This article, authored by Mirna Milanović-Lalić, was originally published in the 2016 European Update Brochure published by Shepherd and Wedderburn LLP.
New Labour Law
The long-awaited Labour Law entered into force in the Federation of Bosnia and Herzegovina on 20 August 2015, changing the landscape for employers and employees in this entity. The Labour Law introduces mandatory changes to employment rulebooks, collective bargaining and employment agreements, along with prescribed timelines ranging from three to nine months within which employers are required to comply with the new requirements.
The Labour Law introduces the possibility of engaging a general manager and other managers via a management agreement, so as not to constitute an employment relationship between manager and employer. The maximum duration of fixed-term employment has been extended to three years (except in the case of a director’s employment agreement, which may last for as long as the director’s term of appointment).
The Labour Law introduces uniquely new provisions regulating discrimination and harassment at work, which allow the employee or job candidate to request protection from the employer. The new Labour Law also provides for the possibility of working from home and stipulates certain mandatory contractual elements to regulate such work.
Annual leave and hours of work
The minimum duration of annual vacation has been increased to 20 days, whilst the maximum weekly duration of overtime work has been decreased from ten to eight hours. Employers are under a new obligation to keep records on employees, including daily records of attendance and working hours.
Significant amendments were also made to the provisions regulating salary, severance payments, and the statute of limitations for employment termination for breach of work duty. In terms of salary, a performance-based element has been added to the mandatory salary structure. This is a variable element, which should be paid if certain criteria set out under the collective agreement or employment rulebook are met. The maximum severance payment is now six average salaries of the employee. The subjective statute of limitations for terminating employment on the grounds of breach of work duty has been extended from 15 days to 60 days from the day the employer or employee becomes aware of the breach.
The obligation to enact an employment rulebook now exists only for employers with over 30 employees. Employers falling into this category must amend existing rulebooks to comply with the Labour Law by 20 February 2016. Employers with less than 30 employees may voluntarily choose to have a rulebook, in which case such rulebooks must comply with the Labour Law by 20 February 2016.
Employment agreements must be amended in line with the changes introduced by the Labour Law by 20 November 2015, unless the employer is in the process of amending its employment rulebook, in which case, the employment agreements must be amended within three months of the date of entry into force of the employer’s new rulebook, but no later than 20 May 2016.
While these changes, aimed at creating a more flexible employment regime in the Federation of Bosnia & Herzegovina, were long awaited (such as engagement of managers via management agreements), in practice, obstacles to the implementation of such changes already exist. For instance, the Tax Authority does not have a proper mechanism to deregister a director, as a former ‘employee’ of a ‘company’ from the social contributions register because of an old decree which stipulates an obligation for directors to be employed and to pay social contributions like other employees. The relevant authorities or lawmakers will likely have to get involved in addressing these challenges in implementing the new Labour Law.