Am I entitled to severance pay in Serbia and how much is it

Who is entitled to severance pay under the Labour Act

Severance pay (otpremnina) is not a general right at every end of employment. The Serbian Labour Act (Zakon o radu) makes it mandatory in only two cases.

The first is dismissal due to technological, economic or organisational changes, when the need for a particular job ceases or the volume of work is reduced (Art. 179(5)(1)). In everyday language this is redundancy (tehnološki višak). The employer must pay severance before the dismissal; its amount is set by the general act or the employment contract but cannot be lower than the sum of one third of the salary for each completed year of service with the employer where the right is exercised (Art. 158(1) and (2)).

The second is retirement: the employer must pay severance of at least two average salaries (Art. 119(1)(1)), where average salary means the average salary in the Republic of Serbia according to the latest published figure of the Statistical Office (Art. 119(3)).

In all other cases there is no statutory severance: resignation (Art. 178), dismissal for breach of a work duty, breach of discipline or insufficient performance (Art. 179(1)-(3)), dismissal for refusing a contract annex (Art. 179(5)(2)), expiry of a fixed-term contract (Art. 175(1)) and mutual termination (Art. 177). There, severance exists only if the collective agreement, the work rules (pravilnik o radu), the employment contract or the termination agreement provides for it. So always read those documents first: they can give more than the Act, never less.

Severance at a small private employer is no different from a large company: an employer under the Act is any legal entity or natural person employing at least one person (Art. 5(2)), so the same minimums apply at a sole trader and at a public enterprise.

Redundancy severance: the formula with an example

The statutory minimum is calculated from two figures: the average salary and the completed years of service.

The salary for the calculation is the average monthly salary paid for the last three months preceding the month of payment (Art. 159). Salary means the amount that includes tax and contributions payable out of it (Art. 105(2)), so gross, not what lands in your account, including increases and the performance-related part paid in those months (Art. 105(1)).

Years of service are the completed years of employment with the employer where the right is exercised (Art. 158(2)); an incomplete year does not count. Time with a predecessor employer after a status change under Art. 147 and with related companies counts (Art. 158(3)). A change in ownership of the capital is not a change of employer (Art. 158(4)), so a sale of the company does not erase your service. For a period already covered by severance, from the same or another employer, the right cannot be exercised again (Art. 158(6)).

A formula you can apply yourself, instead of a calculator:

minimum severance = (sum of gross salaries for the last three months / 3) / 3 x number of completed years of service with that employer

Example: in the last three months before the month of payment your gross salaries were RSD 118,000, 120,000 and 122,000. The average is RSD 120,000. You have been with the employer for seven years and four months, so seven completed years. The minimum severance is 120,000 / 3 x 7 = 40,000 x 7 = RSD 280,000. That amount is tax-free, so it is paid to you in full. If the work rules provide half a salary per year, the severance is 60,000 x 7 = RSD 420,000, and the RSD 140,000 above the statutory minimum is taxed as other income.

The general act or the contract may set a higher amount, but not a longer period of service than the one in Art. 158(2) and (3) (Art. 158(5)). Severance is paid before the contract is terminated (Art. 158(1)): payment first, then the dismissal decision. The procedure, the redundancy programme and the selection criteria are on the page about being declared redundant.

Retirement severance

On retirement the employer must pay severance of at least two average salaries in the Republic of Serbia according to the latest published figure of the Statistical Office (Art. 119(1)(1) and (3)). The base here is not your own salary but the national average, which is an important difference from redundancy severance. The general act may provide a higher amount or tie the base to your own salary, but cannot go below two national average salaries.

The right is tied to the end of employment for the purpose of retirement; the Act does not distinguish between types of pension or between employment ending by operation of law at 65 years of age with 15 years of insurance (Art. 175(2)) and ending earlier at your request. Failure to pay this severance is a misdemeanour (Art. 275(1)(5)), and the claim itself is a monetary claim that becomes time-barred after three years (Art. 196).

Mutual termination and severance

A mutual termination is a written agreement between the employer and the employee (Art. 177(1)). The Act attaches no severance to it. If the employer offers you an agreement, any severance offered is a matter of negotiation, and its amount, method and date of payment should be written into the agreement itself, along with the calculation of unused annual leave.

Before signing, compare the offer with the alternative. If the real reason is that the need for your work has ceased, dismissal on the ground of redundancy gives you statutory severance, tax-free up to the minimum, and the right to unemployment benefit from the National Employment Service. Termination by agreement generally excludes that benefit, because employment ended by your own will (Art. 67(2) of the Law on Employment and Unemployment Insurance), and the employer must inform you of that consequence in writing before you sign (Art. 177(2)). For tax purposes, severance paid under a mutual termination is not covered by the exemptions in Art. 9 of the Personal Income Tax Act, so expect it to be taxed as other income. That is why the "same" sum under an agreement can be worth less than a smaller sum under a dismissal.

Tax on severance pay

The Personal Income Tax Act (Zakon o porezu na dohodak građana) exempts from tax retirement severance up to the amount set as the minimum by the Labour Act (Art. 9(1)(18)) and severance paid by the employer to an employee whose work is no longer needed, also up to the statutory minimum (Art. 9(1)(19)). Up to that limit, the amount calculated under the formula on this page is paid without deduction.

The part above the tax-free amount is "income under Art. 9 above the prescribed tax-free amounts" and is taxed as other income (Art. 85(1)(12)) at a rate of 20% (Art. 86(1)). The employer, as payer, calculates and pays the tax. Severance is not treated as salary under the Labour Act (Art. 105(3)), so it enters neither the base for calculating future severance nor the salary average. On the calculation check three things: which amount was treated as tax-free, whether that amount equals the statutory minimum based on your figures, and how much tax was charged on the excess. Check the treatment of social contributions on the part above the minimum with an accountant or the Tax Administration, as it depends on your insurance status.

Severance and unemployment benefit

Dismissal for redundancy is expressly listed as a ground for unemployment benefit from the National Employment Service (Art. 67(1)(1)(1) of the Law on Employment and Unemployment Insurance, Zakon o zapošljavanju i osiguranju za slučaj nezaposlenosti). The general condition is at least 12 months of insurance, continuous or with breaks, in the last 18 months, with a break shorter than 30 days not counting as a break (Art. 66).

Severance you received neither reduces nor delays the benefit; the law prescribes no waiting period because of severance. The benefit runs from the first day after insurance ends if you register with the Service within 30 days; if you are late, from the day of application (Art. 68). It lasts three months for an insurance record of one to five years, six months for five to 15, nine for 15 to 25 and 12 months for more than 25 years, and exceptionally 24 months if you are within two years of a pension (Art. 72). The amount is based on your salaries in the last 12 months, within the lowest and highest amounts the Service publishes on its website (Arts. 69 and 70). The benefit is exempt from income tax (Art. 9(1)(4) of the Personal Income Tax Act).

Exception: employees who, under a Government decision on a redundancy programme, themselves opted for a payment higher than the statutory severance can obtain the benefit only once they again meet the 12-month insurance condition (Art. 67(2)).

What to do if severance has not been paid

First, a written request to the employer with your own calculation: state the last three gross salaries, the number of completed years and the amount you claim. Attach your payslips. If only the amount is disputed, this step often settles the matter.

Second, the labour inspectorate. It supervises the application of the Labour Act (Art. 268) and may order the employer by decision to remedy the violation within a set period (Art. 269). Denying severance under Art. 158 is a misdemeanour punishable by a fine of RSD 400,000 to 1,000,000 for a legal entity, RSD 100,000 to 300,000 for a sole trader and RSD 20,000 to 40,000 for the responsible person (Art. 275). A report is free.

Third, the court, with two different deadlines. If the dismissal was served without prior payment of severance, a claim for annulment of the dismissal decision is filed within 60 days of delivery (Art. 195); that period cannot be extended. A claim for payment of the severance itself, or of the difference up to the minimum, with default interest, is a monetary claim that becomes time-barred after three years (Art. 196). Both can be made in the same lawsuit. Everything else owed at the end of employment, salary, compensation and pay for unused leave, must be paid within 30 days (Art. 186).

Fourth, enforcement. A final judgment ordering the employer to pay is an enforceable title; if the employer still does not pay, collection goes through a public enforcement officer, as a rule from the employer's business account. If the employer has meanwhile entered bankruptcy, the claim is filed in the bankruptcy proceedings.

Is there a new law on severance pay for 2025 or 2026

No. The severance rules in Arts. 119, 158 and 159 were last substantively amended in 2014, when the calculation was tied to years of service with the employer where the right is exercised rather than to total working life. The latest amendment to the Labour Act, through the e-sick-leave statute (Sl. glasnik RS No. 109/2025), does not touch severance. The tax-free amount does not change annually, because it is tied to the statutory minimum rather than to a fixed sum. If you come across announcements of a new Labour Act, check whether it has been published in the Official Gazette; until it is, the text described here applies.

When to consult a lawyer

A lawyer is useful when the ground for dismissal itself is disputed (the employer says disciplinary, you say the need for your work has ceased), when the dismissal was served without severance and the 60-day period is running, when the count of years or the base is disputed because of status changes and related companies, or when you are offered a mutual termination with severance and need to compare the net effect with a redundancy dismissal. When only the amount is disputed and the sum is small, a written request and the inspectorate are the more economical first step.

Sources

• Labour Act (Zakon o radu, Sl. glasnik RS Nos. 24/2005, 61/2005, 54/2009, 32/2013, 75/2014, 13/2017 - Constitutional Court decision, 113/2017, 95/2018 - authentic interpretation and 109/2025 - other statute), Arts. 5, 105, 119, 147, 158, 159, 175, 177-179, 186, 195, 196, 268, 269 and 275
• Personal Income Tax Act (Zakon o porezu na dohodak građana, Sl. glasnik RS Nos. 24/2001 ... 80/2026), Arts. 9, 85 and 86
• Law on Employment and Unemployment Insurance (Zakon o zapošljavanju i osiguranju za slučaj nezaposlenosti, Sl. glasnik RS Nos. 36/2009, 88/2010, 38/2015, 113/2017, 113/2017 - other statute and 49/2021), Arts. 66-72
• Labour Act, Personal Income Tax Act and Law on Employment and Unemployment Insurance, consolidated texts (paragraf.rs), used to check the wording of individual articles
• Statistical Office of the Republic of Serbia, average salaries
• National Employment Service (Nacionalna služba za zapošljavanje)
• Labour Inspectorate, Ministry of Labour, Employment, Veteran and Social Affairs
• Law on Court Fees (Zakon o sudskim taksama, Sl. glasnik RS Nos. 28/94 ... 91/2025), Art. 10
• Tariff on Attorneys' Fees and Expense Reimbursement (Tarifa o nagradama i naknadama troškova za rad advokata, Sl. glasnik RS Nos. 43/2023 and 56/2025), Items 13 and 14