Rules and complex solution for Calculation of salaries of members of the Management board

Article 4 of the Labor Act (OG 93/2014, 127/2017, 98/2019) states that a member of the management board may be employed in the company in which he/she performs the stated duty, but he/she does not have to. For example, if they are not employed in a company in which they are members of the management board then they may be employed by another employer, unemployed, retired, or foreigners. Irrespective of the previous, they are entered in the register of the competent commercial court.

Minimum salary and base of a board member

It is important to emphasize that there have been changes in the calculation of salaries of members of the management board who are employed in the company in which they perform this duty. Until now, they did not have the prescribed amount of the base for calculating contributions. The provisions of the Minimum Wage Act (OG 39/13) applied to them, as well as to other employees who are not in the company’s management. This caused inequality between the owner of the business and the director of the company in which he has an employment contract. At the beginning of 2021, there was a change in regulations, ie a change in the amount of the average salary. All workers working in the Republic of Croatia are entitled to the minimum wage, regardless of the seat or registration of the employer. The exception appears precisely in the case of members of the management board, executive directors, cooperative managers, liquidators, and the like, and those who are the only employees of the employer and to whom this provision does not apply. They can determine the monthly income (salary) in the amount lower than the minimum wage. In the Order on the amounts of bases for calculating contributions for compulsory insurance for 2021, in Article 19, the monthly basis for full-time work of a person who is a member of the management board or executive director must not be lower than HRK 5,967.65.

If the members of the management board or executive directors are not employed by the company in which they perform this duty, then the Tax Administration will determine their annual base or difference for paid contributions if their base for calculating contributions is less than HRK 5,967.65.

Persons who are employed for the first time or who are classified in the category of young persons under the Contributions Act under certain conditions are not calculated contributions for compulsory insurance. Opposite them can be found non-resident members of the management board who are determined by Article 12 of the Pension Insurance Act to have an insurance obligation.

It is important to emphasize how an employment relationship can be contracted full-time and part-time. If a member of the management board or executive director of the company is employed part-time, then he pays a smaller amount of contributions and exercises the right to health care and length of service as if he were employed full-time.

The average salary for 2021 (OG 118/20) is HRK 9,181.00, while the average net salary is HRK 6,724.00. Given that members of the management board and executive directors do not have compulsory insurance, their task is to independently calculate and pay contributions.

A complex solution for payroll calculations

Precisely because of the previous calculation of employee salaries can be a long and intensive job. That is why various companies, including Confida, offer complete management solutions that provide all the benefits of the payroll department without additional costs and responsibilities. Confida offers a payroll outsourcing service or management of all liabilities related to the payroll process and allows you to focus on your core business.

The benefits of payroll outsourcing are as follows:

  • reduction of internal administration,
  • no investment in updating or purchasing payroll software,
  • no worries about changes in tax regulations or possible penalties for tax non-compliance,
  • high protection of personal data,
  • precision,
  • compliance with deadlines and
  • employment counseling.

There are a number of payroll solutions that are tailored to your team and industry, regardless of scale. Salary calculation packages are flexible and support the exchange of data in electronic and manual form.

The accuracy of payroll is extremely important because it directly affects business and affects the relationship with workers. Confida offers to strengthen the link between employer and employee by submitting payrolls according to agreed deadlines.

The Confida payroll process includes:

  • monthly salary processing,
  • annual calculation of income tax,
  • registration and deregistration of employees in the social security office and the tax authority,
  • preparation and delivery of the necessary forms to the competent institutions,
  • calculation of salaries and salaries of employees in accordance with legal regulations,
  • regular updates of all legal changes related to the payroll,
  • deductions for pension and health insurance,
  • automated procedure (import and export of documents) and flexibility of document format,
  • electronic reports and
  • complete confidentiality of data.

You can see the detailed offer here.

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