How to Hire in Bosnia & Herzegovina: Payroll & Taxes

Hiring employees in Bosnia and Herzegovina is one thing. Getting those employees on your company payroll is another. Foreign companies have two options, each offering its own pros and cons regarding the time it takes to get a new employee working for your company, the cost, and the level of control you have.

Establishing your own legal entity

When you create your own entity in Bosnia and Herzegovina, you gain total control over your employees. However, there are some serious barriers to entry, including registering with local governments, creating internal tax compliance systems, and meeting all of the requirements of Bosnian labor law.

If you're planning to build a large team in Bosnia and Herzegovina or open a permanent office, then setting up a legal entity can be a good option for global expansion . However, if you're planning to test the waters by making only a few hires, the time it can take to set up your own company, along with the ongoing administrative responsibility, may exceed the advantages of a permanent establishment .

Hiring through an employer of record (EOR)

If you don't want to set up your own entity, you can still hire employees through a third-party service called an employer of record (EOR) . In essence, the EOR acts as the legal employer for the employees you hire, while you manage day-to-day work activities and decisions about those employees. An EOR in Bosnia and Herzegovina will draft compliant employment agreements for you in the local language, process payroll for your employees, collect withholdings for taxes, and administer the required benefits to your employees.

The benefit of using an EOR is that you can get your employees up and running in Bosnia and Herzegovina in weeks rather than months. An EOR will help eliminate many of the bureaucratic headaches associated with opening your own company, such as registration, payroll setup, and ongoing compliance monitoring. Using an EOR can be a great way to remove some of the hurdles associated with traditional international hiring .

Employment contracts in Bosnia and Herzegovina

Contracts for employees must be written and delivered before initiating employment. There are no exceptions to this requirement. The contract will need to include basic information about the employee and the employer, as well as the start date, job responsibilities, work hours, wages/bonuses, paid holidays/vacation time, and the timeframe for providing notice to end the contract.

Fixed-term contracts are permitted, but they are limited to five years and must be based on "objective" reasons, such as the completion of a project or the meeting of seasonal needs. When an employee has a fixed contract that extends past five years, the contract may be converted to an indefinite contract unless the employee agrees to the contrary in writing. Many employers opt to use indefinite contracts to eliminate the possibility of converting a contract.

Employment law differs between the Federation of Bosnia and Herzegovina and Republika Srpska due to Bosnia and Herzegovina's dual-entity system. For these reasons, it's essential to tailor the contract to meet the requirements of the entity in which your employee works.

Working hours, holidays, and leave

Standard full-time employment in Bosnia and Herzegovina typically entails a 40-hour-per-week work schedule. While overtime can be issued, it should not be used as an ongoing component of the employer's workforce planning. Annual leave entitlements vary depending on which entity the employee works for. Employees working for entities in Republika Srpska have the minimum right to 20 days of paid vacation; employees working for entities in the Federation of Bosnia and Herzegovina can receive up to 30 days of paid vacation.

In addition to annual leave entitlements, there are additional layers of leave that apply to all employees in Bosnia and Herzegovina. The country celebrates 22 national and entity-specific holidays, including some that recognize religious celebrations. In addition to national and entity-specific holidays, other types of leave available to employees include:

Paid sick leave of at least five days per year
Job-protected parental leave
Special leave for family emergencies or other personal reasons

To begin accruing annual leave entitlements, employees must complete one year of continuous service. Annual leave must be earned during each calendar year, and a minimum of 12 consecutive days of annual leave must be taken during the calendar year in which the leave is earned.

Employee benefits and social contributions

Social security contributions are split between the employer and employee. The system covers pension, health insurance, and unemployment protection. In the Federation of Bosnia and Herzegovina, employees contribute 31%of gross salary while employers add another 5.5%. Republika Srpska has different social contribution rates. Employers contribute 6% to pension insurance, 6.5% to health insurance, and 0.5% to unemployment insurance.

These contributions are mandatory and non-negotiable. Beyond statutory requirements, many tech companies offer supplemental benefits to stay competitive. Private health insurance, meal allowances, and transportation subsidies help attract talent in a market where skilled developers have options. The key is understanding that statutory contributions form your baseline. Everything else becomes your competitive advantage.

Payroll and taxation in Bosnia and Herzegovina

Payroll runs on a monthly cycle with salaries typically due by month-end via bank transfer. Personal income tax is a flat 10% rate across both the Federation of Bosnia and Herzegovina and Republika Srpska. Tax deductions reduce the taxable base. Employers must remit all tax withholdings and social contributions by the 15th of the following month. Miss that deadline and penalties can accumulate quickly. Key payroll obligations include:

Calculate gross salary and statutory deductions
Withhold employee social contributions
Add employer social contributions
Deduct income tax on the net amount
Transfer salary to the employee and remit withholdings to the authorities

Getting payroll wrong creates headaches for everyone. Employees notice immediately when net pay does not match expectations. Tax authorities eventually notice when filings do not align with obligations.

Employee vs. contractor classification

What defines an employee versus a contractor isn’t based on how you refer to an individual in a contract. Bosnia and Herzegovina’s Labor Code considers the working relationship. An independent contractor typically has a contract where they agree to provide services to the company. The contractor is responsible for creating their own schedule and providing services independently, and does not have to follow any directives from the company.

When a contractor begins working within your company’s specified hours and/or receives guidance or directions as you would give an employee, the contractor is essentially functioning as an employee according to the law. Misclassifying employees creates liability for past-due social contributions and potential penalties; however, it also creates potential litigation. Tax authorities take notice of these types of classifications because they result in loss of tax revenues.

Termination and severance in Bosnia and Herzegovina

Notice periods depend on who initiates termination. Employees must give at least 15 days' notice in Republika Srpska. Employers terminating staff must provide 30 days' notice. The Federation of Bosnia and Herzegovina may have similar but slightly different requirements given its dual-entity structure. These minimums can be extended by contract or collective bargaining agreement, but cannot be shortened below statutory levels.

Severance pay kicks in after two years of continuous service unless the employee is fired for serious misconduct. The calculation is straightforward : at least one-third of the employee's average net salary over the preceding three months multiplied by years of service. Someone who worked five years would receive roughly 1.67 months of average net salary. Employees terminated before hitting the two-year mark receive no severance under standard conditions.

Work permits and immigration

Bosnia and Herzegovina requires non-EU nationals to obtain work visas in order to lawfully engage in employment activities within its borders. Typically, the employer is responsible for sponsoring the work visa or work permit application(s). Processing time varies from entity to entity, and also based on the position for which the candidate is applying, as well as the nationality of the candidate. Given the variables, candidates can anticipate processing times ranging from a couple of weeks to a couple of months.

Key requirements to obtain work visas in Bosnia and Herzegovina include:

Valid employment contract from a Bosnian employer or entity
Proof that the position cannot be filled by local labor market
Educational qualifications and professional certifications
Valid passport and health insurance coverage

EU citizens have an easier path under Bosnia and Herzegovina's Stabilisation and Association Agreement with the EU. They still need to register their residence but face fewer bureaucratic hurdles.

Hire talent in Bosnia and Herzegovina with Pebl

Hiring across borders shouldn't require hiring a legal team proficient in Bosnian labor law. Pebl ensures it doesn’t. Our global Employer of Record (EOR) service covers more than 185 countries, including Bosnia and Herzegovina. When you're ready to onboard Bosnian talent, we take care of employment contracts, tax withholdings, social contributions, and ongoing compliance.

You get the skilled labor. We handle the administrative overhead. Contact us to learn more.

FAQs: Hiring in Bosnia and Herzegovina

These are the questions that come up once you start moving from interest to action. Some are practical. Some get at what it's actually like to work with Bosnian talent.

What is a good salary in Bosnia and Herzegovina?

The average monthly salary in Bosnia and Herzegovina is approximately BAM 1,545 (a little over US$900). Tech and finance professionals earn significantly above this average. A "good" salary in Bosnia and Herzegovina is relative to the profession, but an income of around BAM 1,700-2,500 (approximately US$1,000 to US$1,500) would allow for a comfortable, above-average lifestyle.

What is the work culture in Bosnia and Herzegovina?

Bosnia and Herzegovina's work culture combines the professional norms of Europe with a slightly more relational style of interaction than you may experience in many parts of Western Europe. In younger talent pools like the tech sector, English fluency is high. Anticipate direct, unfiltered communications, as well as a no-nonsense, practical style of problem-solving, rather than a hierarchical and formalized structure.

Can I hire in Bosnia and Herzegovina without a local business entity?

Absolutely. Partnering with an EOR removes the need to establish your own legal presence in the country. The EOR handles the legal obligations associated with being the employer, while you will be responsible for managing the direct working relationship with your employees. In many cases, this allows hiring employees within weeks rather than months, which would be required to establish a local entity and obtain the necessary regulatory approvals.

What jobs are in high demand in Bosnia and Herzegovina?

IT and software development continue to be the most in-demand areas of the economy. Beyond tech, the construction industry continues to see significant demand for skilled labor. Other areas of the economy, including light metals, wood processing, food processing, and hospitality, are growing rapidly and require highly qualified individuals. Additionally, the Business Process Outsourcing (BPO) industry has grown into one of the largest sources of employment opportunities for youth over the past decade.

Disclaimer: This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided “as is,” and no representations are made that the content is error-free.