New payroll rules in Republika Srpska (Bosnia and Herzegovina)

Amendments to the Labour Act (“Labour Act”) of Republika Srpska (“RS”) entered into force on 1 January 2022, simultaneously with the amendments to the RS’ Social Contributions Act and the Income Tax Act.

The novelties pertain to the change of the tax base, reduction of the tax rate, reduction of the health insurance contribution rate, and change of how pay for work performance is treated.

Gross salary

The law now requires the employers to state in the employment agreement gross salary, i.e. an overall amount from which salary tax and social contributions will be withheld. Requirement to express gross salary in the employment agreements will have as its implication that any future increase in salary tax or social contributions rates will reduce, whereas any decrease in the rates will increase, the amount the employee will be able to pocket (net salary).

The deadline for the employers to amend their existing employment agreements to state gross salary is 1 February 2022.

Salary tax and social contributions rates

Salary tax rate is reduced from 10% to 8%, whereas health insurance contribution is reduced from 12% to 10,2%, resulting in the reduction of the cumulative social contributions rate from 32,8% to 31%.

The deadline for the labour minister to pass a rulebook on the contents of written payroll slip that should further clarify to employers how to calculate the salaries is 2 March 2022.

Work performance

Payment related to wok performance is usefully removed from the concept of salary and is now regarded as extra pay, if agreed and deserved.

* Our blinkdraft| Employment templates available to clients in Republika Srpska are updated in line with the latest changes to the Labour Act.

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