecast for the following three-month period compared to the same period in the previous year. A decrease of more than 20 % is acceptable.

In return for receiving aid, the employer is obliged to:

  • Maintain the number of persons employed as at the date the request for aid was filed for a period twice as long as the time the aid is used for (i.e. use of aid for one month – obligation to keep the employee employed for two months);
  • Inform the Croatian Employment Institute (Hrvatski zavod za zapošljavanje) immediately or within eight days at the latest if any of the employees has been dismissed, including the exact date of the termination and the reasons for it;
  • Return the received aid in full, including statutory interest, or a proportional part of the received aid for justified termination of employment contracts1, for each person not kept employed twice as long as the aid is used;
  • The employer undertakes to submit to the Croatian Employment Institute evidence of paid salary for the previous month, no later than by the fifth day of the current month in which payment of the aid is due, except for the first payment;
  • Provide an affidavit signed by the owner, director or other authorised person, or other financial document from which it is evident that an obligation to pay salary was fulfilled or a list of employees with the handwritten signatures of the employees and the payment date.

Important requirements for employers:

  • Employers who use the measures of the Croatian Employment Institute and other providers (e.g. aid for active employment of persons employed for the first time), under which they use the salary costs as a justified expense, cannot use the aid for retention of jobs and such other measures simultaneously. Employers who want to use the aid for retention of jobs may opt to put the contractual obligations under the other active employment measures of the Croatian Employment Institute in standstill mode. After the use of this measure expires, employers may continue to use the remaining part of the active employment measures that were put in standstill mode, which will be regulated by an annex to the agreement;
  • For employees hired after 29 February 2020, regardless of the reason, no aid can be extended, except when it comes to hiring a replacement for employees for whom the grant was used and the employment contracts were not terminated by the fault of the employer;
  • Employers who have not paid salaries for February 2020 cannot use the measure;
  • Employers who cannot perform the activity due to a decision of the Civil Protection Committee, and the inspection established a violation of such prohibition, cannot use the aid;
  • Employers who have active contracts under the self-employment support measure, can use this measure for themselves and other employees. If they use the employment retention aid, contractual obligations under active contracts are suspended. After the expiration of the period of application of this measure, they will continue to use the measures of the APZ which they originally put into standstill mode during the remaining period in such a way that it is regulated by the annex to the contract;
  • All employers who have registered their activity and are registered in the Croatian Pension Insurance Institute (HZMO) by 29 February 2020 can use the measure;
  • Employers who receive aid for job retention may not import foreign labour or hire new employees while this measure is applied;
  • Employers who have registered a business entity in the last 12 months and who use self-employment funds cannot benefit from the measure;
  • Employers who have experienced a decrease in the number of employees from 1 March to 20 March 2020 may be granted aid;
  • An employer may not receive a grant if there has been a decrease in the number of employees (except in case of expiration of fixed-term contracts, retirement of an employee and dismissal due to the employee's misconduct) in the period from 20 March 2020 until the date of submission of the request if the percentage of the decrease in the number of employees is greater than:
    • à 40 % where the employer employees up to 10 employees;
    • à 20 % for small enterprises;
    • à 15 % for medium enterprises;
    • à 10 % for large enterprises.

1 For justifiably terminated employment contracts, including (a) the expiry of a fixed-term contract, (b) a dismissal at the request of an employee, (c) dismissal due to personal reasons, (d) the retirement of an employee, and (e) dismissal due to the employee's misconduct, the employer is entitled to aid for those days worked by the respective employee in the month of the termination. If the employment contract is terminated by the fault of the employer, the employer does not exercise the right to aid which is due for payment for the month or days of the month worked by the employee.

Vlahov Buhin*

Attorney at Law | Vlahov Buhin i Šourek d.o.o. in coop. with Schoenherr