Serbian Parliament adopts the Law on Agency Employment

The Government of the Republic of Serbia adopted the long-awaited Law on Agency Employment (hereinafter referred to as the Law) on December 6, 2019. This Law regulates the field of employment through temporary employment agencies (hereinafter referred to as the Agency).

The Law was preceded by the adoption of the Law on Ratification of International Labour Organization Convention No. 181 on private employment agencies with the aim of harmonizing Serbian legal system with the legal regulations of EU Member States for the purpose of the EU accession process and aligning with EU Directive 2008/104 /EC on temporary agency work.

The purpose of the Law is primarily to protect employees and regulate the labour market. The law guarantees equal rights for employees hired through the Agencies and for other employees hired directly by the employer (Beneficiary Employer), which was not the case until the law was enacted.

By legal definition, the Agency is a company or entrepreneur registered with the competent authority in the territory of the Republic of Serbia, which establishes an employment relationship with an employee for his temporary assignment to an beneficiary employer in the territory of the RS for the purpose of performing activities under his supervision and management. Beneficiary Employer is a legal entity, entrepreneur, that is, a representative office or branch of a foreign legal entity that is registered in accordance with the law in the territory of RS, a government body, an autonomous province and local government authority, where the assigned employee temporarily performs his/her duties. It is clear from the definition of the beneficiary employer that foreign legal entities, which are not registered in the territory of RS, cannot use the services of the Agency for temporary employment of employees.

For the Agency to start performing its activity, it is necessary to obtain a license from the Ministry of Labour, Employment, Veterans and Social Affairs. The license is issued for a period of five years and it can be applied for its extension within thirty days before the expiry of the license.

The Agency concludes two contracts in its operations: employment agreement for an indefinite or definite period with assigned employee and agreement on assignment of employees with the beneficiary employer.

The agency is not allowed to charge the assigned employee with the service fee for temporary assignment with the beneficiary employer, as well as for concluding an employment agreement with the beneficiary employer after the termination of the assignment. The Agency may only receive compensation from the beneficiary employer.

The law determines situations where there is a prohibition on concluding an employee assignment agreement, for example, in the case of a replacement of an employee at the employer at whom the strike is organized, unless an employee that is determined to work during the strike to ensure a minimum work process refuses to work; for performing activities where the beneficiary employer has determined the redundancy of employees in accordance with the general labour regulations within the time limit established in accordance with the law governing labour, etc.

Also, there are restrictions on the assignment of employees with an employment agreement for definite period in relation to the number of employees at the beneficiary employer, the basic rule being that the total number of employees assigned to the beneficiary employer for a definite period may not exceed 10% of the total number of employees at the beneficiary employer on the date of conclusion of the agreement for the assignment of employees or on the day of modification of that agreement which changes the number of employees assigned. 

The law guarantees to the employees that during the temporary performance of work for the beneficiary employer, they will be guaranteed the right to equal working conditions that comparable employees of the beneficiary employer have. This means that the assigned employees like the comparable employees have the same working conditions in terms of working hours, overtime and night work, rest during daily work, daily and weekly rest, annual leave, protection of employees, safety and health at work and prohibition of all bases of discrimination, as well as the same elements for calculating wages for work and time spent at work, remuneration and reimbursement of expenses provided for by the labor law, except that the law does not equate the right to bonuses and rewards.

Comparable employee defined by the law is an employee who is employed by the beneficiary employer, who performs or would perform the same activities considering the required degree and type of qualification, i.e. level of qualifications and special knowledge and abilities, i.e. competences, complexity, responsibility, work experience and other special working conditions. Furthermore, it is prescribed that if the beneficiary employer does not have a comparable employee in the same jobs, the assigned employee cannot be given a lower basic salary than the basic salary of the employee at beneficiary employer in the same degree or qualification level. The application of this provision may cause controversial in practice. Namely, in Article 2, Paragraph 2 of the Law it is stated that the beneficiary employer has a clearly defined restriction that he must provide to the assigned employee the same basic salary as is the salary at the beneficiary employer in the same level of education or level of qualification. The Law mentions only the same level of education or qualification, regardless of the type of qualification or professional field and regardless of the responsibility and complexity of the work that the employee performs, which is a defect of the Law and in practice can very easily lead to situations that the assigned employees those who work in lower positions and have a high degree of education must be paid as much as the lowest basic salary of an employee of the beneficiary employer who has a high degree of education. Also, in this way it may happen that those assigned employees who have a lower level position but possess high degree education will have many times higher earnings than the other assigned employees who work in a lower position, but have a secondary or elementary education, inevitably violating the principle of “equal pay for equal work”. 

As a presumption of assignment,the following is prescribed. A person who works for the benefit of the beneficiary employer or in the premises of the beneficiary employer, and who has an employment agreement or other employment engagement agreement with another employer is considered to be assigned employee by that employer, unless otherwise proven. For the work of these employees contrary to the provisions of the Law, responsible are both, employer and beneficiary employer.

In case of termination of employment, the Agency shall issue a decision on termination. The entire documentation proving the validity of the termination is provided by the beneficiary employer to the Agency. The assigned employee may initiate proceedings before the competent court against the Agency and such a decision, which is a paradox, since the whole procedure is conducted by the beneficiary employer and the Agency has no insight into the method of establishing evidence, but has only been given the power to issue a Decision on termination. In addition, if the court renders a decision annulling the decision of termination, the law does not stipulate that the court may impose a measure of reinstatement of the assigned employee, but that the Agency will be obliged to compensate the employee for the amount of the remaining amount of salary from the moment of termination of employment until the expiration of the contractual termination, and maximum up to 18 salaries, as well as the obligation to pay taxes and contributions for the period. 

Supervision of the implementation of this Law is performed by labour inspection and administrative inspection. 

Misdemeanor liability is envisaged for acting contrary to the provisions of the Law, for which a fine in the range of 800,000 to 1,500,000 dinars can be imposed on a company that performs the assignment of employees and beneficiary employer being a legal entity. Furthermore, for the same misdemeanor responsibility is provided and fines are imposed for entrepreneurs and responsible persons in legal entities. 

By-laws related to the work of the Agency, professional qualifications, conditions and manner of issuing, revoking and termination of a work permit shall be issued by the Minister in charge by December 31, 2019. The law will enter into force on March 1, 2020. 

For all the questions regarding the application of the Law, CT Legal team is at your disposal.

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