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Country Spotlight

What You Need to Know About Payroll in Macedonia

Horizontal GPR Aug_Sept_18_CountrySpotlight_Macedonia

By Elena Kostovska

ChartsAndGraphs_Aug_Sept2018GPR_CountrySpotlightThe Republic of Macedonia is a country in the Balkan Peninsula in Southeast Europe. Landlocked by countries such as Greece, Albania, Serbia, and Bulgaria, it is home to over 2 million people, a quarter of which live in the capital city, Skopje. Macedonia is geographically defined by its mountains, valleys, and rivers, with its highest point being Mount Korab at over 9,000 feet.

Since gaining independence from Yugoslavia in 1991, Macedonia has been in an ongoing naming dispute with Greece, whose northern region shares the same name. The countries are currently reaching an agreement to officially change Macedonia to the Republic of Northern Macedonia. The name change needs to be approved by Macedonians via referendum followed by parliament, which would open doors for Macedonia’s acceptance into the European Union and NATO membership. The country is currently a member of the United Nations and the Council of Europe under the provisional description as the Former Yugoslav Republic (FYR) of Macedonia.

Applicable Laws

FYR Macedonia’s labor laws and procedures are primarily regulated with the Labour Relations Law (Official Gazette Nos. 62/05, 106/08, 161/08, 114/09, 130/09, 50/10, 52/10, 124/10, 47/11, 11/12, 39/12), the Collective Agreements (concluded on a national level), and the individual employment contract concluded between the employer and the employee.

 

Social Insurance Foundation

All gross salaries are subject to social insurance and tax deductions, deductible from the employee’s gross salary but payable by the employer on his/her behalf.

As of this writing, the social insurance deductions from the employee’s gross salary are calculated based on the following percentages:

  • Contribution for Pension and Disability Insurance: 18% of the gross salary
  • Contribution for Health Insurance Fund: 7.3% of the gross salary
  • Contribution for Unemployment Fund: 1.2% of the gross salary
  • Contribution for Disability: 0.5% of the gross salary

The employer is obligated to pay all contributions and taxes concurrently with the payment of net salaries.

 

Personal Income Tax

Personal income taxes are levied on the salary amount remaining after the above social insurance deductions are calculated, less a fixed amount portion of the salary (currently Macedonian Denar (MKD) 7,531) that remains untaxed. The personal income tax rate is set at 10%.

 

Employment Procedure

For an employment relationship to be established, the first step that must be taken is the publication of the vacancy by the employer (through daily newspapers or using the national employment agency publication mechanisms or private human resource-specialized agencies). The employer will select the best candidate within a maximum of 15 days from the expiration date of the public notification. The employment officially commences with the conclusion of a written employment contract between the employer and the employee.

The employment contract (which can be concluded for a predetermined duration—up to five years—or an indefinite period) must be kept at the work premises at all times and must specify certain employment aspects, such as the employment commencement date, location, duration, full- or part-time, working hours, salaries and benefits, vacation leave allowances, and other details the employer requests, provided that they are in accordance with the Labour Law.

Should provisions of the individual employment contract be in breach of the Labour Law, they are rendered invalid.

The employer must also register the employee for social insurance and in the health fund and provide the employee with a copy of the registration document.

 

Protection of Employment

Holidays: Employees are entitled to anywhere between 20 and 26 days of vacation leave annually (depending on performance, years in service, and employment contract terms).

A first-time employee gains the right to this vacation leave after six months of completed service. Prior to the completion of six months in service, the new employee is granted the right to two days of leave for every month spent working for the company. The leave of absence can be split into two separate leave periods. However, the employer must grant the employee at least 12 of the 20-26 days of leave within the calendar year. The remaining days of the leave for that year must be used before June 30 of the following calendar year.

Employees are permitted an additional seven days of leave from work during the calendar year with compensated pay, in instances and under conditions determined by the collective agreement, particularly in cases of marriage, death of a close family member, and for professional or other kinds of examinations for the requirements of the employer.

Illness: There is no annual limit on the number of sick days an employee can take. In case of an employee’s inability to work due to illness or injury, the employer must pay salary remuneration for the first 30 days of illness.

The level of remuneration due to the employee on sick leave depends on the duration of the leave:

  • 1-15 days’ duration = 70% of average salary in the last 12 months
  • 16-30 days’ duration = 90% of average salary in the last 12 months
  •  

    After 30 days, the reimbursement is paid by the health insurance fund. If the employee is sick again within the first three days of the expiration of the previous sick leave, the employer is entitled to request from the first-instance medical committee confirmation of the new sick leave, or an extension of the expired previous sick leave. Approved sick leave, while on annual leave, is not computed in the annual leave.

    Maternity: Maternity leave amounts to nine months of continuous leave during pregnancy, birth, and maternity and one-year leave for the birth of more than one child (twins, triplets, etc). Expecting mothers may begin their maternity leave 45 days before delivery and compulsory 28 days before delivery (based on the findings of authorized medical institutions).

    New mothers can return to the place of work before the end of the full maternity leave only upon their own consent. Female employees who have adopted a child are entitled to leave until the child is 9 months old.

    Compensations during the maternity leave are covered by the State Fund for Health and Insurance, provided that all social contributions have been regularly paid by the employer prior to the maternity leave.

    During the employee’s pregnancy and maternity leave, the employer cannot terminate the employment contract under any circumstances. In addition, pregnant women and women with children younger than 1 year may not be asked to work hours longer than those defined in the employment contract. Women with children between the ages of 1 and 3 may only be asked to work overtime upon their written consent.

     

    Payroll Calculation Procedure

    Each month, after the employer completes the necessary salary and social contributions/taxes payments, the employee is given a pay slip outlining the gross salary and all deductions paid from it. Payment of the gross salary automatically updates the health insurance status on the electronic health card of the employee. All residents of the country should be in possession of electronic health cards (which replaced health booklets in 2014).

    In addition, the employer is also obligated to provide the employee with the complete gross salary payment details, showing the payment of all contributions and tax deductions with the payment of each monthly salary, as well as an annual salary statement that needs to be provided to the employee before January 31 of the following calendar year.

     

    Termination of Employment

    When an infinite duration agreement is signed between the employer and the employee, the employer has the right to terminate the employment (providing a written notice of at least 30 days) only when there are justifiable grounds for terminations. Justifiable grounds include:

    • The employee not fulfilling working obligations/duties (even after a written warning)

    • The employee violating the work discipline/order (even after written warning)

    • The employee disregarding employer’s working hours

    • The employee failing to request leave of absence, notifying about sick leave, or misusing sick leave

    • The employee is in breach of a confidentiality agreement

    • Economic, technological, or structural transformations of the employer’s organization

    The employment may not be terminated during any type of approved leave (i.e., sick, maternity, annual vacation, etc.).

    Employees may terminate employment at any time provided that they submit a written notice at least one month in advance.

    In cases of a defined duration employment contract, the employer cannot terminate the employment before the end of the determined time period. Should the employee be willing to continue working past the agreement’s expiration date, an infinite employment agreement is concluded.

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    ElenaKostovska

    With more than 15 years of working experience in FYR Macedonia and abroad, Elena Kostovska has extensive background in both profit and non-profit organizations. Kostovska has undertaken the setup and client base growth of the Eurofast Skopje office since the beginning of operations in the country and oversees the day-to-day provision of high-quality services to a wide range of clients. In recent years, she has been heavily involved in Eurofast's payroll service line, both in terms of group-level relationship management and new business development as well as hands-on involvement in complex local payroll projects.