Introduction

Two weeks after the launch of the initial package of government measures for mitigating the effects of the COVID-19 pandemic on the Croatian economy, a second, more comprehensive set of measures was prepared. All of the government-proposed measures were accepted in Parliament, some of them unanimously, and these entered into force in the second week of April 2020. This second package completes the initial 63 measures. There are now 100 measures in total pertaining to different sectors, but mainly focusing on liquidity and employment.

The government was under substantial pressure from employer associations after the first package of measures was launched as it included a deferral of company obligations to the state (for further details please see "Measures introduced to protect businesses affected by COVID-19 pandemic"), while they demanded full waiver.

Measures aimed at preserving employment

Preserving employment was immediately characterised as one of the government's main goals. The measures for reducing the rate of unemployment caused by the COVID-19 pandemic include:

  • subsidised salaries for employees in affected sectors;
  • the discontinuation of existing employment and self-employment subsidies to secure additional funds to preserve employment in affected sectors; and
  • the extension of subsidies for permanent seasonal workers.

In practice, for most Croatian employers this means compensation of salary costs in the amount of HRK4,000 (approximately €530) for April 2020 and May 2020. The subsidy for March 2020 was HRK3,250 (approximately €430) per employee, which is the minimum salary in Croatia, while the second package of measures brought an upgrade. In addition, the state also covers salary contributions up to approximately HRK1,460 (approximately €195).

This measure is available from 1 March 2020 for a period of up to three months. Employers that use the subsidy for employees whose working hours have been reduced (up to 40% reduction of working hours with a subsidy in the amount of 40% of gross salary, but no more than the amount of minimum salary) can benefit from this measure for up to six months.

Employers that can apply for subsidised salaries are all business owners (ie, companies, trades and independent professions) that recorded a 20% fall in revenue compared with the respective month in 2019, under the condition that they keep their employees. The projected cost of this measure for April 2020 and May 2020 is HRK8.5 billion (approximately €11 billion).

The second packet of measures was well received by the Croatian public, unlike the March 2020 package, which received objections from the Croatian Employers' Association and other organisations in the private business sector. Subsidised salaries have already been used for 480,000 employees.

Meanwhile, government offices are conducting analysis to find additional possibilities for saving resources and alleviate the impact on the economy in the wake of the health crisis. It was announced that a third packet of measures should include a reduction or waiver of parafiscal levies. A total of 488 of such levies are currently imposed on Croatian employers in different sectors.