Accounting & Finance

Employment or Other Forms of Engagement:
How to Hire an Individual in Serbia

When a company wants to engage an individual in Serbia, the first question should not be: “Which contract has the lowest tax cost?”

The first question should be:

What work will the individual actually perform, and under what conditions?

The answer determines whether the appropriate arrangement is employment, temporary and occasional work, a contract for services, supplementary work or another type of engagement.

The name of the document is not enough.

The substance of the arrangement and the way the work is actually performed should correspond to the contractual model being used.

Quick overview

Engagement model	Typical use	Key limitation
Employment	Ongoing work within the employer's organisation	Serbian employment-law framework applies
Temporary and Occasional Work	Genuine temporary or occasional activities	Work must by its nature not exceed 120 working days in a calendar year
Contract for Services – Ugovor o delu	Independent completion of a specific task or result	Generally work outside the employer's business activity, subject to statutory exceptions
Supplementary Work – Dopunski rad	Additional work by a person already employed full-time elsewhere	Up to one third of full working time
Director without employment	Director performing the corporate function without an employment relationship	Separate agreement including mandatory remuneration

Employment

Employment is generally the appropriate structure where an individual performs work continuously, is integrated into the employer’s organisation and works in accordance with the employer’s organisation, instructions and requirements.

Employment may be:

indefinite;
fixed-term where statutory conditions are met;
full-time;
part-time.

As a general rule, one or more fixed-term employment agreements with the same employee may not exceed 24 months, subject to statutory exceptions.

Where a company needs an individual on a continuing basis but only for a limited number of hours, part-time employment may be more appropriate than an arrangement outside employment.

An employee who works part-time for one employer may also establish an employment relationship with another employer for the remaining working time, up to full working time.
This is different from supplementary work.

How is salary taxed?

Employment income is subject to salary tax and mandatory social security contributions.

According to the rules in force on 30 October 2026, the date of the last update of this article:

salary tax is 10%, subject to the applicable monthly non-taxable amount;
the total pension and disability contribution rate is 24%;
the total health insurance contribution rate is 10.3%;
the unemployment insurance contribution rate is 0.75%.

For salary, the relevant contributions are allocated between the employee and employer in accordance with Serbian legislation.

Rates and non-taxable amounts may change and should always be verified for the payroll period concerned.

Employees also have statutory rights arising from employment, including rights relating to annual leave, working time, sick leave, minimum salary and termination of employment.

Temporary and Occasional Work

A Serbian temporary and occasional work agreement is commonly referred to as a PP agreement.

It may be used for work that, by its nature, does not last longer than 120 working days in a calendar year.

It is therefore not sufficient simply to engage one person for fewer than 120 days.

The work itself must genuinely be temporary or occasional.

An employer may directly conclude such an agreement with:

an unemployed individual;
a part-time employee, up to full working time;
an old-age pension beneficiary.

Temporary and occasional work may also be performed through a youth or student cooperative, subject to the applicable statutory requirements.

What rights does the individual have?

A PP agreement does not establish an employment relationship.

The individual therefore does not automatically acquire all statutory rights of an employee merely by virtue of that agreement.

However, this does not mean that the individual has no rights.

They retain the contractual rights arising from the agreement itself and social insurance rights to the extent provided by applicable law.

Tax treatment of Temporary and Occasional Work

The tax treatment depends on both the method of engagement and the status of the individual.

Remuneration under a directly concluded PP agreement is generally treated as employment income for Serbian personal income tax purposes.

However, the calculation should take into account:

the individual’s status;
the basis on which the individual is already insured;
whether the engagement is direct or through a cooperative;
whether a special tax treatment applies to a particular youth or student cooperative engagement.

There is therefore no single calculation formula that should be applied automatically to every PP arrangement.

Contract for Services – Ugovor o delu

The Serbian ugovor o delu is intended for the independent performance of a specific task or delivery of a particular result.

As a general rule, it may be used for work outside the employer's business activity.

Serbian Labour Law also provides a specific exception for individuals performing artistic or other activities in the field of culture, in accordance with applicable legislation.

The agreement should be in writing and relate to a sufficiently identifiable task or result rather than indefinite and continuous performance of the employer's regular work.

The legal nature of the engagement depends on the content of the agreement and on how the work is actually performed.

It is therefore not sufficient simply to label a document “Contract for Services”.

Tax treatment of a Contract for Services

Remuneration under a standard contract for services is generally treated as other income.

For the standard calculation, 20% standardised costs are recognised and personal income tax is generally calculated at a rate of 20%.

For social security contributions, the individual’s specific insurance status must be established.

Under the rules in force on 30 October 2026:

the pension and disability contribution rate is 24%;
the health insurance contribution rate is 10.3%.

However, whether individual contributions are payable depends on the person’s status as an insured individual and the basis on which they are already covered by mandatory insurance.

The same contribution structure should therefore not be assumed automatically for every service contract.

The recipient’s insurance status should be verified before the calculation is made.

Supplementary Work

Supplementary work – dopunski rad is intended for a person who is already employed full-time by another employer.

Such an individual may enter into a supplementary work agreement with another employer for up to one third of full working time.

If the person works only part-time for their first employer, they may instead enter into another employment relationship for the remaining working time, up to full working time.

That is a second employment relationship, not supplementary work.

Tax treatment of Supplementary Work

Remuneration from supplementary work is generally treated as other income.

In the standard calculation, 20% standardised costs are recognised and income tax is generally calculated at 20%.

The social security treatment should be considered together with the individual’s existing insurance status and the rules applicable at the time of payment.

Because full-time employment elsewhere is a condition for supplementary work, the individual already has a mandatory insurance basis through that employment, but the precise calculation should still be confirmed for each payment.

Director without an Employment Relationship

A director may perform the director function without establishing an employment relationship with the company.

In that case, the parties enter into a separate agreement governing the director’s rights, obligations and responsibilities.

When may there be a risk that the relationship is actually employment?

The title of the agreement is not decisive on its own.

Factors that may point towards characteristics of employment include:

continuous and personal performance of work;
working according to a schedule determined by the company;
direct instructions and supervision;
integration into the employer’s organisation;
performance of the employer’s regular business activities;
a long-term arrangement functioning in practice like an employer-employee relationship.

No single factor necessarily determines the outcome in every case.

However, the more the actual relationship resembles ordinary employment, the greater the risk that the chosen contractual form may be challenged.

The potential consequences may be both tax and employment-law related, including claims relating to employment rights and corresponding employer obligations.

Comparison of the main engagement models

Question	Employment	Temporary & Occasional Work	Contract for Services	Supplementary Work
Employment relationship established?	Yes	No	No	No
Suitable for regular ongoing work?	Yes	No	No – specific task/result	Only within permitted supplementary scope
Main time limitation	Depends on employment type	Work by nature up to 120 working days	No 120-day rule	Up to 1/3 of full working time
Who may be engaged?	Individual meeting employment requirements	Statutorily specified categories	Individual performing an appropriate task	Individual already employed full-time elsewhere
General tax category	Employment income	Generally employment income for direct PP engagement*	Other income	Other income
Employment status/rights	Employee	No employment; contractual and statutory insurance rights remain	No employment relationship	No employment relationship

Certain engagements through youth or student cooperatives may have different tax treatment.

Which option is the cheapest?

This should not be the first question.

The company should first establish:

what work the individual will actually perform;
how long the engagement will last;
whether the work forms part of the company’s regular business activity;
whether there is a continuous need for the work;
the individual’s current employment and insurance status;
how the work will be organised and supervised.

Only then should the tax and total cost of the legally available options be compared.

Why does the individual’s status matter?

The same gross remuneration may produce different tax and contribution consequences depending on whether the recipient is:

employed;
unemployed;
retired;
insured on another basis;
a student;
a foreign national or non-resident.

For cross-border engagements, double taxation treaties and bilateral social security agreements may also need to be considered.

Foreign Individuals and Cross-Border Engagements

Where the person is a foreign national, non-resident or remains connected with a foreign employer, additional issues may include:

Serbian tax residence;
work and residence permits;
double taxation treaties;
social security agreements;
continued foreign social security coverage;
Serbian withholding and reporting obligations;
potential Serbian tax consequences for the foreign company.

Cross-border arrangements should therefore be reviewed separately.

Common Mistakes

Using a service contract for continuous regular work

A contract for services is not a universal substitute for employment.

The statutory rule concerning work outside the employer's business activity, the cultural-sector exception and the actual manner in which the work is performed all need to be considered.

Using PP agreements for work that is permanent in nature

The 120-working-day restriction relates to the nature of the work, not simply the length of one individual's agreement.

Confusing supplementary work with a second part-time employment

A full-time employee may perform supplementary work up to one third of full working time.

A person employed part-time may establish another employment relationship for the remaining working time.

These are different legal arrangements.

Choosing the contract only by comparing net remuneration

Lower taxation does not make a particular contractual model legally appropriate.

Ignoring insurance status

The individual's insurance status can directly affect which social security contributions are payable.

Frequently Asked Questions

Can an individual who is already employed elsewhere enter into a contract for services?

Yes, provided the specific engagement itself meets the legal requirements for that type of contract.

Existing employment does not automatically make every additional engagement suitable for a service contract.

Can a contract for services last longer than 120 working days?

The 120-working-day rule applies to temporary and occasional work, not to a contract for services.

For a service contract, the nature and substance of the specific task are decisive.

Can a full-time employee enter into a directly concluded PP agreement with another employer?

Serbian Labour Law specifies particular categories of individuals who may be directly engaged under a PP agreement and does not include an individual already employed full-time.

For such a person, supplementary work may instead be relevant, subject to the statutory requirements.

What if the individual is employed part-time?

They may establish another employment relationship for the remaining working time, up to full working time.

This is not supplementary work.

Does a service contract provide annual leave rights?

Not by virtue of the contract itself, because it does not establish an employment relationship.

Does a person engaged under a PP agreement have no rights at all?

No.

The agreement does not create an employment relationship, but the individual retains rights arising from the contract itself and statutory social insurance rights where applicable.

How Veda Group Can Help

Veda Group supports companies with payroll and other payments to individuals and with determining the Serbian tax treatment of different engagement models.

Before the first payment, we can help determine:

the relevant type of income;
applicable taxes and social security contributions;
how the recipient's insurance status affects the calculation;
expected employer cost and net remuneration;
required Serbian tax filings and records.

For cross-border engagements, we can also review Serbian tax and social security implications and identify whether a treaty or social security agreement may be relevant.

Where legal advice is required to determine the appropriate contractual structure or prepare employment documentation, we coordinate with appropriate legal professionals.

Planning to hire or engage an individual in Serbia and want to confirm the tax treatment before signing the agreement?

Talk to Our Team →

The information in this article is general in nature and does not constitute tax, accounting, employment-law or other legal advice for a specific case. The appropriate engagement model and tax treatment depend on the relevant facts, the individual’s status and the rules in force at the time of payment.

Last updated: 30 October 2026

Note: Tax and social security rates stated in this article were checked against the rules in force on the date of the last update and should be reconfirmed whenever the article is subsequently updated.