Social security contributions paid by the employer and the employee
By Nataša Krejić, Law firm Sajić
Bosnia & Herzegovina is a republic, but due to the complexity of its regional units, it does not function as a republic. It is composed of two entities and a district, i.e. the Federation of Bosnia & Herzegovina (51% of the territory), the Republic of Srpska (49% of the territory) and the Brcko District (which was the subject of disputes and international arbitration and then finally recognised as a district).
There is an obligation to pay social security contributions with each payment of income (wage). The wage represents a basis for the payment of social security contributions. The general definition of a social security contribution payer is that it is a natural person (individual) and resident of Bosnia & Herzegovina who, in terms of regulations governing the area of pension and disability insurance, health insurance and unemployment insurance, is obliged to be insured under certain circumstances or voluntarily insured.
The wages are determined by gross and net amount. The gross amount of a wage includes a net wage, income tax and contributions (contributions for health insurance, pension and disability insurance, and for unemployment insurance).
A net wage includes the basic wage (earnings of employees reduced by tax and contributions) and benefits (meal allowance – a certain amount added to net earnings for each day spent at work, annual allowance – the twelfth part of the total annual earned sum which the employee will get when going for the annual leave, plus an addition for previous years of work - for each year of work the employee receives a percentage increase on the earnings).
The social security contribution payer is obliged to report their contribution obligation to the Tax Authority for each month and the same has to be filled-in on the monthly withholding tax application form set in accordance with the income tax regulations.
Contribution payment is made in accordance with the place of the payee's seat, i.e. the employer's headquarters.
a) Share in contributions paid by employees:
- In the Federation of Bosnia & Herzegovina: 17% for pension and disability insurance, 12.5% for health insurance and 1.5% for unemployment insurance (in total: 31% on gross wage).
- In the Republic of Srpska: 18.5% for the pension and disability insurance, 12% for health insurance, 0.8% for unemployment insurance and 1.7% for child protection (in total: 33% on gross wage).
- In the Brcko District: 17% for pension and disability insurance for employers applied in accordance with the Federation of Bosnia & Herzegovina Act and 18% for pension and disability insurance for employers applied in accordance with the Republic of Srpska Act, 12% for health insurance and 1.5% for unemployment insurance (in total: 30.5% or 31.5% on gross wage).
b) Share in contributions paid by employers:
- In the Federation of Bosnia & Herzegovina: 6% for the pension and disability insurance, 4% for health insurance and 0.50% for unemployment insurance (10.50% on gross wage).
- In the Republic of Srpska: no such contributions are paid.
- In the Brcko District: 6% for pension and disability insurance for employers who apply the Federation of Bosnia & Herzegovina Act.
The lowest wage in Bosnia & Herzegovina represents the lowest amount payable to the employee by the employer for full-time work and standard performance and the same amounts to BAM 410,00 per month, while the average wage is BAM 800.00 per month.
There is an ongoing process of harmonisation of the state legislation with the laws, regulations and directives of the European Union. The Law on Personal Income and Social Security Contributions introduces the principle of world income through categories of unlimited (resident) and limited (non-resident) taxpayers and thus fully harmonises the law with the regulations applicable in the countries of the European Union.
Nataša KrejićLaw firm Sajić, Banja Luka, Bosnia & Herzegovina
T: + 387 51 227 620
Published: September 2018 l Photo: ©Sayonara - stock.adobe.com