How do you terminate an employee in Croatia in 2026?

Croatian dismissal law sits in the Labour Act (Zakon o radu). An open-ended contract can only be ended for a reason the law recognises, and the reason must be stated in the written notice. The three accepted categories are business-conditioned, personally-conditioned, and conduct dismissals.

The three grounds for ordinary dismissal

1. Business-conditioned, where the role is no longer needed for economic, technical, or organisational reasons. This is the redundancy route and it carries severance.
2. Personally-conditioned, where the employee cannot perform the job because of capability or a lasting incapacity. This also carries severance.
3. Conduct-related, where the employee breaches duties under the contract. Repeated or serious breaches can support dismissal, and severance is not owed here.

There is a fourth route for the most serious cases. Extraordinary dismissal ends the contract without notice where a breach is so serious that continuing employment is not reasonable. The employer must act within fifteen days of learning the facts. No severance is due on an extraordinary dismissal.

Protected employees

Some dismissals are not valid whatever the reason given. You cannot dismiss someone because they are pregnant, on maternity or parental leave, a works council member, or a union representative acting in that role. Dismissal during temporary incapacity from a work injury is also restricted. These protections sit in the Labour Act and apply regardless of length of service.

1. Confirm a valid ground

   Anchor the dismissal to a recognised reason: business, personal, or conduct. Croatia has no firing at will, so a dismissal without a justified reason can be overturned in court.

2. Put the reason in writing

   Set out the reason in the written notice and explain it. A vague or missing reason is the most common way a Croatian dismissal gets challenged.

3. Serve notice or pay it out

   Give the statutory notice for the employee's length of service, or pay it out. Notice runs on top of any severance and gives a redundant employee paid time to look for work.

4. Calculate severance and leave

   Work out severance for business and capability dismissals once the employee passes two years, then add unused annual leave and salary to the last day. Conduct dismissals carry no severance.

5. Run group consultation

   For larger rounds, consult the works council and notify the employment service before serving any notice. Skipping the step exposes the whole redundancy to challenge.

These are the legal floors in Article 122 of the Labour Act. A contract or collective agreement can set longer notice. It cannot go below these minimums. The periods rise by half-steps in the middle of the ladder, so two years sits between the one-year and five-year tiers.

The notice clock starts the day after the written notice is delivered. An employee made redundant has a statutory right to paid time off during the notice period to look for new work. Notice is suspended during periods such as sick leave, so the end date can move.

Paying notice out

Either side can pay out the notice period instead of working it. The payment covers the salary the employee would have earned across the notice window. It is treated as ordinary income for tax and contributions. Garden leave, where the employee stays employed but is released from duties, is also common for senior roles.

Statutory severance (otpremnina) is set in Article 126 of the Labour Act. It applies to business-conditioned and personally-conditioned dismissals, the redundancy and capability routes. It does not apply where the employee is dismissed for their own conduct.

The formula

The base figure is the employee's average monthly salary over the three months before termination. For each completed year of service the employee receives at least 33.33% of that base, which is one third of a month's pay per year. A contract or collective agreement can set a higher rate but never a lower one.

The whole payment has a ceiling. Total severance cannot exceed 6 months of the employee's average monthly salary, no matter how long they served. That means severance stops growing once an employee reaches roughly eighteen completed years on the one-third rate. Only completed years count toward the calculation.

What severance sits alongside

Severance is one line of the final settlement, not the whole of it. On top of it you pay out the notice period if it is not worked, any unused annual leave, and salary up to the last day. Croatia grants at least 4 weeks of paid annual leave a year, and any unused balance is a cash liability on termination.

When an employer plans to make a defined number of roles redundant inside a set window, the Labour Act requires a formal consultation before any notice is served. The employer must consult the works council, or the employees directly where no council exists, and notify the Croatian Employment Service in writing.

The consultation has to be genuine. It covers the reasons for the redundancies, the number and categories of staff affected, the selection method, and any alternatives such as redeployment or reduced hours. Serving notice before the process is complete exposes the whole round to challenge.

What the consultation must cover

• The reasons for the planned redundancies
• The number and categories of employees affected
• The criteria used to select who is made redundant
• The proposed severance terms and the timeline
• Any measures considered to reduce or avoid the redundancies

Each affected employee still receives the statutory notice and the Article 126 severance on top of the collective process. The duty to consult is procedural, so a flawed consultation does not remove the severance owed, it adds a separate ground for challenge.

A mutual termination agreement (sporazumni raskid) ends the contract on agreed terms. Because both sides consent, you do not need a statutory ground or a notice period, and the usual dismissal-reason test does not apply. The agreement must be in writing to be valid.

Mutual agreements are common in Croatia for senior exits and contested situations because they give both sides certainty. The employee gives up the right to challenge the ending of employment. In exchange, the employer often pays more than the statutory minimum.

Typical components of a Croatia mutual exit:

• Agreed termination date, with or without a notice period
• Severance or an agreed payment, frequently above the 33.33% statutory rate to reflect the waiver
• Accrued annual leave, paid out for any unused balance from the 4 weeks statutory entitlement
• Confidentiality terms, where commercially appropriate
• Reference wording, agreed in advance

One point to flag for the employee. Signing a mutual agreement usually means they cannot claim state unemployment benefit, because they are treated as having agreed to leave. Many employees ask for a larger payment to offset that. Getting the agreement signed and the final payroll dated before the last working day keeps the exit clean.

Real HR and legal experts handle your Croatia hires, from the first contract through every monthly payroll run and statutory deduction. An actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee, and employer cost passes through at cost, itemised on every invoice.

The split of responsibilities under EOR for Croatia terminations:

Croatia ties severance to a six-month cap and a two-year qualifying threshold that catch employers out. Teamed tracks the qualifying date on every contract so the number is right before the conversation starts.

EOR, contractors, and entity employees all live on one platform. An employee hired through Teamed's Croatia network can graduate to your own Croatian legal presence when headcount makes entity formation the right call, until it isn't. Run the Crossover Calculator to see when the model flips. Start from the Croatia hiring overview.

Key sources: Zakon o radu (Labour Act) and Porezna uprava contributions guidance.