HRP Compliance In The Western Balkans: Complex Processes In An Even More Complex Region

Employment without Establishment region-wide, minimum wage in Serbia, directorship in Bosnia, correctness of payslips in Croatia - how aware are we of the risks of being non-compliant?

Since the breakup of Yugoslavia there have been many attempts to arrive at an adequate appellation for the region in question, and it appears that we have finally settled on the 'Western Balkans'. However, when it comes to business rather than politics, most companies still refer to it as Southeast Europe, tossing all these fledgling states into the same pot with a score of other countries whose economic histories and entrepreneurial environments may be completely different...or, to make matters even more complicated, that may be different to some former Yugoslav republics but quite similar to certain others.

To illustrate: Slovenia and Croatia are both EU member states, but do not have a common language. Montenegro and Bosnia and Herzegovina, which do share the same language with Croatia, are yet to enter the EU - but all of the four mentioned countries' recent economic histories have been marked by long or very long recessions, high levels of State interference, and (more or less) inefficient judicial systems, and, within the regional context, comparatively high taxes and labour costs (especially in Croatia).

Conversely Serbia, language-wise another closest relative of the aforementioned trio, has been attracting manufacturers for quite some time courtesy of a cocktail of low labour costs and zesty governmental incentives for foreign investors (thus competing, in terms of FDI, with the likes of Bulgaria and Romania, and by extension Slovakia and Poland); whilst Macedonia, whose language is mutually intelligible with Bulgarian, has implemented a flat tax and has, all its political instability and name disputes notwithstanding, managed to survive in the epicentre of the proverbial Balkan powder-keg.

In other words, this potpourri of overlapping, intersecting and conflicting disparities and similarities does translate rather well into the practicalities of doing business in the region. Rather logically - at least at first sight - many companies have decided to set up their (sub)regional headquarters in Belgrade or Zagreb or Ljubljana; only to realise, very early on, that the regulatory realities in these three cities and beyond require markedly different approaches and solutions.

Now let us envision a company with its HQ in Zagreb which, for its own reasons...