Working for a UK employer: Croatian workers facing a difficult decision: a higher salary now or a pension tomorrow?

Brexit has resulted in significant changes to contribution requirements, registration, and payment obligations for Croatian citizens employed by UK-based employers. The regulation on the coordination of social security systems applies to employment with EU member countries, the European Economic Area, and Switzerland. Croatian legislation applies to workers living in Croatia and employed by UK-based employers, and such individuals are required to make contributions to pension and health insurance in Croatia while being entitled to receive benefits from the Croatian pension and health systems.

The Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union (Withdrawal Agreement) became effective on 1 February 2020 and outlined the rights and responsibilities of citizens with regard to labour and social security rights. The transitional period ended on 31 December 2020, and the Regulation on the coordination of social security systems remains applicable to individuals in situations involving cross-border elements, such as those working for UK employers, as long as their circumstances remain unchanged.

Until 31 December 2020, EU law was applicable to all work relationships established, and an employee would be insured based on their employment with an employer from another EU member state. Croatian legislation distinguishes between rules governing contributions paid by individuals employed by EU employers versus those employed by third countries.

For workers who started working for a UK employer before 1 January 2021, the UK employer is responsible for managing and making contributions in accordance with EU regulations. They are not affected by the changes, and the UK employer must continue to account and pay contributions in the same manner as before for as long as the worker remains employed. The contribution rates are 20% of the gross salary being allocated to pension insurance contributions (15% for the first pillar and 5% for the second pillar) and 16.5% for the health insurance, paid on top of the gross salary. The basis for contributions is the monthly salary, which includes all payments or perks. EU employers must pay contributions within thirty days from the date of salary payment, and for salary in kind, the deadline is the last day of the following month. The benefits applicable to employment with a Croatian employer also apply when working for an EU employer.

The Trade and Cooperation Agreement between the EU and the UK establishes regulations for future relationships and collaboration and pertains to EU and UK citizens who were not in a cross-border situation before the end of 2020, and therefore are not covered by the Withdrawal Agreement. The Protocol on Social Security Coordination provides clarity regarding the rules that apply to individuals employed by a UK-based employer after 1 January 2021. The provision on applicable legislation is nearly identical to the regulation on the coordination of social security systems, meaning that the legislation of the country where an individual is employed applies to that person. However, under Croatian legislation, employers from third countries, including the UK, are not obligated to pay contributions for their workers. The worker assumes all obligations. Contributions are due by the fifteenth day of the month for the previous month, and the monthly basis for contributions is the product of the average salary in Croatia and the coefficient 1.0. Contributions are based on the statutory base, unlike contributions based on monthly salary. Standard contribution rates apply.