Despite the fact that agency employment practice has been widely existing in Serbia for many years, there has been no legal framework for such practice until now. First ever Staff Leasing Law (“Law”) was adopted in December 2019 came into force on 1 March 2020.

The Law regulates the legal relationship between employment agency (“Agency”), beneficiary employer and employees, as well as the rights and duties of these parties during and in relation to employee assignment (i.e. staff leasing). The Law also introduces a lot of restrictions and obligations both for the Agency and the beneficiary employer.

In principle, legal relationship between the Agency, beneficiary employer and employee are regulated by two separate agreements: (i) one between the Agency and the beneficiary employer (Employee Assignment Agreement), and (ii) another between the Agency and the employee (Employment Agreement). Obligatory elements for both agreements are governed by the respective laws (Labor Law and Staff Leasing Law).

According to the Law, the Agency will not be able to hire personnel on the basis of the temporary and occasional work anymore and staff has to be employed by an employment agreement whether for fixed term (which is equal to the assignment period) or for indefinite term.

Fixed term employees may be assigned for a specific period in accordance with the provisions of the Labor Law regulating the basis and duration of fixed term employment. However, these employees cannot be assigned (i.e. leased) if they have previously been working for the same beneficiary employer directly or through agency for a fixed term.

Another limitation introduced by the Law is regarding the number of fixed term employees that can be assigned to the beneficiary employer. Namely, this limit is set to 10% of all employees at the beneficiary employer at the moment of conclusion of the Employee Assignment Agreement. On the other hand, such limitation shall not apply to the assignment of indefinite term employees, which will also be entitled to a salary compensation at the Agency during the period between two assignments.

The Law entitles the assigned employees to the same working conditions the “comparative employees” at beneficiary employer have (salary, working hours, leave, health and safety etc.) which is one of the biggest and most important novelties so far. Another important benefit for the assigned employees the Law stipulates is beneficiary employer’s joint and several liability for the Agency’s obligation to pay the salary, salary compensation and reimbursement of expenses to the employee.

Regarding the termination reasons, they can occur with both Agency and beneficiary employer. Notwithstanding, the Agency is the only one who can terminate the employment agreement and in case of unlawful termination, the Law limits the damage compensation up to 18 salaries. Also, the Law prescribes numerous fines for both the Agencies and the beneficiary employers.

Having in mind that the Law regulates the staff leasing for the first time in Serbia, there is no relevant court or labor inspection practice available in this regard. Therefore, all flaws and advantages shall be visible after certain period of time. Until then, it remains to see how an open issues will be regulated in the forthcoming days.