How to pay international contractors in Serbia
So you want to hire an independent contractor based in the Republic of Serbia? Unlocking the potential of global talent is a game-changer for businesses. With a population of about seven million, Serbia is a great place to tap into for remote workers. However, navigating international payments for contractors can be daunting.
This guide will walk you through payment methods, Serbian labor laws, and correctly classifying Serbian workers so your business is equipped to properly onboard Serbian contractors. Whether you’re hiring in the capital of Belgrade or elsewhere, read on for your step-by-step guide on running payroll for contractors in Serbia.
Step #1: Classify your workers in Serbia
Though misclassification lawsuits aren’t common in Serbia, it’s important to stay on the right side of the law to avoid legal issues or fines. The 2005 Labor Law defines employment law in Serbia, including employee-employer relationships. Here are how contractors and employees are delineated:
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Rippling
High level of worker control. Contractors can work flexibly, determining how to complete their work and when to do it.
More employer direction. Employers provide guidance on how to perform work and can set specific working hours.
Equipment and tools are owned by the worker.
Equipment and tools are typically provided by the employer.
Less integrated. Contractors are independent from the organization, meaning they’re more likely to work remotely.
Highly integrated. Employees are typically more integrated and may work on company premises.
No entitlement to benefits. Contractors don’t get the same employee benefits and labor protections as employees. Contractors pay their own taxes and social security contributions.
Entitled to benefits. Employees are entitled to employment benefits and protections, such as overtime pay, minimum wage, bereavement leave, sick leave, and maternity leave. Employers contribute to their pension insurance and health insurance.
Time-bound engagement. Contractors work for a specific period on a set project and for a fixed fee.
Indefinite agreement. Employees are typically hired indefinitely and are paid hourly wages or a monthly salary.
Risk of loss. Contractors take on more risk and liability for their work. They’re also liable for tax issues or debt.
No risk of loss. Employees are protected from liability for work-related problems.
Paid upon completion of their project(s).
Paid at least once per month.
Serbian contractors should sign a written service agreement outlining the work to be completed, the fees, and the timeframe. Employees must receive employment agreements written in Serbian, which cover their job title, responsibilities, salary, and more.
In Serbia, independent contractors may be registered with the Serbian Business Registers Agency as entrepreneurs (sole traders) or as a limited company. As an employer, you can engage with contractors operating under either model. In addition to working directly with a contractor, you can go through an umbrella company (also known as a contractor management company), which hires individuals and contracts them out for work. In that case, you pay the umbrella company, which is responsible for paying out the workers, making tax withholdings, and complying with local laws.
Step #2: Determine the best way to pay your contractors in Serbia
When you establish your service agreement, it's essential to consider the most suitable payment method for your Serbian contractors. The rise of the global workforce has uncovered numerous options for sending payments, including:
- Bank wires: You can choose to open a Serbian bank account and deposit funds directly into your contractors' local accounts. Alternatively, use your bank to send a global wire transfer for payment.
- International money orders: While this is a traditional option, it can be slow and inconvenient, involving physical purchases and deposits. Additionally, there may be fees and unfavorable exchange rates.
- Digital wallets or payment platforms: Be cautious, as not all digital payment platforms are available in Serbia. Venmo doesn’t allow transfers outside of the US, but Wise, on the other hand, does allow transfers to Serbia. Keep in mind that exchange rates may fluctuate, affecting your outgoings.
- Global payroll services: Although contractors usually aren't part of payroll, platforms like Rippling offer the convenience of paying Serbian employees and contractors, along with other global workers, in a single pay run.
Step #3: Use global payroll software to process payments for Serbian contractors
Though there are various methods available for paying contractors in Serbia, one stands out as the fastest and simplest: global payroll software like Rippling.
Rippling allows you to pay all your global employees and contractors in a single pay run, no matter where they’re based. Take a closer look at how Rippling's efficient global payroll system works:
Step #4: Ensure your Serbian contractors have the right tax information
Self-employed, independent contractors are paid their fees in full without deductions for taxes or social contributions. They are expected to report and pay their own taxes, Pension and Disability Insurance Fund contributions, health insurance contributions, and social insurance contributions.
Serbia follows a unique tax system for independent contractors. Registered entrepreneurs pay personal income tax at 10% and social security at 37.8% of their earnings. Alternatively, they can also register for the lump-sum taxation model, which withholds a set amount of income tax and social security (often resulting in fewer taxes paid than the former). Contractors should have a tax identification number, known in Serbia as the Poreski Identifikacioni Broj (PIB), and thoroughly keep track of their income information.
Even though employers don’t have to withhold taxes on behalf of their Serbian freelancers, there’s other tax-related paperwork that they need to complete to remain compliant. And, if those contractors are converted to employees, the employer will need to begin processing tax withholdings (more on that below).
If that sounds overwhelming, a huge benefit of processing payments through a global payroll system like Rippling is offloading the paperwork, including calculations and filings.
Frequently asked questions about running payroll for contractors in Serbia
Do you need to withhold taxes when paying contractors in Serbia?
Foreign companies are not required to withhold payroll taxes when paying contractors in Serbia. Freelancers are responsible for their own taxes and contributions.
Does the Serbian minimum wage apply to independent contractors in Serbia?
In Serbia, the minimum wage is 54,649 Serbian dinar (RSD). However, minimum wage regulations don’t apply to independent contractors. Freelancers negotiate their own pricing.
Do Serbian contractors get benefits?
No. Though full-time employees in Serbia receive benefits, such as group personal accident insurance and paid time off, independent contractors aren’t entitled to such benefits.
Can you pay contractors in Serbia in your home currency?
Employers should pay all Serbian contractors in Serbian dinar unless they agree in writing to be paid in a different currency.
Can you manually pay contractors in Serbia?
While some small business owners may opt for manual payment processing to save costs, this can be time-consuming. Moreover, this approach comes with significant risks:
- Compliance. Human errors and omissions pose compliance risks when handling payroll manually. In contrast, Rippling ensures automatic enforcement of compliance with local employment laws, regardless of where your workers are located.
- Security. Using spreadsheets or paper records for manual payroll processing can expose sensitive employee information to potential loss or theft.
Rippling offers the advantage of automated payroll processing. By synchronizing payroll with HR data, the need for manual data entry is eliminated. Regardless of where your employees and contractors are based, Rippling ensures prompt, compliant payments—all in a single pay run. Streamline your payment processes and mitigate risks with Rippling.
How do you turn a contractor into an employee in Serbia?
Leveraging independent contractors offers advantages, providing flexibility without the need for a legal entity in Serbia. However, if you decide to integrate your contractor as part of your team, you can convert them into a full-time employee.
Converting a contractor into a full-time employee in Serbia is similar to hiring any regular employee. This involves drafting an employment contract in Serbian, which adheres to labor codes, specifies probation periods, outlines salary details and working hours, and defines notice periods for termination. Those who hire full-time employees either need to either establish a local entity or use an Employer of Record service (EOR).
To remain compliant, you’ll want to ensure that their pay is above minimum wage, regardless of what their fee was as a contractor. You must also enroll the new employee in benefits and make pension-related payroll deductions. Additionally, you may need to verify their legal eligibility to work in Serbia and whether they have or need a work permit.
Managing onboarding, administrative tasks, and compliance can be complex—but Rippling simplifies the entire process. With Rippling, you can efficiently manage contractors and seamlessly transition them to full-time employees with compliant paperwork, benefits administration, payroll, and more.
Rippling and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.
