Fixed-Term Employment Contract

Under the Labour Act (Zakon o radu), a fixed-term employment contract with the same employee may last for a total of no more than three consecutive years, including all extensions and renewals. After that, the employer must offer an open-ended contract or end the employment relationship. Exceptions exist for certain activities and situations, for example cover for maternity leave or projects with a defined duration. Every extension must have an objective reason justifying the fixed term – seasonal work, an increased volume of work, or cover for an absent employee. Concluding a series of consecutive fixed-term contracts without an objective reason is treated as a disguised open-ended contract, and the employee may ask the court to establish that the employment relationship is open-ended. A break of more than two months allows the three-year period to be counted afresh.

Where a fixed-term employment contract expires in the ordinary way on the agreed date, the employee has no statutory right to severance pay. Severance pay is paid only where the employer terminates the contract for reasons that are not the employee’s fault, and only to employees with at least two years of service. The expiry of a fixed-term contract is not a dismissal but the ordinary end of the agreed relationship. However, a collective agreement or the employer’s internal rules may provide for compensation on the expiry of a fixed-term contract as well. If the employer terminates a fixed-term contract before the end date, the general rules on termination apply, including any severance pay. The employee may register with the Hrvatski zavod za zapošljavanje (Croatian Employment Service) and claim unemployment benefit if the conditions are met – a certain period of insurance and termination without the employee’s own fault.

Employees on fixed-term and open-ended contracts have the same fundamental rights under the law – the right to a salary, working hours, annual leave and occupational safety. Practical differences do exist, though. A fixed-term contract ends on expiry of the term, with no need for notice and with no right to severance pay. With an open-ended contract, the employer must have a justified reason for termination and must observe the notice period. Employees on open-ended contracts are entitled to severance pay if they have sufficient service and are dismissed through no fault of their own. Protection against dismissal is significantly stronger under an open-ended contract, especially for protected categories such as pregnant women. In practice, employees on fixed-term contracts often have poorer access to benefits and promotion because employers regard them as temporary. Banks and landlords prefer employees with an open-ended contract.

An employer may terminate a fixed-term employment contract before the end date, but must observe the same rules as for an open-ended contract. This means there must be a justified reason for termination – business-related (abolition of the job position), personal (inability to work) or conduct-related (breach of obligations). The termination must be in writing and must state the reasons. The employee is entitled to a notice period, the length of which depends on years of service. If the reason for termination is the employee’s conduct, the employer must carry out the prescribed warning procedure. Extraordinary termination without notice is possible only for particularly serious breaches of obligations. An employee may challenge an unlawful dismissal before the court. Termination by mutual agreement is possible at any time with the consent of both parties.