Employment contract, contract of employment or labor contract is an agreement between employer and employee by which they establish an employment relationship. Main purpose of concluding employment contract is, of course, entering into an employment relationship, and defining rights and obligations between the employer and employee.
Labor law defines all obligatory elements of employment agreement in Serbia and other relevant procedures regarding conclusion of the employment agreement.
Conditions and requirements for establishing an employment relationship
As per Serbian regulation, employment relationship is established by an employment contract. The employment contract is concluded between the employee and the employer and it is considered concluded when both the employee and the employer sign it.
In this sense, we would like to immediately clarify a common question our clients frequently ask: Can an employment contract in Serbia be concluded electronically, that is, signed using an electronic signature?
Answer to this question is – no.
Namely, Labor law prescribes that the employment contract is considered concluded only when both parties sign it. Moreover, it specifically prescribes that the employment contract must be concluded in at least three copies. Further, there is an explicit provision in law that states that an employment contract must be concluded in writing before the employee starts to work.
In this sense, it is clear that employment agreement in Serbia can not be signed electronically, but rather both parties must put their handwritten signature on it.
Not only that it is obligatory to conclude the employment agreement in writing, but also the moment of commencement of work of employee is extremely important.
Namely, if an employee fails to start working on the day specified by the employment contract, it is considered that the employee has not established the employment relationship.
Of course, if employee was prevented from starting to work due to justifiable reasons, or if the employer and the employee agree otherwise, then the employee can start working on a day different that the one prescribed by employment agreement.
Mandatory elements of employment contract
Employment contract contains:
- Name and seat of the employer;
- Personal name of the employee, permanent or temporary residence of the employee;
- Type and level of qualification, i.e. education of the employee which is necessary for carrying out the activities for which the employment contract is concluded;
- Name and description of activities the employee needs to perform;
- Place of work;
- Type of employment relationship (for an indefinite or definite period of time);
- Duration of the employment contract for a definite period of time, and the grounds for establishment of employment relationship for a definite period of time;
- Date of commencement of work;
- Working hours (full-time, part-time or reduced);
- Pecuniary amount of base salary at the date of conclusion of the employment contract;
- Elements for determining base salary, work performance, salary compensation, increased salary and other earnings of the employee;
- Deadlines for payment of salaries and other earnings to which the employee is entitled;
- Duration of daily and weekly working hours.
Above mentioned are obligatory elements of employment contract, yet, employment agreement may contain also additional provisions regulating some specific rights and obligations of the parties.
Rights and obligations of employees and employers defined by the contract
Very important part of employment agreement is defining in precise manner rights and obligations of employees and employer. In that sense, employment agreement contains provisions that are regulating:
- Specific working obligations of the employee: employment contract should contain detailed explanation of the job responsibilities;
- Metrics for tracking the fulfillment of work duties and tasks;
- Duration of the annual leave: minimum duration is prescribed by law and it is 20 days per year;
- Obligation of employee regarding confidentiality: it is our recommendation to conclude a Non – disclosure agreement besides employment agreement, in order to secure the confidentiality of sensitive business information that employees may access while performing their job duties during the course of their employment;
- Non – compete clause: a provision that is often agreed upon but frequently cannot be enforced in practice, precisely due to the (incorrect) manner in which it is stipulated in the contract;
- Provision related to protection and regulation of IP rights: in a significant number of cases, the employment relationship is connected with intellectual property rights, but not all employment contract contains appropriate clause related to the IP protection.
Non – compete clause in Serbia
The non-compete clause is very often agreed upon between the employee and the employer in the employment contract. However, in practice, disputes regarding the implementation of this clause are common as it is often not agreed upon in the manner prescribed by law, or on the other hand, there are violations of this clause by either the employee or the employer.
Namely, what is a non – compete clause, in the first place?
A non – compete clause is a clause that stipulates the activities that an employee may not be engaged in on his own behalf and for his own account, as well as on behalf and for the account of another legal or natural person, without the consent of his employer.
However, the non – compete clause can, however, can only be agreed upon under certain conditions. These conditions are met if the employee, through their work for the employer may acquire:
- new, particularly important technology know-how,
- a wide circle of business partners, or
- learn significant business information and secrets.
Therefore, it would be possible to stipulate a non – compete clause only in case that the work position and job responsibilities of the employee are such that enable the employee to gain access to sensitive information and know – how procedures.
A non – compete clause is usually agreed for the duration of the employment relationship. However, duration of the non – compete clause can be extended also upon termination of the employment relationship, for up to two years following such termination.
In this case, a lot of employers consider that it is enough only to stipulate the restriction of engaging the employee with certain business activities. However, in such case the non – compete clause would not be valid, since law stipulates obligation of the employer to pay to the employee pecuniary compensation during the agreed period.
Therefore, if employer wishes to stipulate the non – compete clause following termination of employment relationship, then the employer needs to undertake the obligation in the employment contract to pay the employee certain amount of compensation during that period of time.
Also, one of the common mistakes when it comes to stipulating a non – compete clause are:
- too wide territorial validity: even if some employers think that it is good idea that a territorial validity of non – compete clause should be widely defined, it is not. Actually, if you define it too widely or in generic manner then the non – compete clause may lose its point;
- not defined in a precise manner the works that should not be performed by employee: it should be defined in a precise way what kind of works are encompassed by the non – compete clause, instead of widely defining this part. We understand that it is the interest of the employer to cover as much areas as possible, yet, if not defined in an appropriate manner it can be considered that it is too restrictive towards employee.
In case that the employee violates the non – compete clause, the employer is entitled to claim damages from the employee.
Types of employment relationship in Serbia
There are different types of employment relationship and the first basic distinction is between employment concluded for an indefinite period of time and fixed-term employment. If employer in employment contract does not indicate the period of time of its validity it is considered to be a contract for an indefinite period of time.
Fixed-term employment relationship
However, a fixed-term employment, although very common in practice, may be stipulated only for establishment of employment whose duration is predetermined by objective reasons. Those reasons may be:
- objective reasons that are justified by the time period or
- execution of a certain chore, or
- occurrence of a specific event.
Therefore, the employment relationship may be established for a definite period of time only in case of existence of above-mentioned reasons and only for the period of duration of such reasons.
In this sense, Serbian law prescribes that an employer may conclude one or more employment contracts for a definite period of time with the same employee for the period that with or without interruptions may not be longer than 24 months. In this way employer is limited in relation to concluding a fixed-term employment agreement with the same employee, where such kind of employment may last up to 24 months.
However, there are some exceptions when the duration of the fixed-term employment contract may be longer than 24 months. This is, among other cases, case when establishing employment relationship with a foreign citizen, on the basis of a work permit issued in Serbia. Namely, in this case employment relationship may be concluded for the period which is no longer than the expiry of the work permit – which can be issued for a period of up to three years.
Also, one more exception when an employment agreement may be concluded for a definite period of time, but longer than 24 months is case when employee is entering into employment relationship with a newly established employer. Namely, if employer has registered company in Serbia in a period that is no longer than one year prior to the moment of conclusion of the employment contract, then a fixed-term employment agreement may be concluded for a time period up to 36 months.
Probation work
The employment contract may stipulate also a probation work for performing one or more associated or related activities determined by the employment contract. Stipulating probation work period may be useful in a situation where employer is not completely sure whether the new employee will meet all work expectations and perform job responsibilities in stipulated manner.
The probation work may last for a maximum of six months and it gives certain relaxed termination conditions for both employer and employee. Namely, prior to the expiration of the time for which the probation work was contracted, the employer or the employee may terminate the employment contract with a notice period which may not be shorter than five working days.
On the other hand, an employee failing in the course of probation work to present corresponding work and professional abilities, shall have his employment relationship terminated as of the day of expiry of the time limit stipulated in the employment contract.
Remote work
We are witnessing the fact that, since the COVID-19 pandemic, most employers have switched to remote work. Many companies have retained this work model, considering the greater comfort it provides to employees when working from home.
On the other hand, some companies have adopted a hybrid work system, allowing employees to work from home for a certain number of days while requiring them to work from the office or the employer’s headquarters on the remaining days.
In both cases, when employees are working remotely, there are some additional items that must be regulated through employment agreement. Namely, such employment agreement should also contain provisions on:
- manner of supervision of work and quality of work performance of the employee;
- work equipment which the employer is obliged to procure, install and maintain;
- usage of employee’s work equipment, and compensation for such usage;
- compensation for other costs of work and the method of their determination.
The idea is to regulate some specific situations which arise when employee is working remotely, such as costs incurring during work and usage of the work equipment. It can be the case that employee is using her/his own equipment (for example computer, cell phone etc.) in which case the compensation for such usage should be stipulated.
Bear in mind that you must be compliant with regulations if you have system of working remotely for your employees, otherwise, you are violating the provisions of the law.
Management contract (Contract on rights and duties of director)
Upon establishing a company in Serbia, legal representative of the company should regulate the status within the company. This can be done in two ways:
- by concluding employment agreement, or
- by concluding so-called management contract.
If legal representative does not want to establish an employment relationship with the company, then the management contract should be concluded. By management contract mutual rights, obligations and responsibilities of a director and the employer, are regulated. Of course, also in case of concluding such contract, a legal representative, i.e. a director is entitled to remuneration for work and other rights, obligations and responsibilities.
Work outside employment relationship and types of non-employment contracts
Serbian law prescribes specific types of non-employment contracts by which the employment relationship is not established. Those kinds of contracts include:
- Temporary and Periodical Jobs;
- Services Contract;
- Contract on Vocational Training and Internship;
- Supplementary Work.
Temporary and Periodical Jobs;
For performing jobs whose nature is such that they do not exceed 120 workdays in a calendar year, an employer may conclude a contract on performing temporary and periodical jobs with:
- an unemployed person;
- a part time employed person – up to full working hours;
- an old-age pension beneficiary.
Therefore, the purpose of concluding such contract is to engage a person to conduct a work for a very limited period of time – those jobs are usually connected with seasonal work.
Services Contract
An employer may conclude with a particular person a service contract for the performance of jobs outside employer’s line of business. Hence, such contract cannot be concluded for performing work which is actually connected with employer’s business activity. It must be the jobs which are outside employer’s line of business, i.e. the jobs that are not performed by employees.
Those kinds of works may include independent manufacture or repair of a particular item, independent carrying out of a particular physical or intellectual work.
Contract on Vocational Training and Internship
Contract on vocational training may be concluded, for completing traineeship or taking a professional exam, when that is a separate requirement for independent work in the profession.
Contract on internship may be concluded, for professional development and acquisition of specific knowledge and skills to work in the profession, or to undergo specialization, during the time established for the program of internship, i.e. specialization, in accordance with a special regulation.
Supplementary Work
In addition to the full-time employment relationship, an employee may conclude a contract of supplementary work with another employer. Such supplementary work contract may be concluded to a maximum of one third of the full-time working hours.
Therefore, this contract could be concluded, for example, when employee has the need for additional earnings. The contract of supplementary work specifies the right to pecuniary compensation and other rights and duties based on work.
Example of employment contract – how to draft employment agreement
Even though it may seem time efficient and as a good option to download an employment contract template from the internet and use it for establishing employment relationship, we must say – be very cautious! A numerous disputes arose in practice for poorly and badly drafted employment agreements which either did not contain all relevant provisions or did not contain provisions tailored to the needs of employer.
Even if it may seem that drafting employment agreement is not a process which requires much time and attention, this is not the case. Badly drafted and incomplete non – compete clause may cause a lot problems in practice when it comes to its enforcement. Disclosure of sensitive business information can affect employers’ business in so many ways.
In order to avoid such situations, we recommend to pay attention to every detail when drafting employment contract and if needed, to seek professional legal help from law firm, in order to be legally compliant.
Employment contract – conclusion
Employment agreement is a very important contract by which employment relationship is established between employer and employee. It should not just be a simple template, but should be carefully tailored to the specifics of the employer’s business and the type of work being performed.
A well-drafted contract for work should cover all relevant aspects of both the employer’s and the employee’s rights and obligations. This is especially important for employment agreements in sectors such as IT, manufacturing, or other more complex industries, where it is necessary to regulate specific details related to job tasks, responsibilities, deadlines, intellectual property and data protection.
Therefore, employment agreement should be specific, precise, and fully aligned with the law, as well as the needs of both the employer and the employee, to avoid misunderstandings and legal complications.
If you seek legal assistance in regulating your employment relationship with an employee, feel free to contact our experienced attorney team from NCR Lawyers and we would be glad to assist along the way.
This article is for informational purposes only and does not constitute legal advice. If you need additional information regarding the topic in question, please feel free to contact us by email at office@ncrlawyers.com or by phone at +381677049551.
