Employer of Record in Bosnia and Herzegovina

Employing talent in Bosnia and Herzegovina requires a clear understanding of the local legal and administrative framework. Companies looking to expand their workforce into the country have several avenues to consider, each with distinct implications for compliance, cost, and operational complexity. Navigating these options effectively is crucial for a smooth and compliant hiring process, ensuring both the employer and the employee meet all necessary obligations.

Here are the primary options for hiring employees in Bosnia and Herzegovina:

• Establishing a local legal entity: This involves registering your company in Bosnia and Herzegovina, which can be a time-consuming and resource-intensive process, requiring local expertise for legal, tax, and administrative setup.
• Utilizing an Employer of Record (EOR): Partnering with an EOR like Rivermate allows your company to hire employees in Bosnia and Herzegovina without establishing your own legal presence. The EOR acts as the legal employer, handling all local compliance.
• Hiring as an independent contractor: For specific project-based work, you may engage individuals as independent contractors. However, it's vital to ensure the engagement genuinely meets the criteria for independent contractor status to avoid risks of misclassification and associated penalties under Bosnian labor law.

How an EOR Works in Bosnia and Herzegovina

An Employer of Record (EOR) simplifies international hiring by taking on the legal responsibilities of employment in Bosnia and Herzegovina. When you partner with an EOR, your company maintains full control over daily tasks and management of your team, while the EOR manages the intricate aspects of local employment.

Specifically, an EOR in Bosnia and Herzegovina will take care of:

• Onboarding and employment contracts: Ensuring contracts are compliant with Bosnian labor law.
• Payroll processing and tax contributions: Managing local payroll, income tax, and social security contributions in accordance with Bosnian regulations.
• Benefits administration: Handling the provision and administration of statutory benefits, such as health insurance, pension, and unemployment contributions.
• HR and labor law compliance: Navigating complex labor laws, termination processes, and severance requirements in Bosnia and Herzegovina.
• Visa and work permit sponsorship: Facilitating the necessary work permits and visas for foreign nationals, if applicable.

Benefits for Companies Hiring Without a Local Entity

Opting for an EOR service offers significant advantages for businesses aiming to expand into Bosnia and Herzegovina without the overhead of establishing a physical presence. These benefits enable quicker market entry and reduced operational burden.

Key benefits include:

• Rapid market entry: Hire employees in Bosnia and Herzegovina quickly, bypassing the lengthy process of entity registration.
• Reduced compliance risk: Ensure full adherence to Bosnian labor, tax, and payroll laws without needing in-depth local expertise yourself.
• Cost efficiency: Avoid the significant costs associated with setting up and maintaining a local legal entity, including legal fees, administrative staff, and office space.
• Access to talent: Tap into Bosnia and Herzegovina's skilled workforce without geographical limitations or administrative hurdles.
• Operational flexibility: Focus your resources on your core business activities while the EOR manages the complexities of local employment.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in Bosnia and Herzegovina includes comprehensive HR support, benefits administration, compliance management, and access to our proprietary dashboard for real-time workforce analytics. No hidden costs, no setup fees—just straightforward pricing that scales with your business needs while ensuring full legal compliance in Bosnia and Herzegovina.

Bosnia and Herzegovina's decentralized tax system complicates employer compliance, involving multiple levels (state, entities, cantons, municipalities). Employers must handle social security contributions, income tax withholding, and reporting obligations, with rates varying slightly between the Federation of Bosnia and Herzegovina and Republika Srpska.

Key employer contributions include pension (17-18.5%), health (10.2-10.5%), unemployment (0.5-0.6%), and disability insurance (1.7-2%), calculated as a percentage of gross salaries. Income tax is progressive, with illustrative brackets of 10%, 15%, and 20%, and must be withheld monthly. Employees can claim deductions such as personal and dependent allowances, pension contributions, and other expenses.

Employers must submit monthly payroll tax returns and annual income tax reports by specified deadlines to avoid penalties. Foreign workers and companies should consider treaties, residency rules, and potential permanent establishment status, often requiring professional advice for compliance.

Salaries in Bosnia and Herzegovina vary significantly by industry, role, and location, with major cities like Sarajevo and Banja Luka offering higher wages. For example, annual salaries range from BAM 12,000 for teachers to BAM 60,000 for healthcare doctors and IT managers. Key sectors include IT (Software Developer: BAM 25,000–50,000; IT Project Manager: BAM 35,000–60,000), manufacturing, finance, sales, healthcare, education, and engineering.

Employers must adhere to minimum wage regulations, which as of 2025 is approximately BAM 650 per month, with standard work hours of 40 per week and overtime paid at 1.5x. Compensation packages often include bonuses such as holiday, performance, transportation, and housing allowances, alongside statutory paid leave of 20 days annually. Salaries are typically paid monthly via bank transfer, with employers responsible for tax and social security deductions.

Salary trends are gradually rising, especially in high-demand sectors like IT, healthcare, and engineering, influenced by economic growth and foreign investment. Staying competitive requires offering attractive packages aligned with market rates and legal requirements.

Employees in Bosnia and Herzegovina are entitled to a minimum of 20 working days of annual paid leave, with additional days possible based on seniority, job complexity, or company policies. Unused leave generally cannot be carried over unless explicitly allowed by the employer or collective agreement. Public holidays include New Year’s (Jan 1-2), Orthodox Christmas (Jan 7), Labor Day (May 1-2), Victory Day (May 9), Statehood Day (Nov 25), and Christmas (Dec 25), with religious holidays like Eid and Orthodox Easter observed variably.

Sick leave requires a medical certificate, with duration and compensation depending on service length and collective agreements. Maternity leave typically lasts around one year with salary compensation, while paternity leave is shorter, often a few days or weeks, also with compensation. Adoption leave mirrors maternity leave in duration and conditions. Other leave types include bereavement, study, and sometimes sabbatical leave, depending on employer policies.

Employers in Bosnia and Herzegovina must provide mandatory benefits such as paid leave (minimum 20 days), public holidays, sick leave, maternity and parental leave, and social security contributions covering pensions, healthcare, and unemployment. They are also required to pay at least the minimum wage and may owe severance pay upon termination without cause.

Beyond legal requirements, many companies offer optional benefits like private health insurance, life insurance, meal and transportation allowances, professional development, gym memberships, company cars, performance bonuses, and flexible working arrangements to attract and retain talent. Private health insurance is increasingly valued, with employers often covering a significant portion of premiums, especially in larger cities.

Retirement benefits include participation in the public pension system, with some employers providing private pension plans, often with employer contributions and vesting periods. Benefit packages vary by industry, company size, and location, with larger firms and those in competitive markets offering more comprehensive options.

Employment agreements in Bosnia and Herzegovina must comply with the Labor Law to ensure enforceability and fairness. They define the employer-employee relationship, specifying rights, responsibilities, and terms. Employers should be aware of contract types, mandatory clauses, and legal requirements to avoid disputes and penalties.

Key contract types include:

Essential clauses for valid contracts encompass:

Understanding and including these elements ensures legal compliance and a clear framework for employment relationships in Bosnia and Herzegovina.

Bosnia and Herzegovina is gradually embracing remote work, with legal frameworks still evolving. Current labor laws do not explicitly regulate remote arrangements but allow employees to negotiate work-from-home terms, which should be formalized in writing. Employers are responsible for providing a safe working environment and ensuring compliance with laws related to working hours, rest, and overtime.

Flexible work options are gaining popularity, offering benefits such as access to a broader talent pool, cost savings, and improved employee satisfaction. However, companies must carefully navigate legal requirements and ensure proper documentation and adherence to safety standards.

This evolving landscape presents opportunities for employers to expand their remote workforce while emphasizing the importance of legal compliance and workplace safety.

Bosnia and Herzegovina's labor laws regulate employment termination, emphasizing compliance with notice periods, severance pay, and valid grounds. Employers must follow specific procedural steps, including providing written notices, documenting reasons, and settling final wages and severance, especially when terminating without cause. Failure to adhere can lead to legal disputes and reputational damage.

Notice periods vary based on service length, with minimum durations as follows:

Severance pay is generally one-third of the average monthly salary per year of service, applicable when termination is not due to misconduct. Employees are protected against wrongful dismissal, with rights to challenge in court and seek reinstatement or damages if unlawfully terminated. Employers must ensure justified reasons and proper documentation to avoid legal risks.

Bosnia and Herzegovina is experiencing a rise in freelancing and independent contracting, driven by global trends towards flexible work and the digital economy. Employers engaging independent talent must navigate legal distinctions between employees and contractors to avoid misclassification, which can lead to penalties. Key factors distinguishing contractors include autonomy, financial risk, and non-exclusivity. Contracts should clearly define roles, payment terms, and intellectual property rights to reinforce the independent nature of the relationship.

Independent contractors in BiH handle their own tax and social contributions, with specific obligations depending on their registration status. Income tax is progressive, and VAT registration is required if turnover exceeds the threshold. Contractors must also manage their own insurance, though registered entrepreneurs contribute to state schemes. Common sectors utilizing freelancers include IT, creative services, consulting, and education, where flexibility and specialized skills are valued.

Ensuring compliance with local regulations is crucial for businesses leveraging independent contractors, particularly in dynamic sectors where flexibility and cost-effectiveness are prioritized.

Foreign nationals wishing to work in Bosnia and Herzegovina must obtain both a valid visa and a work permit, with the process involving application submission, document verification, and compliance with local regulations. The most common visa types include the Type D long-stay visa (for stays over 90 days), temporary residence visa (valid for one year), and the work permit visa, which is typically issued alongside the Type D visa. Employers must be registered entities, demonstrate no qualified local candidates are available, and justify the need for hiring a foreign worker. Employees need qualifications, a clean criminal record, health insurance, and a valid passport.

The application process requires employer documentation (business registration, market test results, financial stability) and employee documents (qualifications, criminal record, health insurance). Processing times generally range from 1 to 3 months, with fees varying by case. For permanent residency, a minimum of five years of continuous residence, financial stability, language knowledge, and a clean record are required. Family members can apply for dependent visas, mainly for spouses and children, with proof of relationship and support.

Employers and employees must ensure compliance with legal obligations, including accurate documentation, timely renewals, and adherence to labor laws. Non-compliance can lead to fines, deportation, or penalties, emphasizing the importance of understanding and fulfilling all legal requirements.