Employer Obligations in Serbia: Mandatory Internal Acts and Consequences of Omission

Have you established, or do you plan to establish, a company in Serbia and do you intend to hire a larger number of employees? Which internal acts/policies are you, as an employer, required to adopt, and what are the consequences of failing to do so? Are you concerned about a visit from the Employment Inspectorate and wish to pre-empt inconveniences that may arise during an inspection, or do you simply want your operations to be in full compliance with all employment-law regulatory requirements so as to reduce the risk of potential employee claims? If these questions have caught your interest, you are in the right place: in this article we explain, in a systematic manner, how to achieve and maintain compliance with the applicable Employment Act and other relevant regulations.

When it comes to the employer’s mandatory internal acts, the discussion must begin with the Employee Handbook. It is a fundamental general internal act by which, in accordance with the law, the rights, obligations and responsibilities arising from the employment relationship are regulated. The applicable Employment Act provides that the Employee Handbook is adopted in the following cases:

1. if no trade union has been established with the employer or no trade union meets the conditions of representativeness, or no association agreement has been concluded in accordance with the Employment Act;

2. if none of the parties to the collective agreement initiates negotiations for the conclusion of a collective agreement;

3. if the parties to the collective agreement fail to reach agreement on the conclusion of a collective agreement within 60 days from the commencement of negotiations;

4. if the trade union, within 15 days from the date of receipt of the invitation to commence negotiations for the conclusion of a collective agreement, does not accept the employer’s initiative.

The Employee Handbook may not contain provisions that grant an employee fewer rights or establish less favourable working conditions than those determined by law, whereas it may provide for greater rights and more favourable working conditions than those determined by law, as well as other rights not determined by law, unless otherwise provided by law. The Employment Act affords employers autonomy to regulate a range of matters that should be governed by the Employee Handbook as a general internal act. In this article, we will point to some of those matters which often cause uncertainty in practice.

For example, the legislator provides that the elements for the calculation and payment of the basic salary and salary based on work performance are determined by a general internal act—namely, the Employee Handbook. These elements should be set in a way that corresponds to the nature of the work, tailored to the employer’s specific requirements and needs, and constitute objective indicators that ultimately determine the calculation and payment of the employee’s basic salary and performance-based salary. Furthermore, the legislator prescribes the criteria on the basis of which the statutory minimum annual leave of 20 working days is increased (individual contribution/performance at work, working conditions, work experience, the employee’s qualifications), while other criteria are determined by a general internal act or the employment contract. Since this is regulation intended to apply to a larger number of employees, it is more expedient to regulate it by the Employee Handbook as a general internal act and thereby avoid implementing it into each individual employment contract. Accordingly, the Employee Handbook should specify by how many working days the duration of annual leave is increased for each of the listed criteria. It is also worth mentioning the official opinion of the competent ministry, according to which employers are obliged to determine additional criteria for increases, in addition to those expressly provided for by law—a duty that employers often overlook.

In certain provisions, the Employment Act more explicitly requires employers to regulate certain matters by means of a general internal act. For example, in the section governing part-time employment, the employer is under a duty to inform employees in a timely manner about the availability of full-time and part-time positions, in the manner and within the time limits laid down by a general internal act. In any event, regulating matters that concern a larger number of employees through the Employee Handbook is advisable for practical reasons—so as not to overload the content of individual employment contracts. Nevertheless, the contracts themselves should contain proper cross-references to the relevant provisions of the Employee Handbook, so that employees are clearly informed of all their rights and obligations arising from employment. It is worth noting that an employer’s failure to adopt an Employee Handbook is not expressly “sanctioned” as a misdemeanour; however, it may still be subsumed under a “breach of law”, which may result in the imposition of remedial measures during an inspection by the Employment Inspectorate and other inconveniences that such proceedings may entail.

The obligation to adopt this rulebook does not apply to employers with 10 or fewer employees.

The Rulebook on Organisation and Systematisation of Jobs sets out the conditions for work on specific posts, the employer’s organisational units, the title and description of posts, the type and level of required professional qualifications or education, and other specific conditions for work on those posts; it may also determine the number of post-holders.

This rulebook should, to the greatest extent possible, be tailored to the employer’s business activity, its specific requirements and needs, and the nature of the work. Particular attention should be paid to defining organisational units and their hierarchy, with the clearest possible delineation of job descriptions and the responsibilities they entail.

As with the Employee Handbook, failure to adopt the Rulebook on Organisation and Systematisation of Jobs is not expressly sanctioned as a misdemeanour; however, its adoption is strongly recommended—both to avoid inconveniences during inspections by the Employment Inspectorate and to ensure the lawful conduct of any procedures for determining redundancies, and the like.

The next statute that imposes a range of obligations on employers is the Law on Safety and Health at Work. Article 14 provides that employers are under a duty to determine, by a general internal act, the rights, obligations and responsibilities in the area of safety and health at work. The relevant general act to be adopted is the Rulebook on Safety and Health at Work. However, an employer with up to 10 employees may regulate this subject matter in the employment contract or another contract in accordance with the labour regulations. For employers that are legal entities which fail to determine, by a general internal act, the rights, obligations and responsibilities in the area of safety and health at work, misdemeanour liability applies and a fine ranging from RSD 1,000,000 to 1,500,000 (approximately EUR 8,547 to 12,820) may be imposed. For the same offence, an employer–sole trader is subject to a fine of RSD 200,000 to 400,000. The same offence also carries a fine for the director or other responsible person with the employer in the amount of RSD 30,000 to 150,000. An identical fine is prescribed for employers who are natural persons. The same law obliges all employers, regardless of the number of employees, to adopt a written risk assessment (document) for all workplaces in the work environment and to set out the manner, measures and deadlines for eliminating or reducing risks to the lowest possible level. This document contains a description of the work process, an assessment of the risk of injury and/or damage to health in the performance of all tasks in the work environment, and the measures for eliminating or reducing risks with a view to improving safety and health at work. Failure to adopt the risk assessment entails misdemeanour liability for the employer (as well as for the director or another responsible person) and even stricter fines than those mentioned above.

Furthermore, the Law on Safety and Health at Work requires employers to conduct theoretical and practical training of employees for safe and healthy work, in accordance with a training programme for safe and healthy work which they are obliged to adopt. The programme consists of a general and a special part: the general part covers familiarising employees with rights, obligations and responsibilities in the field of safety and health at work under the law and by-laws, as well as with the employer’s general internal acts in this field; the special part covers familiarisation with all potential hazards and harmful effects at the workplace, the assessed risks and the measures for safe and healthy work. Failure to conduct training, as well as failure to adopt the programme, also entails misdemeanour liability and high fines (for employers that are legal entities the range is RSD 1,500,000 to 2,000,000, while for the director or other responsible person the fine ranges from RSD 50,000 to 150,000). The law further obliges employers, by a written act, to appoint a safety and health at work adviser/associate. Non-compliance with this obligation is likewise sanctioned as a misdemeanour. Finally, we note that the Law on Safety and Health at Work prescribes numerous other obligations for employers, which must be complied with consistently in order to avoid inconveniences both in inspection proceedings by the Employment Inspectorate and in relation to misdemeanour liability.

Article 10(1) of the Law on the Prevention of Harassment at Work grants employees the right to be informed in writing of the prohibition of harassment and of the rights, obligations and responsibilities of employees and the employer in relation to that prohibition. For this purpose, the employer should adopt a Rulebook on the Prevention of Harassment at Work and display it on the notice board so that employees can acquaint themselves with its contents.

The same law obliges employers to inform employees in writing, prior to commencing work, of the prohibition of harassment and of the rights, obligations and responsibilities of the employee and the employer in relation to the prohibition, in accordance with the law. Non-compliance with this obligation constitutes a misdemeanour for an employer that is a legal entity and is punishable by a fine ranging from RSD 100,000 to 400,000. The responsible person within the legal entity is punishable by a fine ranging from RSD 5,000 to 30,000, and an employer–sole trader by a fine ranging from RSD 10,000 to 40,000.

It is also necessary to mention the Rulebook on Rules of Conduct of Employers and Employees concerning the Prevention and Protection from Harassment at Work, which imposes an obligation on employers to make available to employees the identity and contact details of the person at the employer to whom a request for protection from harassment is to be submitted. Accordingly, it is necessary to adopt an appropriate decision appointing this person, together with instructions on how to submit the request, and to publish it on the notice board or otherwise make it available to employees.

Employers with more than ten employees are required to regulate the internal whistleblowing procedure by means of a general internal act. This obligation is imposed by the Law on the Protection of Whistleblowers; non-compliance gives rise to misdemeanour liability, with fines ranging from RSD 50,000 to 500,000 for legal entities and from RSD 20,000 to 200,000 for sole traders. For the same offence, a fine ranging from RSD 10,000 to 100,000 is prescribed for the responsible person in a legal entity, a state authority, an authority of territorial autonomy or a unit of local self-government. In addition, this law obliges employers to deliver to all persons engaged to work a written notice of the rights provided by the law. Failure to comply with this obligation likewise entails misdemeanour liability for the employer and the responsible person, accompanied by the fines set out above. Finally, under the Law on the Protection of Whistleblowers, the employer must designate a person authorised to receive disclosures and to conduct the procedure related to whistleblowing. Accordingly, it is necessary to adopt an appropriate decision appointing this person and to display it on the notice board or otherwise make it available to employees. Non-compliance with this obligation also attracts misdemeanour liability and fines in the amounts indicated above.

In the final section of this article, we also address other internal acts that employers ought to adopt, which are, to a greater or lesser extent, connected with employment-law matters.

By adopting this rulebook, the obligation laid down in Article 41(3) of the Personal Data Protection Act is fulfilled. The controller is required to take appropriate technical, organisational and staffing measures to ensure that processing is carried out in accordance with the law and to be able to demonstrate such compliance, taking into account the nature, scope, circumstances and purpose of processing, as well as the likelihood and level of risk to the rights and freedoms of natural persons. Where proportionate to the processing, these measures include the application of appropriate internal acts/policies of the controller on personal data protection.

Article 8 of the Accounting Act imposes an obligation on legal entities and sole traders to regulate, by a general internal act, the organisation of accounting in a manner that enables comprehensive recording, as well as the prevention and timely detection of incorrectly recorded business transactions, and to determine, by that act, the types and forms of subsidiary ledgers.

The sanctioning provisions of the Act provide for the liability of a legal entity for an economic offence if it fails to regulate, by a general internal act, the organisation of accounting in the manner described above, punishable by a fine ranging from RSD 100,000 to 3,000,000, as well as the liability of the responsible person within the legal entity for an economic offence, punishable by a fine ranging from RSD 20,000 to 150,000.

The obligations of business entities in the field of fire protection are determined by a categorisation according to fire risk. This categorisation is carried out ex officio by the Ministry of the Interior by issuing a decision. Theoretically, according to the categorisation, four types of entities can be distinguished:

- entities with a high risk of fire outbreak (first category);

- entities with a heightened risk of fire outbreak (second category);

- entities with a certain degree of fire risk (third category);

- entities falling outside the foregoing categories.

For example, entities in the first and second fire-risk categories are obliged to adopt a Fire Protection Plan; entities in the third category adopt Fire Protection Rules; and a common obligation for all three categories is to adopt and prominently display an Evacuation Plan and instructions on procedures in the event of a fire. In addition, the employer is obliged to organise basic fire-protection training for all employees immediately upon commencement of work, and no later than 30 days from the date of commencement. In connection therewith, the employer must also adopt a Basic Training Programme for employees, consisting of a general part and a special part dedicated to the specific features of fire protection for the activity carried out by the legal entity.

Under Article 14 of the Law on Archival Material and Archival Activities, creators and holders of archival material and documentary material are required to adopt: (i) a general internal act (Rulebook) governing the manner of recording, classification, archiving and retention of archival material and documentary material; and (ii) a general internal act (Rulebook) governing the manner of recording, protection and use of electronic documents. Failure to adopt these internal acts constitutes a misdemeanour of the legal entity, punishable by a fine ranging from RSD 50,000 to 2,000,000, and a misdemeanour of the responsible person within the legal entity, punishable by a fine ranging from RSD 5,000 to 150,000.

Finally, it should be noted that the law is a living organism and that regulations change frequently; it is therefore necessary to monitor amendments on a regular basis to ensure that your business operations are aligned with all current regulatory requirements.