PAYROLL & EMPLOYER SERVICES

Leading Professional Services... across South East Europe Accounting & Payroll Mergers & Acquisitions Intellectual Property Cross Border Transactions Shipping PAYROLL & EMPLOYER SERVICES Quality tax advice, globally! www.taxand.com Eurofast is the Cypriot member of Taxand Payroll 1

INDEX Payroll overview by country About EUROFAST GLOBAL LTD ALBANIA 1. Social Insurance 2. Tax Deductions 3. Employment Procedure 4. Protection of Employment 5. Payroll Calculation Procedure 6. Employment Termination BULGARIA 1. Applicable Law on Payroll Fees 4. Employment Procedure CYPRUS 1. Applicable Law on Payroll Fees 4. Employment procedure 6. Payroll Calculation procedure 7. Termination of Employment GREECE 1. Applicable Law on Payroll Fees 4. Employment Procedure MONTENEGRO 1. Applicable law on Payroll Fees 4. Employment Procedure 4 6 7 7 7 8 9 10 11 11 11 12 12 12 13 13 14 14 14 15 16 16 17 17 18 18 18 20 20 21 22 22 23 23 23 24 24 25 25 26 SERBIA 1. Applicable law on Payroll Fees 4. Employment Procedure FYR MACEDONIA 1. Applicable law on Payroll Fees 4. Employment procedure CROATIA 1. Applicable law on Payroll Fees 4. Employment procedure BOSNIA & HERZEGOVINA 1. Applicable law on Payroll Fees 4. Employment procedure KOSOVO 1. Applicable law on Payroll Fees 4. Employment procedure EGYPT 47 ROMANIA 27 1. Applicable law on Payroll Fees 47 1. Applicable law on Payroll Fees 27 47 2. Social Insurance Contributions 27 48 28 4. Employment procedure 48 4. Employment Procedure 28 49 29 50 30 50 30 2 Payroll Payroll 3 32 32 33 33 33 35 36 36 38 38 38 39 39 39 41 41 43 43 43 44 44 45 46 46 47 47 47 48 48 49 50 50 47 47 47 48 48 49 50 50

Introduction Eurofast in recent years has become a leader in employment and payroll services offering practical and responsive advice to a wide spectrum of clients including multinational and locally listed companies, mid-market companies and large private entities. Effective employee remuneration is critical to business success and errors can be costly. Our aim is to ensure remuneration plans work in practice not just theory, wherever you deploy your people. We understand that globalisation and the complexity of the business environment demand sophisticated and customised advice that meets the highest standards, delivered by experienced professionals who put their clients best interest first. Our Payroll & Employment Services include: Long and short-term global equity and cash plan design and implementation Payroll preparation and processing Employer and employee tax, social security, withholding and compliance due diligence Legal and regulatory global due diligence Employee compensation and engagement programs Equity awards for international assignees Taxation of expatriates Residency permits We are proud to share with you our comprehensive guide focusing on South East Europe and look forward to working with the purpose to optimise value for your people and business. What is innovative about our boutique organization is our passion for our work. We are dedicated to delivering independent, added value and proactive services to our clients, with the aim not only to satisfy them, but to delight them. With local teams ranging from 10-60 professionals, we enforce our mission and philosophy in every one of our offices. Eurofast in recent years has achieved worldwide market recognition for its exceptional advice, capabilities and innovation in the Region. About Eurofast Taxand Eurofast Taxand closely cooperates with Eurofast Global providing tax advisory services in Cyprus. Eurofast Taxand works with a wide spectrum of clients including multinational and locally listed companies, mid-market companies and large private entities. Eurofast delivers a full range of technical services and a partner led personal service with the highest level of confidentiality. Eurofast is Taxand Cyprus. Taxand provides high quality, integrated tax advice worldwide. Our tax professionals, nearly 400 tax partners and over 2,000 tax advisors in nearly 50 countries grasp both the fine points of tax and the broader strategic implications, helping you mitigate risk, manage your tax burden and drive the performance of your business. We re passionate about tax. For further information please visit our website www.eurofast.eu About Eurofast Global Ltd Eurofast is a boutique professional services Group operating in South East Europe and East Mediterranean through fully fledged offices in Lefkosia, Athens, Sofia, Bucharest, Belgrade, Podgorica, Tirana, Skopje, Zagreb, Pristina, Banja Luca, Sarajevo, Cairo and Alexandria. Our professional services include accounting and payroll services, transaction advisory, compliance reporting and cross border structuring. Eurofast employs over 220 people in South East Europe and East Mediterranean. It is managed by a team of professionals capable of efficiently addressing all client needs in one single meeting, using one single language for all the countries in the Region. 4 Payroll Payroll 5

defined as companies whose turnover does not exceed 8.000.000 ALL) are registered as tax-payers and are entitled to paying contributions every trimester. The documents required for public and private institutions are the monthly payroll slips. All employees in the public or private sector are issued a personal social insurance number from the I.S.SH. 2. Tax Deductions Companies are liable to pay Salary s Tax (deducted from the gross salary of the employee, and paid on behalf of the employee), based on the base gross salary of the employee and as follows: ALBANIA Base gross salary for employees: 0 10.000 ALL Nil 10.000 30.000 ALL 10% applied on amount exceeding 10.000 ALL Above 30.000 ALL 10 % applied to the whole amount. 1. Social Insurance The central institution for Social Insurance is The Institute of Social Insurance ( I.S.SH. ) which operates according to law nr. 7703 dt.11/05/1993. The contribution rates are as follows: Employer 16.7% Employee 11.2% The social security contributions due by employees are withheld by the employer from their gross monthly income and the employer is liable to pay the total amount of social and health insurance by the 20th of the month following the month in question. The relevant forms are available from the site www.tatime.gov.al Self-employed individuals in the private sector are liable for 30% of the minimum base salary as determined every year by the Decision of the Council of Ministers (23% social insurance and 7% health insurance). According to the Law on Tax Returns in Albania, a salaries table of reference is used as the basis for the payment of contributions and salaries tax returns. The table considers the trade activity of the employer, location, as well as the employee s position and educational background. 3. Employment Procedure The employment contract must be in accordance with the Employment Contract Template of the Labour Code which includes clauses such as: 1. The identity of the parties 2. Employment duration period limited or unlimited, start date and the work place 3. The working hours per week (in conformity with the Albanian Labour Code, the standard number of working hours per week is 40) and the wage information. Additional working hours per week are compensated as overtime. 4. Annual Holidays 5. The rights and liabilities of both parties The two types of employment are: Small & medium sized companies (as of 2010, these are 1. Full - time employment 2. Part - time employment 6 Payroll Payroll 7

The employment contract is compiled in accordance with the Labour Code and includes any particular requirements from employer and employee. It also includes any additional specifications arising from internal requirements, but they always must be in accordance with the local regulations. Documents to be submitted upon employment: a. Employment contract b. Certification confirming that the employer is willing to pay social and health insurances and the salaries tax returns on behalf of the employee. The declaration is submitted by the employer to the Regional Tax Directorate. Periodic obligations include: - Monthly net salary - Monthly payment of social & health insurance and salaries tax returns 4. Protection of Employment Obligatory payments of the employer and the Social Insurance Fund occur in the following cases: Holidays: The employee is liable to 28 calendar days of paid leave for each year of service in the company if the period of service is less than one year, the paid leave days are in proportion with the period of service i.e. if the employee has been in service for a period of 9 (nine) months, the paid leave days will be 9/12*28 = 21 days. Official holidays are paid as well the chart of the official (national) holidays is published in the official website www. bankofalbania.org Illness: absences approved by a medical report or any other document predicted by the Labour Code - only the actual working days are paid. For sick leave absences not approved by a medical report or another medical document, the employee is compensated for the working days as agreed in the employment contract. For absences less than 14 days approved by a medical report, the employee is reported on the payroll, and the employer is obligated to pay contributions for the whole working period (including the absent days), but the net salary is based on the actual working days. The employee is entitled for 80% reimbursement of the daily average salary by the Regional Insurance Directorate. For absences over 14 days which have been approved by a medical report, the employee is not reported on the payroll and the employer doesn t pay any contributions on behalf of the employee. The employer does not pay any salary to employees for the period of absence. The employer is obligated to submit the medical reports to the Regional Insurance Directorate, and the employee is reimbursed 80% of the average salary amount from the Regional Insurance Directorate if the employee s years of employment are over 10 years, and 70% of the average salary amount if the employee has less than 10 years of employment. Maternity: The employee is liable to maternity leave and for reimbursement from the Health Insurance Institution, if social & health contributions were paid 12 months prior to the pregnancy and during the pregnancy period. The calculation for the benefits from the Health Insurance Fund is based on the previous calendar year. The employee is liable to a maternity leave on the 9th month of the pregnancy and has the right to benefit from the Health Insurance Fund for 12 consecutive months: the first six months the employee will be compensated with 80% of the average monthly salary (of the previous year), and the following 6 months with 50% of the average monthly salary (of the previous year). 5. Payroll Calculation Procedure - Full working days, no bonuses, and no overtimes: Net salary is payable to the employees monthly. The total days worked are calculated on the payroll list as is the basis gross salary. Deductions are then made according to law instructions and the net salary is derived. - Bonuses + overtimes Overtimes are hours of work exceeding 40 hours/week and they are compensated with at least 25 % more than the regular working hours. Bonuses and overtimes are considered as one-time income for the employee thus not included in the gross basis salary for contribution purposes. They are included in the gross salary only for the calculation of the personal income tax. 8 Payroll Payroll 9

At the end of each month, the employer is obliged to transfer the net salaries to the employees bank account. 6. Employment Termination If the employment period ends according to the agreement, there are no obligations for either party. If the employment period ends before the contractual date, the employer is obligated to pay to the employee the full amount of salaries up to the expiration date of the contract. When the employee resigns before the contractual expiry date, he/she is liable for penalties for the remaining period, as determined in the contract. BULGARIA 1. Applicable Law on Payroll Fees The general provisions regarding the Bulgarian payroll system are settled in accordance to the Bulgarian Labour Code and Bulgarian Social Insurance Code. Social insurance contributions are paid on a monthly basis. The percentage of social insurances depends on the activity of the employer. As from the 1st of January, 2011, the range of social insurance contributions is between 30.30% up to 46.40% of the gross salary of the employee. The most common case 30.80% is distributed as follows: Employer 17.90% Employee 12.90% The employer is obligated to pay the social insurance contributions each month by transferring the relevant amount to the bank accounts of the National Revenue Agency. When the payments are completed, the employer submits the necessary declarations for the accrued social insurances and the paid social contributions to the relevant authorities. 10 Payroll Payroll 11

The personal income of individuals is taxed at a flat rate of 10% of the net salary. Income tax is payable by the employer on behalf of the employee together with the payment of social insurances. Every additional payment (including bonuses) is subject to social insurance and taxes. At the end of the year, every employer provides to employees a certificate for the total amount that has been paid on their behalf including social insurance contributions and income tax. Depending on the employer s trade activities and the position held by the employee, there are set minimum social insurance bases. The maximum Social Insurance base is at 2.000,00 BGL / 1.022,58 EURO. 4. Employment Procedure The employer has the obligation to register employment contracts no later than 3 days after their signing, but not later than the starting date of the employee and no later than 7 days after their termination. The statutory number of working hours per week is 40 hours. There is a separate procedure that needs to be followed in cases when a company is hiring a specialist from a non-eu country. Holidays: According to the Bulgarian Labour Code, every employee is entitled to have 20 working days of paid annual leave. If there is an additional agreement between the employer and the employee this period can be longer, but not shorter. There are some categories (such as students at the university) which have additional paid days off, but the number of days can never exceed 30. If the employment contract is terminated and the employee has unused days off, these days should be paid by the employer as a compensation. is 70% of the gross salary of the employee. For the days after that, the employee is receiving 80% of the average income in the past six months, which is payable by the State. In case of a work accident this percentage is 90%. The employer has the obligation to present the sick-leave list of the employees to the Authorities. Compensations are paid by the Government within 30 days of its presentation. Maternity: The compensation is payable by the Government and it is set at 90% of the income of the person for the last eighteen months of employment. It is payable for a duration of 410 days. The only obligation of the employer in such cases is to provide the maternity-leave list to the Government Institutions. The monthly payroll calculation procedure consists of the following steps: Employees monthly working and sick days are calculated and compared in case there are additional leave applications and contracts. Bonuses or any other benefits are added to the Gross salary. After the necessary calculations and deductions are made, the necessary print outs are generated. The payroll file, social insurance payment orders as well as salary payment orders (if necessary) are sent to the employer. When the payroll calculations are completed, two extra declarations are prepared and submitted to the National Revenue Agency. In case of illness and after the declarations have been submitted the sick leave list must be prepared and submitted no later than 3-5 days after the salaries are accrued. Employment termination may occur with a notice of one, three or six months based on the employment contract. After the termination of the contract, the employer is obliged to provide to the employee all the relevant documents including certificate for paid social insurances and income tax and used annual leave report. In addition to the 20 paid leave days, every employee is entitled to approximately 15 official holidays. Illness: The compensation is payable by the Government, except for the first three days, which are paid by the employer. The amount of the compensation for the first three days 12 Payroll Payroll 13

Maximum limit of emoluments in relation to employees Weekly employees Monthly employees Weekly Monthly Yearly 1002 52.104 4.342 52.104 Social cohesion fund As from 1st January 2003, every employer is liable to pay a 2% contribution to a special fund called cohesion fund, on salaries of all employees, both locals and expatriates. CYPRUS 1. Applicable Law on Payroll Fees There are a number of applicable laws in Cyprus covering many aspects of the Employment and Insurance Sections. The most commonly used ones for calculations and documentations are the following: Social Insurance Legislation, Annual Paid Leave Legislation, Termination of Employment Legislation, and Social Pension Legislation. The Social Insurance Contribution is compulsory in Cyprus and covers all those working in the Republic. The applicable rates are as follows: Self- Employed Social Insurance Contribution 12.6% Contribution to the Redundancy Fund Contribution to the Industrial Training Fund Contribution to the Social Cohesion Fund - - - Employee 6.8% - - - Employer 6.8% 1.2% 0.5% 2% However, an exemption from the contribution to the social cohesion fund is granted in cases of foreign employees employed by an International Business Company, a foreign government, a ship management company or a company owning a Cyprus ship. This contribution replaces the 2% contribution to the defence fund, which is abolished as of 1/1/2003. Resident individuals are subject to tax on their worldwide income. In order to be classified as a resident individual, one has to reside in the Republic of Cyprus for a period exceeding 183 days in a year. Tax is charged on income accruing in, derived from or received in Cyprus by any person in respect of gains or profits from any trade, business, profession or vocation or from any office or employment, including pensions or from dividends, interest, rents, annuities and royalties. In the case of salaried individuals income also includes benefits in kind. Expatriate employees of International Business Enterprises are taxed only on the income earned or generated in Cyprus, provided that such employees meet the residency requirements as defined above. Those expatriates living and working outside Cyprus are exempt from income tax if they are paid through a bank in Cyprus. 14 Payroll Payroll 15

The personal tax rates applicable are as follows: Taxable Income EUR Tax Rate % 0 19.500 0 19.501 28.000 20 28.001 36.300 25 36.301-30 4. Employment procedure The employer must be legally registered to the Social Insurance Fund and have a registration number in order to be able to employ another person. Furthermore, a hiring document/contract is completed by the employee containing full personal details. The document has to be signed by both employer and employee and must be submitted by the employer to the Social Insurance authorities. The agreement must also state the nature of the employee s work, the working hours and the way that payments will be made. The period of employment can be indefinite or defined stating the actual date of termination. The maximum working hours can not exceed 8 hours per day and 38.5 hours per week. Holidays: Employees that work 5 days per week have the right of 20 days of paid (by the employer or the Annual Leave Fund) leave each year. Employees that work 6 days per week are entitled to 24 days per year. The said paid leave is allowed to be reduced if the employee has worked less than 48 weeks during the year. Public holidays, maternity leave, leave due to accidents or inability to work and days of strike are not considered days of annual leave. Every employer is liable to pay contribution (of 6-9% of the employee s salary depending on the type of work) to the Annual Leave Fund from which the employees are paid for their annual leave, unless the employer pays the employees directly for their leave. Illness: In order to get a sick leave for more than one day, an employee has to visit a doctor who will decide how many days the employee needs to recover and will issue a document stating those days. The salary and insurance for this leave are covered exclusively by the Annual Leave Fund (the first three days of the sick-leave are unpaid). In order to receive this salary, the employee has to complete a request form and submit it to the relevant authorities. Maternity: Maternity leave allowance is 18 weeks (can start 2-6 weeks prior to estimated birth date). The salary and insurance contributions of the mother are usually paid by the Social Insurance Fund and equal to 75% of the salary (if the mother is the head of the family or dependants the allowance is 80%, or 90% if the mother has more than one dependent). The employer is not allowed to dismiss a mother for at least one year after she has given birth. Furthermore, after the mother goes back to work, she is entitled to a shift reduction of 1 hour per day for the first nine months after the date of birth. 6. Payroll Calculation procedure The payment of an employee s salary is made at the end of each month. The amount to be paid is calculated according to the employment agreement. If the employee has been absent on a non-paid leave, the employer has the right to deduct an amount proportional to the absence from the employee s salary. 7. Termination of Employment If the employment agreement is indefinite, the employer has the right to terminate the employment at any time by informing the employee. A Termination of employment document is signed by both parties and submitted to the authorities by the employer. The employer is obliged to pay the employee for the period in service, as well as to provide the employee with the benefits he/she is entitled with for the period worked (such as 13th salary). If the duration of the agreement is a defined one and it comes to an end, the employee is obliged to leave without any additional compensation after getting paid for the period in service. If there is intention from both parties to continue the cooperation, the agreement automatically continues for an indefinite time of employment. 16 Payroll Payroll 17

responsible for a different working specialty. Every employer and employee needs to be registered in the equivalent social insurance foundation according to the employer s activities and the employee s working position. The most common Social Insurance Foundation is IKA (Social Insurance Foundation). Its deductions are calculated on the gross salaries as follows: Employee 16% Employer 28.06% The above percentages apply when both pension and health deductions are covered by IKA. GREECE 1. Applicable Law on Payroll Fees Each year, the Greek government (in collaboration with the syndicate unions) announces special wage tables for each working position. These tables (taking into account factors such as the employees prior working experience, marital status, and certified knowledge) estimate the minimum legal salary that should be paid by the employers. Any amount over the lowest legal one can be agreed on between the employer and the employee. Throughout the year, twelve salaries are calculated, one for each month. In addition, three more benefits are provided: during the Christmas period (paid until the 21st of December and in value almost equal to a monthly salary), during the Easter period (payable until Holy Wednesday and in value equal to half a salary) and an additional benefit given when the employee is on his/her annual paid leave (financially equal to half a salary as well). All salaries and benefits are subject to social insurance and tax deductions. All salaries are subject to social insurance deductions. There are numerous social insurance foundations; each one In cases when extra social insurance deductions are required (eg, such as TEAYEK -social insurance foundation regarding employees working in stores) the above percentages differ as follows. IKA Employee 13% Employer 25.06% TEAYEK Employee 7% Employer 3% All percentages are calculated on the gross salary with a pre-set limit of deductions. All percentages are indeed calculated on the gross salary as long as the salary doesn t exceed the amount of 5,543.55 per month. In case of a salary of 6,000.00 per month, for example, the social insurance deductions will be calculated on the ceiling amount of 5,543.55. The employer is obligated to pay all calculated social insurance deductions to the respective foundation at the end of the following month for the one at hand. In case of delinquency, the payable amount is surcharged with a percentage of 3% for the first month and a percentage of 1% for every additional month. In addition, the employer is also obligated to submit a statement with the employees complete personal, working and financial data at the end of the following month of the 18 Payroll Payroll 19

trimester at hand. In case of not meeting the deadline, the employer is fined with a percentage of 10% for the first month of delay and a percentage of 30% for every additional month of delay. All percentages are calculated on the trimester s total social insurance deductions. Employees salaries are also subject to tax deductions. The percentage used to calculate the tax deduction varies according to the employee s estimated annual income. Employee s Tax Income Scale - 2009 Annual Income in scale Tax percentage% Up to 12.000 0 12.000 16.000 18 16.000 22.000 24 22.000 26.000 26 26.000 32.000 32 32.000 40.000 36 40.000 60.000 38 60.000 100.000 40 Over 100.000 45 Every second month, the employer is obligated to pay the amount of taxes withheld from the employees salaries until that time by submitting the appropriate statement. Furthermore, the employer has to submit an annual statement with the total financial data of the year. 4. Employment Procedure For an employment relationship to be established, the employer has to be legally registered to the appropriate Social Insurance Foundation. Once this is done, a hiring document is completed with the employee s personal information such as full name, IRS No., education level etc. and working information (such as working position and employer data). Both employer and employee sign the document, which must be submitted to the authorities within eight calendar days. Besides the hiring documents, an employment agreement document must also be concluded and signed by both parties. The agreement content can vary. Typically, the agreement states the nature of the employee s position, the way he/she will be paid, the agreed working hours as well as the period of employment. The period of employment could be infinite or defined between a time-period of one month to a year. In addition, the working hours can be agreed on as long as they don t exceed 8 hours per day and 40 hours per week. After each hire, the employer has to submit a personnel chart containing the new employee s working and personal data in a period of 15 days since the hiring date. This chart is submitted to the relevant authority. The same personnel chart is also submitted once every year with all the employees data. Holidays: Each employee is entitled to 2 days of annual paid leave for every month of service. The pre-mentioned method applies for the first two years (a limit of 20 days for the first year, and a limit of 21 days for the second) of employment. From the first day of the third year, the employee has the right to 22 days of paid leave. Once the employee completes a 10 year service to the same employer or a 12 year experience overall, he/she is entitled to 25 days of paid leave. Illness: In case of an absence because of illness, the employee has to visit a doctor approved by the Social Insurance Institute so that a formal document can be issued stating the days the employee requires in order to recover. The employer covers half the amount of the salary and the insurance of the first 3 days of recovery. For any additional day, the employee will get a portion of his salary from the Social Insurance Institution and the remaining from his employer. Maternity: A mother to be has the right to 56 days of leave before the estimated date of the birth and 63 days of leave after it. The employer has to cover the salary as well as the insurance of the employee for the first 30 days of leave. The rest of the days are covered by the Social Insurance Institution. The mother also has the right to a six months leave after the end of the 63 days. During that time her compensation and insurance are only covered by the state. A new mother cannot be laid off for at least a year after she has given birth. Furthermore, when she returns to her working duties, she has the right to a reduced shift. Specifically, she can work an hour less each day for two and a half years or - if the employer agrees - she could work two hours less a day for a year and an hour less for half a year. 20 Payroll Payroll 21

Each month, the employees working days are counted in order for the payroll to be calculated. Then, all Social Insurance and Tax deductions are calculated. After the payroll procedure is completed, there are several obligatory reports that must be printed. Payroll Chart A list of all the employees and their calculated payrolls. Social Insurance Funds chart Pay-slip When an indefinite duration agreement is signed between the employer and the employee, the employer has the right to terminate the employment at any time. The employee is notified of the dismissal and an Employment Termination document is signed by both parties. The document must be submitted to the competent authority within 8 calendar days. In case of an employment termination, the employer is obliged to pay the employee a compensation fee, unless the employment period is less than a year. In case of a defined duration agreement, the employer does not have the right to end the employment. The only way to lay off the employee is by compensating for the full agreed salaries up to the end of the agreed time of employment. When a defined duration agreement comes to an end, the employee is obliged to leave without any additional compensation. If the defined duration agreement comes to an end and the employer wishes to keep the employee, then the agreement is automatically altered to one of infinite duration of employment. MONTENEGRO 1. Applicable law on Payroll Fees Main laws that regulate employment include: Labour Law Law on Pension and Health Insurance Law on Salaries in Economy Law on Contributions of mandatory social insurance Law on personal income tax Collective Agreement signed between Labour Union and Government Rates of Contributions and Personal Income Tax are: Pension Fund Contribution Health Fund Contribution Unemployment Insurance contribution Employer share Employee Share 5.5% 15% 3.8% 8.5% 0.5% 0.5% 22 Payroll Payroll 23

Personal Income tax is 9% and Surtax of maximum 15% on the individual income tax which is withheld from the employees salaries. These rates apply to the gross monthly salary. Other employer s obligations 31 January of the current year is the deadline for submitting the Report on Paid Gross Salaries, Taxes and Contributions for Employee (OPD2). Reports have to be submitted for each employee with information on total amount paid for gross salaries as well as mandatory pension and health insurance during the previous year. 31 January of the current year is the deadline for submitting the Report on Paid Gross Salaries, Taxes and Contributions for Employer (OPD3). Reports have to be submitted for the employer with information on the total amount paid for gross salaries, mandatory pension and health insurance during the previous year for all employees. Personal Income Tax rate is 9%. Personal income tax is imposed on the full net salary amount. 4. Employment Procedure The employment contract is signed in the local language prior to assuming work responsibilities. If the employer fails to sign an employment contract with the employee in written form prior to assuming work responsibilities, it is considered that the employee has established an employment relationship for an unlimited duration of time as of the date of assuming work responsibilities, should the employee accept that employment. In this case, the employer shall sign an employment contract for an unlimited period of time within three days from the day of assuming work responsibilities. The Montenegrin Labour Law recognises three types of employment: Undefined duration employment Employment for defined period of time Short term employment for occasional engagements such as consultancy. Working hours The normal working hours are 8 hours/day or 40 hours per week. An employee can conclude employment contracts with more than one employer and thus make a full-time work engagement. An employment contract can be concluded with work engagement with less than full time, but not less than ¼ (10 hours) working full time. Holidays: In each calendar year the employee has the right to an annual leave in total amount set by Collective Agreement, or employment contract but the number of total leave days should not be less than 18 working days. Official Holidays An employee has the right to be fully paid during official holidays that are set by Law. Illness: Medical doctors are giving recommendations for sick leave. The employer has an obligation to pay 70% of the gross salary for up to 60 days of sick leave. For sick leave that lasts longer than 60 days, the Health Fund covers 70% of the gross salary. Maternity: Women have the right to be absent for 356 days on maternity leave. Maternity leave starts 4 weeks before the delivery date. The employer is obligated to pay the total amount of their last salary during the maternity leave. In the first 10 days after the payment of the monthly salary, the Employer has to submit the Request form for Reimbursement of the total amount of salary for the employee on maternity leave. Employee monthly net (or gross) salary is determined with the employment contract that has to be signed by the employee and the employer. If the employee worked overtime, the employer is obligated to re-calculate the salary on a monthly level. The obligatory reports of every month include: Payroll slip Report to Tax Office on monthly amount of tax and contributions Report to Municipal Office with info on paid taxes and sur-tax. 24 Payroll Payroll 25

Main characteristic of Payroll Procedure in Montenegro is calculation based on Gross salaries (Net salary + Tax + Contribution Employee Share ). Employment shall terminate by: 1. Force of law 2. An agreement between the employer and the employee 3. Cancellation of the employment contract by the employer or the employee An employee shall have the right and duty to remain at work at least 15 days past the day of submitting the notice of canceling the employment contract, i.e. the decision on termination of employment (notice period), in cases determined by the collective agreement and the employment contract. ROMANIA 1. Applicable Law on Payroll Fees The general provisions regarding the Romanian payroll system are settled in accordance to the followings: Romanian Labour Code Health, Insurance and Unemployment Laws and Regulations Romanian Tax Code. 2. Social Insurance Contributions The contribution rates to the state social insurance funds are determined on an annual basis by the law on social insurance budget approval and the law on health insurance or, for the contributions to the employment accident & professional illnesses insurance fund, by a Government decision. The social insurance contribution rates for year 2011 are as follows: 31.3% for normal work conditions: - Employer s contribution 20.8% - Employees contribution 10.5% 36.3% for hard work conditions: - Employer s contribution 25.8% - Employees contribution 10.5% 26 Payroll Payroll 27

41.3% for special work conditions - Employer s contribution 30.8% - Employees contribution 10.5% These rates apply to the gross monthly incomes. The contribution rate is partially the liability of the employees and partially the liability of the employers. As for the other categories of insured persons, who are not employees or who don t work for a certain employer or for an assimilated person, the contribution is entirely owed by the insured and will be in proportion with the gross insured income. The employer will calculate, withdraw and pay such contributions to the social insurance fund on a monthly basis. Contribution to the unemployment insurance budget Contribution to the health social insurance fund Contribution to the National Insurance Fund for Work Accidents and Professional Illness Contribution to Guarantee fund for payment of salaries 0.5% employer 0.5% employee 5.2% employer 5.5% employee 0.1%-4% depending on employer s activity 0.25% Romanian Tax Code provides for that individuals are taxed with 16% for the salary incomes. The personal deduction applicable for salaries up to 1000 RON is 250 RON. Some supplementary deductions may be granted if the employees have dependants. No personal deduction is applicable for gross salaries higher than 3000 RON. 4. Employment Procedure According to the Romanian Labour Code the individual labour contract is concluded based on the parties mutual consent, recorded in writing, in Romanian language. The obligation to conclude individual labour contracts is incumbent on the employer. the case may be, on the general provisions he intends to insert/amend in the contract, such as: the parties identity, the work place details, the employer s residence or headquarters, risks of work, contract duration, position/occupation as per the Classification of Occupations in Romania, terms and conditions of the prior notice to be served by the contracting parties, the basic salary, the applicable collective labour agreement, etc. Any amendments of the above-mentioned elements shall involve execution of an addendum to the contract within 5 days from the written notification of the employee. The provisions of the individual labour contract may not be contrary or grant rights in favour of the employee below the minimum level established by the relevant legislation or by the collective labour agreement. The Labour Code provides for the following types of individual labour contracts a) Labour contract for a determined duration b) Temporary labour contract c) Part-time individual labour contract d) The individual labour contract for home work e) Apprenticeship contract As a rule the Labour Code provides the conclusion of an individual labour contract for an indefinite period. Working hours The normal working hours are 8 hours/day or 40 hours/ week in average. For people under the age of 18, the normal work time is 6 hours/day and 30 hours/week. Employees may opt for an irregular distribution of the working hours, but strictly observing the normal working hours of 40 hours/week. The maximum legal working hours may not exceed 48 hours/week, including overtime work. Holidays: For each employee, the annual holiday leave is of minimum 20 working days. Before concluding or amending any individual labour contract, the employer must inform the applicant or the employee, as The right to annual leave can not be subject to any waiver, assignment or limitation. 28 Payroll Payroll 29

The official holidays, as well as the paid days off, stipulated in the applicable collective labour agreement are not included in the annual leave. Additionally, according to the Labour Code, the employees have the right to paid days off for certain family events or for other particular situations. Illness: In case of illness the Employer must pay the sick leave days, depending on the illness severity. Maternity: The total maternity leave amounts to 126 calendar days. One of the parents has the right to a one year leave for baby care, paid with 75% of the average salaries of the last 12 months, but not less than 600 RON. The monthly payroll must be submitted and registered to the authorities until the 25th of the following month and includes the calculation for all contributions of the employer and employee and tax on income contributions. The due date for payment of all taxes related to the salaries is the 25th of the next month. The following declarations must be submitted to the relevant authorities, the latest on the 25th of the next month: - Declaration of the Contributions for Pensions and Social Insurance - Declaration of the Contributions for the Health Fund - Declaration of the Contribution of the Unemployment Fund - Declaration of the Labour Chamber commissions - Declaration of the taxes to the consolidated state budget pursuant to parties mutual consent, on the date agreed, or further to the one of the parties initiative, under the terms and conditions provided by law. Resignation Based upon a written notification, the employee has the right to inform the employer of the termination of his/her individual labour contract, after the completion of a prior notice term. The employee is not bound to justify such resignation. The notice term will be established by the parties in the contract or be subject to the provisions of the applicable collective labour contracts, and cannot exceed 20 calendar days for the employees in executive positions, and 45 calendar days for management positions. Termination of Employment The dismissal represents the cessation of the individual labour contract based on the employer s initiative and may occur: - for reasons due to the employee s fault, or - for reasons independent of such fault The notice period for dismissal is 20 working days. The employees may not be dismissed, among others, in the following situations: a) during the employee s temporary working incapacity; b) during pregnancy, if the employer was aware of the woman s condition before her dismissal; c) during maternity leave; Additionally, the Register of the employees must be updated with each change, within 5 days from the modification. The annual individual calculation of the tax on income must be provided by the employer to all the employees and must be submitted to the Tax authorities the latest on 28th of February of each year for the previous year. The individual labour contract may cease either lawfully, 30 Payroll Payroll 31

same work or the work of equal value performed for an employer. The work of the same value shall be understood as work requiring the same professional qualification level, same work abilities, responsibility and physical and intellectual work. The Employer is obliged to register every employment in the following authorities: - Health Insurance Institute - Social Insurance Fund (Pension and Disabled Fund) - National Employment Agency. SERBIA d) during military service; e) during annual paid leave, etc. 1. Applicable law on Payroll Fees The Labour Law The Pension and Disability Insurance Law The Health Insurance Law The Law on Employment and Insurance in a case of Unemployment The salary is to be agreed between the employer and employee. The only provision bounding the employer that refers to the amount of salary is the minimum salary. Social and Economic Council of Republic of Serbia (SEC) shall pass the decision on amount of minimum salary for a period of 6 months. According to the last decision of SEC, the net amount of minimum salary for period which has started on the beginning of March 2011 is 17.480 RSD (approx. 170 EUR), that equals the gross amount of 23.684,45 RSD (approx. 230 EUR) Employees shall be guaranteed equal earnings for the Both the Employer and the Employee are obliged to pay Social Insurance Contributions at the following rates: Pension and Disability insurance - 11% Health insurance 6,15% Insurance for the case of unemployment - 0,75%. Even though the employee is liable for those contributions, the employer is obliged to calculate and pay them. Personal Income Tax on salaries is 12%. The gross amount is used as a basis to calculate contributions. The taxable amount is equal to the gross amount minus a fixed amount of 7.310,00 dinars. 4. Employment Procedure - The employment relations are established on the basis of an employment contract signed by the employee and the employer who is represented by the Director (Member of the Board of Directors) or an employee authorized by Power of Attorney issued by the Director. - Contracts must have necessary employer and employee data. Signature date and commencement day must also be included. A contract must define the type of job and main responsibilities for both employer and employee, gross salary, working hours, vacation period, violation of employment discipline, cancelation of contract notice (min. 15 days) and other details relating to the specific position. 32 Payroll Payroll 33

- An employment relation could be established with a person who is at least 15 years old. - A person who is older then 15 and younger then 18 can be employed only with a written consent from a legal guardian. - The first day of work is considered as the date of employment commencement (the day when employee does really start to work). - It is forbidden for an employer to request from the employee certain data/information which is in relation with family status, marital status, family planning as well as to request the employee to submit to a pregnancy test. The Variety of Employments Probation work Probation work and its duration may be stipulated in the employment contract but must not be in duration longer then 6 months. During the period of probation work, both employee and employer could cancel the employment contract with a notice period not less than 5 days. Employment with a definite duration Employment relations may be established for a definite period of time, but no longer then 12 months. Working Hours Full working hours amount to 40 hours per week. It could be stipulated that full working hours are less than 40 hours per a week by a general employer s act but it cannot be less than 36 hours per a week. Part - time employment is allowed in accordance with law. Overtime work The employee is obliged to work overtime on a reasonable employer s request. Overtime work of an employee cannot exceed 8 hours per a week and 4 hours per a day. The employee shall be entitled to an increase in the salary. The increment cannot be less than 26 % of basic salary. Holidays: The annual leave given to an employee amounts to a minimum of 20 working days. The minimum of 20 working days could be increased on following basis: - work contribution - work conditions - working experience - level of education - other criteria determined by general act or employment contract An employee who has been employed for the first time or who has interrupted the employment relation for more than 30 workdays shall gain the right to an annual leave after 6 months of uninterrupted work service. Such an employee is entitled to one twelfth of the annual leave (proportional part) for each month of work in a calendar year. Paid and Unpaid Absence The right to paid absence for a maximum of seven workdays in the course of a calendar year is granted to an employee in the case of marriages, births, deaths, serious illness of a member of the close family and in other cases determined in a general act or the employment contract. An employee is entitled to additional days of paid leave as follows: - 5 days in the case of death of a close family member (spouse, children, brothers, sisters, parents, adoptive parent, adoptee, guardian and other persons who live in a joint family household with the employee) - 2 days in the case of voluntary blood giving. Unpaid leave could be granted to an employee. In the case of unpaid leave, the employee s rights and duties stagnate (they are frozen). Illness: An employee is obliged to submit to the employer, no later than 3 days from the occurrence of his/her temporary impediment from work, a certificate issued by a physician. Such a certificate has to be issued in accordance with the 34 Payroll Payroll 35

health insurance regulations. Maternity: A pregnant employee is entitled to maternity leave as well as to nursing leave in the combined duration of 365 days for the first and the second child, and two years for a third and a fourth child. During the maternity leave, the pregnant employee is entitled to a reimbursement of salary in accordance with the act passed by competent Ministry. Gross salary (net salary + social insurance contribution and taxes) includes: salary for performed work and time spent at work bonuses, premiums and other incomes derived from the employee s contribution to employer s business success other incomes in accordance with laws, by laws and internal acts. Payment of salary Written notice of termination of employment has to be given to the employer at least 15 days prior the day of termination. Termination of employment by employer There is an obligation for an employer to issue a warning letter to an employee prior to termination. The grounds and reasons for the termination of employment have to be explained in a letter and facts and evidences which indicate existence of termination reasons must be presented. An employee has the right to answer to a warning letter in a period of 5 days. Prohibited termination It is prohibited to cancel the employment contract of an employee who is pregnant, is on a maternity leave, nursing leave or a leave for special care for a child. An employee shall be entitled to compensation of earnings in the amount of the average earnings for the three preceding months, in conformity with the general act and employment The salary shall be paid in the way determined by the general act and/or employment contract at least once a month. The employer is obliged to pay the salary for the previous month until the end of the current month the latest. An employment shall terminate in one of the following ways: a) after the expiration period stated in the employment agreement b) if the employee is 65 years old and completes 15 years of social insurance and employer and employee have not agreed otherwise c) by mutual agreement concluded between employer and employee d) by termination by employer or employee e) at the request of the parents or guardian of an employee younger than 15 years f) other ways stipulated by law, general act or employment agreement. Termination of employment by an employee 36 Payroll Payroll 37

c) Contribution for Unemployment Fund: 1.2% of the gross salary d) 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 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 MKD 7,035) which remains untaxed. The personal income tax rate is set at 10%. 4. Employment procedure FYR MACEDONIA 1. Applicable law on Payroll Fees FYR Macedonia s payroll laws and procedures are regulated with the Labour Relations Law (Official Gazette No 62/05, 106/08, 161/08), the Collective Agreements (concluded on a national level), other legal acts and the Individual Employment Contract concluded between the Employer and the Employee. 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. The social insurance contributions have been decreasing from year to year starting from 2007, and are planned to continue to decrease in the next couple of years as well. At the moment, the social insurance deductions from the gross salary are calculated based on the following percentages: a) Contribution for Pension and Disability Insurance: 18% of the gross salary b) Contribution for Health Insurance Fund: 7.3% of the gross salary 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 HR-specialised agencies). The employer will select the best candidate within a maximum of 15 days from the expiry 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 5 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 vs. 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. Holidays: Employees are entitled to anywhere between 20 and 26 working days vacation leave annually (depending on performance, years in service and employment contract terms). 38 Payroll Payroll 39

A new employee gains the right to this vacation leave after 6 months of completed service. Prior to the completion of six months in service, the new employee is granted the right to 2 (two) days of leave for every month spent in 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 additional seven days 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, for professional or other kinds of examinations for the requirements of the employer. Should the employer not allow the full utilisation of the agreed-upon vacation leave days, the employee is entitled to a reimbursement for any remaining unused days of leave. 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 is entitled to pay salary remuneration for the first 21 days of illness. After 21 days, the reimbursement is paid by the health insurance fund. If the employee is sick again within the first three days of the expiry 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 work 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 the maternity leave 45 days before delivery and compulsory 28 days before delivery (based on the findings of authorised medical institutions). New mothers can return to the place of work before the end of the full maternity leave only with their own will. Female employees who have adopted a child are untitled leave until the child is nine 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. The employer cannot (during the employee s pregnancy and maternity leave), under any circumstances, terminate the employment contract. In addition, pregnant women and women with children younger than one 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. 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). This pay slip is also taken to the Social Fund and based on it and the social registration number of the employee, the employee receives the monthly blue cards which are considered a proof of paid social and health contributions. These blue cards are necessary for statefunded health related expenses. 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 which needs to be provided to the employee before the 31st of January in the following calendar year. 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 fails to request leave of absence or notify about sick leave or misuses sick leave The employee is in breach of confidentiality agreement Economic, technological or structural transformations of the employer s organisation 40 Payroll Payroll 41

The employment may not be terminated during any type of approved leave (sick, maternity, annual vacation). Employees may terminate employment at any time provided that they submit a written notice of at least one month. 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 expiry date, an infinite employment agreement is concluded. CROATIA 1. Applicable law on Payroll Fees Main laws that regulate employment in the Republic of Croatia include Labour Acts, Wage Directives, Social Security Acts and Employment Protection Acts. Employers, employees and trade unions can stipulate working conditions more favourable to the employees than the ones prescribed by the Croatian labour acts as well as less favourable if authorised to do so. Labour wages in Croatia are regulated by laws, collective and individual contracts. Minimum wage is determined annually, in June of each year and the increase of it ties with the real GDP growth from the previous year. According to the announcement of the Central Bureau of Statistics for period 1june 2010-30 may 2011 minimum wage is set at 2814 kuna ( 380) Croatia Social Security contributions payable by the employee are subject to ceiling defined by law. Employer: 17,2% calculated and paid on top of the gross salary. 42 Payroll Payroll 43

Employee: 20% calculated and deducted from the gross salary. pension fund health insurance health insurance at work place unemployment contribution Total Employee 20% - - - 20% Employer 15% 0.5% 1.7% 17.5% Employees tax deductions are calculated on their monthly gross salary and are paid monthly to the relevant authorities. The tax scale by which the individual income is taxed is the following: Annual Tax Base Up to 43.200 HRK 12% Over 43.200 HRK and up to 129.600 HRK 25% Over 129.600 HRK 40% 4. Employment procedure Tax Rates When employing personnel the employer must keep records of his/her employees and upon request from a Labour Inspector the records must be presented by the employer. At the commencement of the employment an employment contract must be concluded in writing. Employment contracts can be either open-ended or fixed termed. The essential elements the employment contract must include are the following: Parties and their permanent residence The place and nature of work Date of commencement and termination in case of a fixed-duration contract Duration of paid annual leave Basic salary Working hours On the day of commencement of the work the employee must provide the employer with his/hers employment book. The employment book is returned to the employee upon termination of the employment relationship or when it is requested by the employee. An employment contract can be concluded for full-time or part-time working hours. The statutory full time working hours cannot exceed the limit of 40 hours per week. Over time work is possible in case of force majeure. Overtime work cannot exit 8 hours per week or 32 hours per month or 180 hours per year. Minors are prohibited to work overtime. Annual Leave: Each employee that has worked for at least six months with the same employer has the right to paid annual leave of at least 4 weeks for each calendar year. Leave days over the aforementioned limit must be stipulated in the employment contract or by a collective agreement. For those employees that the six-month period has not expired they are entitled to a proportion of annual leave equal to one-twelfth of annual leave for each full month of work. Holidays, non working days as well days of illness cannot be calculated as annual paid leave. An employee has the right to take annual leave in two sections, unless otherwise agreed by the employer or stated in the employment contract. In such cases the first section of the annual leave must last at least two weeks. Illness: Each employee has the right to a sick leave for the whole period of sickness until a medical doctor confirms that he/she is able to return to his/hers working duties, or until the Pension Committee declares permanent lack of ability for work. During sick leave the employer is liable to compensate the employee s salary for the first 42 days of illness. From the 43rd day and onwards the employee is compensated by the Croatian Health Insurance Fund for at least 70% of his/her average salary for the past six months. Special cases apply where the Health Fund can cover 100% of the employee s salary. Maternity: The employer cannot refuse work to a pregnant woman and terminate her employment contract due to her pregnancy. Furthermore information regarding the employee s pregnancy is strictly confidential and the employer is not allowed to inquire. The employee is entitled to 6 months maternity leave and to additional 6 months parental leave. Parental leave can be extended to 30 months depending on the number of 44 Payroll Payroll 45

the employee s children. The parental leave can be given to either of the two parents. During maternity and parental leave the employees are compensated by the Croatian Fund for Health Insurance according the employee s average salary during the past 6 months for the maternity leave and according to a limit set by the state for the parental leave (approx. 350) Monthly payroll calculation depends on the number of days or hours the employee has worked during the relevant month. The gross salary is calculated and then all statutory contributions regarding wage tax and social security are calculated and deducted from the monthly gross salary. The net salary is paid to the employee while the deductions are forwarded to the relevant authorities. An employment contract ends in the following cases: Upon death of the employee Expiration of a fixed-duration contract When the employee has reached the age of 65 years old or 15 years of social insurance. Under inner agreement Upon a legally effective decision due to inability to work By cancellation By court decision when authorised When terminating an employment contract the employer must prepare a notice of dismissal in writing, give reasons for the dismissal also in writing and serve the employee with the notice. In cases of regular notice the notice period lasts between two weeks and three months depending on the time the employee has worked continuously for the same employer. The notice period starts running on the day the notice is served and cannot run during pregnancy, maternity, parental and adoption leave or work with shortened hours. On termination the employee is entitled to all statutory compensations regarding salaries, unused paid leave days etc. BOSNIA AND HERZEGOVINA 1. Applicable law on Payroll Fees The Labour Law of Federation of Bosnia and Herzegovina (FBiH) The Labour Law of Republic of Srpska (RS) The Law on Pension and Disability Insurance of FBiH The Law on Pension and Disability Insurance RS The Law on Contributions of RS The Law on Contribution of FBiH General Collective Agreement of RS General Collective Agreement of FBiH The contributions in Federation of Bosnia and Herzegovina (FBiH) for Social Security (Pension/Disability and Health Insurance) are paid both by employers and employees on the gross amount of the salary. In Republic of Srpska (RS) the Social Insurance contributions are also calculated on the gross amount of the salary. In Brčko District, Pension insurance contributions are regulated by the entity regulations.* The Social Insurance contributions are deducted from the 46 Payroll Payroll 47

gross salary based on the following percentage: Employer s share: FBiH: 6% - Pension insurance, 4 % - Health insurance, 0, 50% - insurance for unemployment. Employer s share in total is 10, 50%. RS: no social contributions are paid from the employers in RS Brčko District: 6% for Pension insurance. Employers share in total is 6% Employee s share: FBiH: 17% - Pension Insurance, 12, 5% - Health Insurance, 1,5% - Unemployment Insurance. In total: 31 %. RS: 18% - Pension Insurance, 12, 5% - Health Insurance, 1% Unemployment Insurance, 1,5% - Protection of child contributions. In total 33% *Brčko District: If FBiH Pension laws aplicable the rate is 17%, but if RS Pension laws applicable the contrsibution rate is 18%, Health Insurance -12%, Unemployment Insurance- 1,5%.Total 30,5% or 31,5% depending on the entity law that is applicable. Personal Income Tax on the entire territory of BiH is 10%. The tax base for calculation of Social Insurance Contributions is the gross salary. 4. Employment procedure Labour Laws in BiH recognise different types of employment contracts such as: - Permanent - Temporary - Part-time - Seasonal - Probationary Process of Employment in BiH stipulated by the Labour Law is based on the Employment Contract (must be in written form) signed with employees for definite or indefinite period. Among other conditions, the Employment Contract must consist the following : the name and seat of the employer, qualification and residence of the employees, the employee s salary, duration of the contract, annual leave duration, working hours, the place of work, time of conclusion, working conditions, description of the duties and rights, dismissal notice. Upon signing a Labour Agreement, employer has obligation to register employees to the Pension /Disability Fund and the Health Fund. Probation period is up to three months. The normal working hours are 8 hours per day or 40 hours per week. Working week lasts 5 consecutive days - from Monday to Friday. In cases such as increase of work volume and force major (earthquake, flood, fire) or other similar cases, employees are obliged under the request of employer to work over time which could be maximum up to 10 hours a week. The Employment Contract can also be signed on a part -time base, providing that employees are entitled for Social Insurance contributions and all other rights in proportion to the time spent at work. Employers may conclude a contract with a trainee for the specific professions determined as the trainee period by Bosnian authorities. Holidays: In accordance with the Labour Laws in BiH, the minimum annual leave is 18 days during which the employees are entitled for a full salary compensation based on the Laws, Collective Agreements and the Rule- books. Employees who are younger than 18 years (minors) are entitled for the minimum 24 days of annual leave while employees who are engaged in jobs under special working conditions are entitled to minimum 30 paid leave days. Employers may agree with employees to break their annual leave in two parts, provided that one part of the annual leave is not less than two weeks without interruption. Illness: Under the Labour laws in BiH, employees are entitled to paid leave of absence for three working days annually in cases of serious illness and death of family members. Employees may refuse to work if the health and safety measures are not met by the employers at the work place. Employers must register all employees to the Health and Healt/Dissability Insurance and enable the full protection of employees against any accidents at work. During his/her temporary inability to work, employers can not dismiss Employment Contract with the employee that suffered injury at work or had disease Employer must allow 48 Payroll Payroll 49

employees to return to their same job posts that they worked before the occurrence of these conditions. Maternity: Women are entitled to Maternity leave for a period of one year without interruption during the pregnancy, child birth and after the birth for the care of the baby. In case of birth of twins or third child, women are entitled to 18 months of maternity leave. The woman may start the maternity leave on her demand within 28 days before the due date and on recommendation of the competent doctor. She may start to work on her demand before the expiration of her maternity leave, but not before 60 days after the child birth. She is entitled to 60 minutes break during the working hours for child feed and other care. During the maternity leave, women are entitled to full salary compensation. The tax base is the gross salary. After all deductions such as social insurance contributions, personal income tax and other taxes are made, the employee is entitled to a net salary which in average amounts to 410 Euros. Employment contract can be terminated both by the employer or employees upon agreement, death of employee, by the decision of a competent court, expiration of the period stated on the contract if it is concluded on a definitive time etc. In BiH Employers are entitled to terminate the employment for various reasons including lack of organisational, technical skills or on economic bases, poor performance or different types of misconduct. The notice period can not be shorter than 15 days in case if the employee terminates the employment contract, or shorter than 30 days if the employer terminates the employment contract. The notice period starts upon submission of the written notice either from employers or employees. KOSOVO 1. Applicable law on Payroll Fees The labor market in Kosovo is regulated by the Law No.03/L 212 on Labour establishing a comprehensive, functional and sustainable legal basis on employment relationship and by the Law No. 03/L-084 on amending UNMIK Regulation 2005/20 amending UNMIK Regulation 2001/35 on Kosovo Pensions Trust. Social security contributions are managed by the Kosovo Pension Savings Trust (Trusti). Contributions paid in the Trusti are not taxes; they are mandatory savings. The new pension system of Kosovo enables Kosovar employees to save for their future. The amount of the pension will directly depend on the amount contributed and on the invested assets growth. Currently, Kosovo has established only one mandatory social fee in the form of a pension contribution. Employees and employers must make a monthly contribution each amounting to 5% of the employee s gross salary. Both the employees and employers may increase voluntarily the amount of contribution by an additional 10% each. Joint 50 Payroll Payroll 51

contributions may not be less than 10% and may not be more than 30%. However this contribution is not mandatory for expatriates. Thus, the breakdown of contributions to be paid as follows: Employee 5% Employer 5% Payment of pension contributions is made each month through employers, or by self-employed persons on each quarter (by 15 April, 15 July, 15 October, 15 January). A report, representing the initial phase of savings allocation in contributors accounts has to be submitted to the authorities following the payment. If the report has not been submitted despite the payment is made money remain unallocated at the employee level, even though it has been paid. Based on the gross salary of the employee companies are liable to pay salary tax (deducted from the gross salary of the employee, and paid on behalf of the employee), Personal income tax is regulated by the Law Nr.03/L-161 and applies to natural persons receiving income from Kosovo sources and also to foreign incomes, received by residents of Kosovo. The rate of personal income tax varies from zero percent to 10 percent. 4. Employment procedure The procedure and rules of employment are as follows (according to Law No.03/L 212): An employment relationship may be concluded by any person of eighteen (18) years of age or above. An employment relationship may also be established with a person between fifteen (15) and eighteen (18) years of age, who may be employed for easy labour that do not represent a risk to their health or development and if such a labour is not prohibited by any Law or sub-legal act. It is prohibited to conclude an employment contract with a person below fifteen (15) years of age. For the due payment of contributions and other legal duties, the employer is obliged to report the employee to the Tax Administration of Kosovo and other institutions which manage and administer the obligatory pension schemes and other obligatory schemes. An employment contract shall be in written form and signed by both parties. Employment contract can be signed for: an indefinite period; a fixed period (may not be concluded for a cumulative period of more than ten (10) years); and specific tasks and duties (may not be longer than 120 days). Annual Income 0 EUR 960 EUR 0% The contract should include the following: Annual Income 960 EUR 3000 4% of the amount over 960 EUR EUR data on the employer (designation, residence and business Annual Income 3001 EUR 5400 816 EUR + 8% of the amount over register number); EUR 3000 EUR data on the employee (name, surname, qualification Annual Income 5400 EUR - 273.6 EUR + 10% of the amount and dwelling); above over 5400 EUR designation, nature and the form of labour and/or services and the job description; Tax year is from January 1st to December 31st. Filing and the place of work or a statement that work is performed payment of tax on salary and pension contribution must be at various locations; declared and paid by the employer not later than the 15th working hours and working schedule; date of the month following the month of deduction from the date of commencement of work; the salary. Annual personal income tax returns are due the duration of the Employment Contract; on or before 1st April of the year following the tax period. the basic salary and any other allowance or income; Non-declaration and nonpayment is subject to a penalty the period of vacations; amounting to a maximum of 25% of the tax on salary and termination of employment relationship; pension contribution. other data that the employer and employee deem important for the regulation of employment relationship; an employment contract may include other rights and duties provided for by this Law; 52 Payroll Payroll 53

Holidays: An employee is entitled to a paid annual leave for at least four (4) weeks during a calendar year, despite that if he/she works a full-time or part-time base. The extension of annual leave is defined on the basis of work experience, whereby one day is added for every five (5) years of service. An employee performing tasks and duties that contain harmful effects despite the application of protective measures, is entitled to an annual leave of at least thirty (30) working days for a calendar year. Mothers with children up to three (3) years of age and single parents as well as persons with disabilities are entitled to additional two (2) working days off. Unused annual leave shall not be compensated in money, unless the employment relationship of an employee is about to expire. Illness: An employee is entitled to full compensation (of their salary) for ordinary sick leave up to twenty (20) working days in one (1) year. An employee is entitled to a 70 % of salary compensation for sick leave as a result of documented occupational injury and related illness as a result of performing work or services for the employer. However compensation for occupational injuries further clarified under the Article 60. Payment of compensation for sick leave falls on the employer. Maternity: According to the article 48 of Law No.03/L 212 on Labour, pregnant women as well as mothers with a child under the three (3) years of age, shall not be obliged to work longer than the full-time working hours and night shifts. Article 49 provides for that women are entitled to 12 months of maternity leave. Documented by medical certificate, the woman may commence the maternity leave up to 45 days before the expected date of birth. In the period from 28 days before expected childbirth, the employer with consent of the pregnant woman may request her to begin her maternity leave if the employer finds that the woman is not able to perform her duties at work. The compensation of seventy percent (70%) of the basic salary is paid by the employer for the first six (6) months of the maternity leave. The following three (3) months of the maternity leave is paid by the Government of Kosovo with the compensation of fifty percent (50%) of general average salary (set by a commission by the government) in Kosovo. The woman has the right to extend her maternity leave further three (3) months without payment. Article 55 provides for that an employee is entitled to a salary defined in compliance with the Law, Collective Contract, Employer s Internal Act and Employment Contract. The right to salary, overtime, salary compensation and other income, shall be exercised by the employee on the basis of the agreement reached with the employer for the work performed and time spent at work as defined in the employment contract. The employer shall issue a salary statement for each salary payment and any other remuneration paid to the employees. Salary payments can be made through bank transfers or in cash payments for which the employer shall keep records. Salaries in Kosovo shall be paid in the official currency Euro ( ) and salary payment shall be executed at least once per month. Article 67 provides for that employment contract, on legal basis, may be terminated, as follows: With the death of the employee; With the death of the employer when the work performed or services provided by the employee are of personal nature and the contract cannot be extended to the successors of employer; With the expiry of duration of contract; When an employee reaches the pension age, sixty- five (65) years of age; On the day of the submission of plenipotentiary proof of the loss of labour competencies; If an employee shall serve a sentence which will last longer than six (6) months; With the decision of the competent court, which leads to the termination of employment relationship; With the bankruptcy or liquidation of the enterprise; Other cases specified by Laws in force. An employee is entitled to the unilateral termination of the employment contract. An employee on a fixed term contract shall give 15 calendar days notice of his/her termination of the employment contract to the employer in writing, whereas an employee on an indefinite term contract within 30 calendar days. An employee may cancel his/her employment contract without providing prior notice in written where the employer 54 Payroll Payroll 55

is guilty of breach of obligations under the employment contract. An employer may terminate the employment contract of an employee with the prescribed period of notice of cancellation, when: Such termination is justified for economic, technical or organisational reasons; The employee is no longer able to perform the job. The employer may terminate the employment contract in the circumstances specified above, if, it is impracticable for the employer to transfer the employee to other employment or to train or qualify the employee to perform the job or other jobs. An employer may terminate the employment contract of an employee with providing the period of notice of termination required, in serious cases of misconduct of the employee; and because of dissatisfactory performance of work duties. An employer should notify the employee about his/her dismissal immediately after the event which leads to this decision or as soon as the employer has become aware of it. An employer may terminate the employment contract of an employee without providing the period of notice of termination required, in the case when: the employee is guilty of repeating a less serious misconduct or breach of obligations, the employee s performance remains dissatisfactory in spite of the written warning. Source: Law No.03/L 212 on Labour EGYPT 1. Applicable law on Payroll Fees Employment relations in Egypt are regulated by Labor Act No. 12/2003 (hereafter LA ), which was promulgated on 7 April 2003. Provisions stipulated in individual employment contracts; collective agreements, enterprise internal regulations or those established by custom and practice are valid if they are more favorable to the worker than the provisions of the LA (Article 5, LA). The governmental body for Social Insurance in Egypt is the National Institute for Social Insurance; this institute follows the Ministry of Finance and Social Insurance. The total social insurance rate is 40% for fixed salary and 35% for variable salary, contribution rates for employer and employee are as follows: a. Fixed salary: Maximum monthly covered amount EGP 875 Employer 26% Employee 14% 56 Payroll Payroll 57

b. Variable salary: Maximum monthly covered amount EGP 1050 Employer 24% Employee 11% The social security contributions due for employees are withheld by the employer who is liable to pay it in addition to his share to the social security institute by the 15th of the following month. All employees in private and public sector are issued a unique personal social insurance number by the Social Security institution. Companies and establishments are liable to calculate and withhold the salaries tax amounts from the employees monthly salaries and pay it to the appropriate tax district by the 15th of the following month. The salaries tax rates applied are as follows: UP TO EGP 5.000 EGP 5.001 TO 20.000 10% EGP 20.001 TO 40.000 15% More than EGP 40.000 20% Exempted Part time and nonresident employees are subjected to 10% tax flat rate on total income with no deductions or exemptions applicable. 4. Employment procedure All individual employment contracts must be written in Arabic, in three copies to be kept by the employer, by the worker, and one to be submitted to the social insurance office (Article 32, LA). Various types of employment defined in the LA such as temporary work which considered to be part of the employer s activities and of limited duration, or which involves executing a specific task. Casual work is considered to be the work lasting less than six months and which is not a usual part of the employer s activities. Seasonal work is considered to be the work that carried out during the traditionally recognised periodical seasons (Article 1, LA). Probation period cannot exceed three months (Article 33, LA). Holidays: Employees that spent one complete year in the service entitled to annual leave of 21 days with full pay which is increased to thirty days once the worker spends ten years in service with one or more employers. For those over the age of fifty years the leave shall be for a period of thirty days per year. The holidays, the official occasions days off and the weekly days off shall not be counted as part of the annual leave. If the worker s service is less that one year, he shall be entitled to a leave in proportion to the period he has spent in work, providing that he has spent six months in the service of the employer. The annual leave period shall be increased by seven days for the workers engaged in hard, dangerous and unwholesome works, or in the remote areas to determine by virtue of a decree of the concerned minister after consulting the view of the concerned quarters. Subject to the provision of clause 2 of article (48) of the present law, the worker shall not give up his leave. The employer shall determine the dates of the annual leave according to work needs and conditions. He/ she shall not interrupt the leave except for strong reasons necessitated by work interest. The employer determines the date and the period to be taken for annual leave. Incase of written refusal of the employee to go on leave he/she forfeits his/her right to collecting their equivalent in wage terms. In all cases, the worker shall obtain an annual leave of fifteen days including at least six continuous days and the employer shall settle the balance of leaves or the wage computed against that balance at most every three years. If the work relationship expires before the worker exhausts the balance of his annual leave, he shall be entitled to the wage computed against that balance. The leave may not be divided, joined or postponed with regard to the juveniles. Illness: According to Article 54 of LA, the worker whose sickness is established shall have the right to a sick leave to be determined by the concerned medical quarter. During that period he shall be entitled to a compensation for the wage as shall be determined by the Social Insurance law. The worker whose sickness is established in industrial installations to which are applicable the provisions of articles (1) and (8) of Law No. 21 for the year 1958 on reorganistion 58 Payroll Payroll 59

and encouragement of industry, shall have the right to a sick leave every three years in service on the basis of one month with full pay, then eight months with a wage equivalent to (75%) of his salary, then three months without pay, in case the concerned medical quarter decides the likelihood of his recovery. The worker may benefit from his frozen annual leaves, besides the sick leave to which he is entitled. He may also request transferring the sick leave into an annual leave if he has a balance allowing for doing so. Maternity: A female worker having spent ten months in the service of the employer or more shall have the right to a maternity leave of ninety days, with a compensation equal to her comprehensive wage, comprising the period before delivery and after parturition, providing she shall submit a medical certificate indicating the date on which delivery most likely took place. A female worker shall not be required to work during the forty five days following childbirth. The maternity leave shall not be entitled more that twice throughout the female worker s period of service. The contract of employment can be terminated in certain circumstances, including at: The expiry of a fixed-term contract; and The completion of the task for which the contract was concluded. As regards retirement, the employer has the right to terminate the employment of a worker who reaches sixty years of age, unless the contract is for a definite period of time and extends beyond this age. In this case, the contract will be terminated on the date mentioned in the contract at the moment of its conclusion (Article 125, LA). The employer is entitled to dismiss a worker in case of some custodial sentences, which are listed under Article 129 of the LA, such as breach of honor, honesty or public morals. A worker cannot be dismissed unless he/she has committed a serious offence (Article 69, LA). A worker is deemed to have committed a serious offence if he/she has: loss, provided the employer informs the competent authorities of the incident within 24 hours of becoming aware of it; despite having received a previous written warning, failed to observe written instructions displayed in a prominent place, compliance with which is necessary to ensure the safety of the workers and of the establishment; been absent without a valid reason for more than 20 days a year, or for more than ten consecutive days, provided that the worker is first warned in writing by the employer after ten days absence in the former case and after five days in the latter; divulged professional secrets concerning the enterprise employing him/her, which caused s erious damages to the enterprise; been competing with the employer in the same field of activity; been found in a state of obvious drunkenness or under the influence of drugs within working hours; assaulted the employer or the employer s representative, or has committed a serious act of violence against any of his/her superiors during or in connection with his/ her work; not respected the rules on strikes prescribed by the LA. The decision to dismiss a worker as a sanction for serious misconduct is taken by a special committee established by the LA for this purposes (Article 68, LA). This kind of committee acts under the civil and commercial procedure law. The LA lists some invalid reasons for dismissal, such as, among others, color, sex, social status, family obligations, religion political views, participation in trade union activities, and filing a complaint against the employer (Article 120, LA). In Egyptian law, collective dismissals can only be for economic reasons. The employer cannot dismiss a woman during maternity leave (Article 92, LA). assumed a false identity or submitted false documents; acted negligently, causing the employer considerable 60 Payroll Payroll 61

Worldwide Recognition 2011 Cyprus Tax Firm of the Year INTERNATIONAL TAX REVIEW 2011 Ranked Tier One Tax Transactional Practice in Cyprus INTERNATIONAL TAX REVIEW 2010 Ranked Tier One Tax Transactional Practice in Cyprus INTERNATIONAL TAX REVIEW 2009 Cyprus Tax Firm of the Year INTERNATIONAL TAX REVIEW 2009 Ranked Tier One Tax Transactional Practice in Cyprus INTERNATIONAL TAX REVIEW Contact Details We are confident that you found the guide interesting and useful. Our target was to put together a comprehensive guide which will provide quick answers to your questions. However, we are fully aware of the varying tax and legislative systems of the different countries we operate including the risks associated with cross border transactions. This is why at Eurofast we deliver a full range of technical services, and a partner led personal service with a focus on clients specific requirements. We remain at your disposal Sincerely Chris Damianou International Tax Director For updated office information please visit our website www.eurofast.eu LEFKOSIA Zoe Kokoni Director zoe.kokoni@eurofast.eu Cypress Centre 5, Chytron Str P.O Box 24707 1302 Nicosia, Cyprus Tel: +357 22 699 222 Fax: +357 22 699 004 ATHENS Katerina Fragkou Advisor katerina.fragkou@eurofast.eu 5 Victoria Square (Kyriakou) 3rd floor 10434 Athens, Greece Tel: +30 210 8257722 Fax: +30 210 8257721 Ext: 2100 SOFIA Simeon Grigorov Acting Manager simeon.grigorov@eurofast.eu 22 Cyril and Methodius Str. Floor 5, ap 12 1202 Sofia, Bulgaria Tel: +359 2 988 69 75 Fax: +359 2 988 69 79 Ext: 2300 BUCHAREST Cozmina Avasaloaei Advisor cozmina.avasaloaei@eurofast.eu 79, Vasile Gherghel street District 1, Bucharest, Romania. Tel: +40 21 318 2262 Fax: +40 21 318 2264 Ext: 2400 BELGRADE Slobodan Mihajlovic Director slobodan.mihajlovic@eurofast.eu 12 Čika Ljubina Street 11 000 Belgrade, Serbia Tel: +381 113241 484 Fax: +381 113038 848 Ext: 2700 PODGORICA Jelena Zivkovic Acting Manager jelena.zivkovic@eurofast.eu Bul Sv Petra Cetinjskog 112 81000 Podgorica, Montenegro Tel: + 382 20 228 490 Fax: + 382 20 228 491 Ext: 1720 TIRANA Lorena Kurti Advisor lorena.kurti@eurofast.eu Rruga Deshmoret e 4 shkurtit Pallati i ri (mbrapa Akademise se Arteve) Tel: + 355 42 248 548 Fax: +355 42 226 299 Ext: 2200 CAIRO & ALEXANDRIA Hasan Berkut hasan.berkut@eurofast.eu Cairo 5 Al Ahram street Heliopolis Tel: + 20222900751 Fax: + 202 24151303 Alexandria 196 Port Said Street, Sporting, Egypt BANJA LUKA Slobodan Mihajlovic Director slobodan.mihajlovic@eurofast.eu Pave Iredana 20 Banja Luka Tel.:+38751315414 Fax.:+387 51315414 SKOPJE Elena Kostovska Advisor elena.kostovska@eurofast.eu Partizanski Odredi 43A/15 1000 Skopje, F.Y.R Macedonia Tel: +389 224 00 225 Fax: +389 224 00 226 Ext: 1630 PRISTINA Faton Lekaj faton.lekaj@eurofast.eu Rr. Janina nr. 252 Veternik 10000 Prishtina, Kosovo 62 Payroll Payroll 63

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