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Terminating an employee: what Croatian law requires from the employer

Status date: 30 July 2026 · Examples are fictional scenarios, not real clients

Dismissals often fail because the procedure and written reasons do not support the decision. In a dispute over an employer dismissal, the employer bears the burden of proving the justified reason.

Choose the legal ground before drafting the letter

Regular dismissal by the employer is based on business reasons, the employee’s personal capacity, or culpable conduct. Extraordinary dismissal requires an especially serious breach or another particularly important fact that makes continuation impossible. “Not a good fit” is not a statutory category; the actual facts must fit and prove one of the legal grounds.

Procedure is part of the validity

  • Before regular dismissal for conduct, a written warning and opportunity to defend are generally required.
  • Where a works council exists, consultation must take place before the decision. If none exists, the trade-union representative may exercise its statutory role.
  • Some protected employees require prior consent.
  • The dismissal must be written, reasoned and properly delivered.

The Labour Act does not create a universal one-year expiry for every warning and does not prescribe a formal “performance improvement plan” as a general condition. Those may be useful evidence or internal rules, but should not be presented as statutory requirements.

Notice and severance are separate calculations

Minimum notice depends on uninterrupted service, with special rules including a reduced notice for culpable-conduct dismissal. An employee released from working during notice retains salary compensation and employment rights. Unused annual leave is compensated at termination.

Statutory severance generally arises after two years of uninterrupted service and is excluded in the situations stated by law, including dismissal for conduct. The minimum is one third of the average monthly salary from the preceding three months for each completed year, subject to the statutory cap unless a more favourable rule applies.

Illness is not itself a dismissal reason

Temporary absence due to illness or injury is not a justified reason for dismissal. Work injury, occupational disease, pregnancy and specified parental rights have additional protection. Suspected misuse of sick leave is a separate legal issue and does not turn illness itself into a dismissal ground.

Repeated documented breach

An employee repeats the same duty breach after a written warning and has an opportunity to respond. The employer still needs a specific reasoned decision and any required consultation; the warning alone does not complete the process.

Role genuinely disappears

A reorganisation eliminates a job rather than replacing the person under a new title. The employer documents the organisational reason and applies the notice and severance rules linked to the employee’s service.

A vague termination letter

The letter states only that performance was “unsatisfactory” and contains no concrete facts. Even if management had genuine concerns, a generic explanation makes the justified ground difficult to prove.

Frequently asked questions

Must the employer prove the reason for dismissal?

Yes. In a dispute over an employer-initiated dismissal, the employer bears the burden of proving the justified reason.

How long does a written warning remain valid?

The Labour Act does not prescribe one general fixed expiry period. Any period in practice must come from the relevant rules and facts, not an invented statutory deadline.

Must I run a performance improvement plan?

The Labour Act does not create a general formal PIP requirement. Evidence of performance and a fair opportunity to respond may still matter to the legal assessment.

May I dismiss an employee who is on sick leave?

Temporary absence due to illness is not itself a justified reason. Special protection applies to incapacity caused by occupational injury or disease.

What if I skip consultation with the works council?

Where consultation is required, a decision made contrary to that duty is void. The applicable representative and statutory response period must be identified first.

When is severance due and how is it calculated?

The entitlement generally follows the statutory service condition and excludes prescribed cases. The minimum uses completed years and prior average salary, subject to the statutory cap unless a more favourable rule applies.

How much severance is tax-free?

The Income Tax Rulebook sets different coefficients and categories rather than one universal euro amount. The ground for termination and completed service determine the ceiling.

Is mutual termination always better for both sides?

No. It can change unemployment-benefit rights and tax treatment of payments, so the consequences differ from an employer dismissal.

May I deduct employee damage from salary?

Not unilaterally. Set-off against salary requires the employee's later consent or another lawful enforcement basis, and liability itself must first be established.

May I hire someone else after a redundancy dismissal?

Not immediately for the same work without first observing the former employee's statutory priority during the protected period.

Verified primary legal sources

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Status date: 30 July 2026. This guide is general information, not tax or legal advice for a specific case. Croatian rules and annual amounts can change; the date above is part of the information.

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