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Management contracts

  • June 13, 2025
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  • Category: Blog
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Throughout the history of mankind, many significant business projects and ventures have been conducted. From the business idea to its implementation, it was necessary to engage trusted people, with whose help and support the business idea could be realized. Of course, for successfully implemented tasks, trusted people – managers – were richly rewarded.

Today's modern companies depend heavily on their managers because they are the ones who achieve the goals on which they are based. Therefore, it is particularly important to conclude a valid management contract in accordance with the law.

We will look at the legal regulations and obligations when signing Management Contracts in the FBiH, RS and hiring foreigners as managers.

FBiH 

In the FBiH, Article 27 of the Labor Law prescribes "which positions are considered managerial in the eyes of the law..."   

The Labor Law stipulates that the employment contract must contain information on: 

a) Name and headquarters of the employer;        
b) First and last name, place of residence or place of residence of the worker;
c) Duration of the employment contract;       
d) The day of commencement of work;  
e) Place of work;         
f) The workplace to which the worker is employed and a brief job description;
g) Length and schedule of working hours;    
h) Salaries, salary supplements, and payment periods;           
i) Salary compensation;
j) Duration of annual leave;
k) The notice period and other data related to the working conditions established by the collective agreement
                                                    
Managerial contracts can be with or without establishing an employment relationship and with or without compensation.

If a manager performs a function with an employment relationship, his rights and obligations are regulated by the Labor Law. He is registered in the Unified System like all other employees. In addition, the manager is required to register with the court registry. The deadline for registration in the records kept by the Tax Administration is 5 days from the date of registration in the Court Registry, using the POR 500 form.

If a manager is hired without an employment contract, the rights, obligations and responsibilities are regulated by a contract in accordance with the general act of the employer. A copy of the management contract must be submitted to the competent Tax Administration. Persons hired as managers in the FBiH without an employment contract are not entitled to pension and health insurance (unless they pay voluntary pension and health insurance themselves).

In cases of payment of compensation to managers based on the management contract, it is necessary to calculate the corresponding tax and contribution. The so-called small taxes and contributions:
(PIO 6%; ZO 4%.; INCOME TAX 10%; special and water fee at the rate of 0.5%)
                       After payment, a declaration is submitted to the Tax Administration on form ASD-1032.

RS

In the RS, Article 51 of the Labor Law defines the status of a director (manager).

Persons hired as managers without employment are entitled to pension, disability and health insurance and register on the day of signing the contract as a "Responsible Person without Employment" using Form PD 3100.

The income of managers in the RS represents income from a natural person and taxes and contributions are calculated when paying the agreed fees. The tax base is the amount of gross personal income. Income tax in the amount of 13% and other contributions in the amount of 31% are paid. The manager is not entitled to use the basic personal deduction or to a deduction based on the tax card. Registration in the Unified System is mandatory.      
Just like in the FBiH, managers in the RS who perform their duties without establishing an employment relationship are not entitled to tax-free payments provided by law for employed persons.
 
In BiH, there are no restrictions on hiring foreigners on the basis of a management contract. 
       
If they do not stay in the territory of BiH for more than 90 days, they do not need a work permit and can work without establishing an employment relationship. If they stay for more than 90 days, they need to establish an employment relationship, obtain a work permit and regulate temporary residence.

A foreigner who does not stay in the territory of the Federation of Bosnia and Herzegovina for more than 183 days on the basis of a management contract is taxed only with the income tax 10%. If he stays for more than 183 days, then it is necessary to calculate, pay and report small contributions.


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