The global labour market has long stopped being reserved for large multinational corporations.

Today, a startup in Berlin may engage a software engineer from Novi Sad. A marketing agency in Belgrade may provide services to a client in Dubai. At the same time, a Serbian company may hire a specialist relocating from another country.

At first glance, this may appear straightforward.

However, behind a single signature there are often several overlapping legal regimes: employment law, tax, immigration and work authorization, data protection, and foreign exchange regulations.

This is precisely why cross-border employment, remote work, employment of foreign nationals, freelance engagements, and Employer of Record (EOR) models have become part of everyday business operations.

Yet what initially appears to be a simple matter of signing a contract and making payments frequently opens questions relating to employment compliance, immigration requirements, tax exposure, intellectual property, confidentiality obligations, and termination risk.

Choosing the wrong engagement model may result in additional tax liabilities, regulatory exposure, labour inspection issues, disputes concerning ownership of work product, and unnecessary operational complexity.

For this reason, cross-border workforce planning should not be treated merely as an HR or administrative matter. In many cases, it becomes a legal and strategic business decision.

What Does Cross-Border Employment Cover?

Cross-border employment and workforce engagement may take many forms.

In practice, the most common models include:

• employment of a foreign national by a Serbian employer;
• posting employees from Serbia to work temporarily abroad;
• remote work performed from Serbia for a foreign employer without a local Serbian entity;
• Employer of Record (EOR) structures, where a local provider formally acts as employer;
• engagement of freelancers, consultants, sole entrepreneurs, or Serbian companies for foreign clients.

Each of these models may be lawful, efficient, and commercially practical — but only if properly structured.

Therefore, it is rarely sufficient to look solely at engagement cost or administrative simplicity. The key question is whether the selected legal structure reflects the actual manner in which work is performed.

Where Do Problems Most Commonly Arise?

In practice, legal and tax issues most often arise when companies attempt to fit a straightforward business arrangement into an unsuitable legal framework.

Typical risks include situations where:

• a foreign national begins working in Serbia before residence and work authorization are properly regulated;
• a person is formally engaged as a freelancer or independent contractor but operates in practice as an employee;
• remote work from another jurisdiction has not been assessed from a tax perspective;
• remuneration flows through multiple jurisdictions without a clear tax structure;
• employees are posted abroad without adequate documentation;
• contracts fail to regulate intellectual property, confidentiality, data protection, or dispute resolution;
• long-term presence of employees or contractors in another jurisdiction raises questions of permanent establishment (PE) exposure.

For that reason, the engagement model should ideally be reviewed before cooperation begins — not after a dispute arises or regulatory supervision starts.

Legal Framework in Serbia

Cross-border employment in Serbia is not regulated by a single standalone law.

Instead, the legal framework is broad and combines several areas of regulation that apply simultaneously depending on the chosen engagement structure, the location where work is performed, the tax profile of the parties, and the immigration status of the individuals involved.

As a result, analysing employment issues in isolation is rarely sufficient. Cross-border workforce arrangements frequently require coordinated consideration of employment, immigration, tax, corporate, data protection, and contractual matters.

The most relevant Serbian regulations include:

1. Labour Law (Zakon o radu) – governs employment relationships, remote work, work performed outside employer premises, employment contracts, employee rights, and employer obligations.
2. Law on Foreigners (Zakon o strancima) – regulates entry, movement, residence, and legal stay of foreign nationals in Serbia.
3. Law on Employment of Foreigners (Zakon o zapošljavanju stranaca) – regulates conditions and procedures for employment and work authorization of foreign nationals.
4. Law on Conditions for Posting Employees Abroad and Their Protection – governs temporary posting of employees from Serbia to foreign jurisdictions, including duration, employee consent, and employer obligations.
5. Personal Income Tax Law – relevant particularly for taxation of individuals, contractors, freelancers, and sole entrepreneurs.
6. Law on Mandatory Social Security Contributions – regulates mandatory social insurance obligations.
7. Copyright and Related Rights Law – relevant for software, design, written content, creative work, and transfer of intellectual property rights.
8. Personal Data Protection Law – relevant where employees, contractors, or local partners process personal data from Serbia.
9. Foreign Exchange Operations Law – governs payments and transfers between residents and non-residents.
10. Double Tax Treaties and Bilateral Social Security Agreements – particularly important for tax residence, payroll allocation, and social contribution exposure across jurisdictions.

For this reason, legal analysis should generally begin with identifying the actual business model first — and only then selecting the appropriate legal structure.

Employment of Foreign Nationals by Serbian Employers

One of the most common scenarios in practice is where a Serbian company intends to hire a foreign national who will perform work in Serbia.

Examples include a Serbian LLC employing an engineer from Türkiye, a manager from Russia, or a specialist relocating from India.

Before work begins, employers should assess at least three questions:

• whether the individual requires a visa to enter Serbia;
• what immigration basis applies for residence;
• whether the foreign national is legally authorised to work.

Since February 2024, Serbia has implemented a Single Permit system, which combines temporary residence and work authorisation into one integrated procedure for eligible employment-based cases. Depending on the legal basis and underlying circumstances, the permit may be granted for a period of up to three years. Applications are primarily submitted electronically through the dedicated foreign nationals’ portal.

In practice, the process commonly includes:

• review of applicable visa requirements;
• registration of address upon arrival in Serbia, where required;
• preparation of employer and employee documentation;
• assessment of labour market conditions where applicable;
• electronic submission of the application;
• communication with competent authorities until final decision.

Employers should also keep in mind that not all employment scenarios follow identical procedural rules. Certain categories of work and specific forms of engagement may involve additional requirements or exemptions.

Particular attention should be paid to ensuring that the foreign national performs work strictly within the scope of the approved legal basis.

Starting work before obtaining appropriate authorisation may expose both the employer and the individual to compliance risks and administrative consequences under Serbian law.

Remote Work from Serbia for Foreign Employers

Remote work has become a standard part of modern business operations. However, from a legal perspective, it should not remain unstructured.

The fact that an employee or contractor performs work “from home” does not mean that employment, tax, or compliance rules cease to apply.

Serbian Labour Law recognises work performed outside employer premises, including remote work and work from home arrangements. Such arrangements generally require contractual regulation and should address matters such as work organisation, supervision, equipment, reimbursement of work-related costs, and other elements specific to remote performance of work.

Particular attention should be given to employee monitoring.

Employers are generally entitled to supervise work performance. However, monitoring measures should remain proportionate, transparent, and appropriately documented through internal policies and contractual arrangements.

Excessive monitoring practices — including continuous camera surveillance, extensive screen tracking, keystroke monitoring, or disproportionate activity monitoring — may raise privacy and personal data protection concerns.

This approach is also reflected in the case law of the European Court of Human Rights. In Bărbulescu v. Romania, the Court emphasised the importance of prior employee notification, proportionality of monitoring measures, and the existence of a legitimate business justification before employee communications are monitored.

In cross-border employment scenarios, additional questions frequently arise:

• Is the individual considered tax resident in Serbia?
• Where is the work factually performed?
• Who ultimately bears payroll costs?
• Does the foreign employer create taxable presence in Serbia?
• Could the employee’s activity contribute to permanent establishment (PE) exposure?
• How should confidentiality and personal data obligations be structured?

Importantly, the presence of remote workers in Serbia does not automatically create permanent establishment exposure. However, depending on the facts — including authority, duration, integration into business operations, and applicable tax treaties — the issue should be assessed individually.

Accordingly, remote work should not be viewed merely as an operational arrangement. In many cases, it becomes an employment, tax, contractual, and compliance matter.

Freelancers, Independent Contractors and the Risk of Hidden Employment

Companies frequently choose freelance and contractor models because they appear more flexible and commercially efficient.

However, legal qualification does not depend solely on the title of the agreement.

In practice, authorities may assess how the relationship functions in reality rather than relying exclusively on contractual wording.

In other words, it is rarely decisive whether the agreement is called a consulting agreement, independent contractor agreement, service agreement, or freelance arrangement.

What matters is how the engagement actually operates.

Risk indicators may arise where the individual:

• works exclusively or predominantly for one client;
• receives regular fixed payments resembling salary;
• uses client equipment and infrastructure;
• receives day-to-day instructions and operates within internal hierarchy;
• uses internal systems, communication channels, and company tools;
• bears little or no independent business risk.

For Serbian sole entrepreneurs and lump-sum taxpayers, particular attention should be given to the independence test, which may influence the tax treatment of the engagement.

At the same time, it is important to distinguish between two separate issues:

• tax assessment of entrepreneurial independence; and
• broader employment law analysis regarding possible hidden employment relationships.

Failure to meet entrepreneurial independence criteria does not automatically mean an employment relationship exists. However, it may create additional tax and compliance exposure depending on the actual circumstances.

For that reason, contractual documentation should reflect the real business model rather than attempt to artificially achieve a preferred legal outcome.

Posting Employees from Serbia to Work Abroad

Another common model arises when a Serbian employer temporarily assigns employees abroad to deliver projects, provide services, support affiliated entities, or participate in professional development.

This area requires particular attention because multiple legal systems often apply simultaneously.

Companies typically need to consider:

• Serbian employment law;
• employment rules in the destination country;
• tax obligations;
• social security contributions;
• applicable international agreements.

Under Serbian law governing temporary posting of employees abroad, posting may generally last up to 12 months, subject to extensions and applicable international arrangements.

The framework also regulates:

• who may be posted;
• employee consent requirements;
• employer obligations;
• documentation requirements;
• employee protection measures.

As a general rule, the employee should already have an established employment relationship before posting begins, although exceptions may apply.

Companies also frequently confuse business travel with employee posting.

However, attending meetings abroad or participating in short-term business activities does not necessarily qualify as temporary work abroad.

For that reason, employers should review the purpose of travel, expected duration, documentation, and local requirements before employees leave Serbia.

Particular attention should be given to:

• amendments to employment agreements or other supporting documents;
• employee consent;
• duration of assignment;
• salary and reimbursement arrangements;
• healthcare and social security coverage;
• tax treatment;
• employment rules in the destination country.

Cross-border mobility often appears operational. In practice, it quickly becomes a compliance exercise.

Employer of Record (EOR)

Employer of Record (EOR) structures allow companies to hire internationally without establishing a local entity in every jurisdiction.

This model has become increasingly common due to remote work, distributed teams, and faster international expansion.

Today, it is not unusual for one company to employ:

• a developer in Serbia;
• a designer in Portugal;
• a marketing manager in Spain;
• a sales consultant in Poland;
• a project manager in Türkiye.

At first glance, the model appears simple.

The company identifies talent, agrees commercial terms, and integrates the person into its business.

However, each jurisdiction applies different rules on:

• employment;
• payroll;
• social security;
• dismissal;
• paid leave;
• working time;
• employee protections;
• employer obligations.

As a result, companies cannot assume that one hiring model works globally.

A structure that qualifies as consulting in one jurisdiction may create employment exposure elsewhere.

EOR providers emerged largely as a practical response to that complexity.

How Does EOR Work in Practice?

Imagine a foreign company that does not have a registered entity in Serbia but wants to engage an employee based in Belgrade.

Direct employment would often require the company to consider:

• local incorporation;
• registration procedures;
• payroll administration;
• social security registration;
• labour law compliance;
• local administration and reporting.

If the company plans to engage only one or several employees, establishing a Serbian entity may not make commercial sense.

This is where the EOR model becomes relevant.

The local EOR provider formally acts as employer and handles local administration.

At the same time, the foreign client usually directs daily work, allocates projects, evaluates performance, and integrates the employee into its wider business.

Why Companies Use EOR

Companies often choose EOR when they want to scale quickly across multiple jurisdictions.

Imagine a business planning to hire ten employees across ten countries within six months.

Without EOR, that company would need to understand and coordinate:

• ten legal systems;
• ten payroll regimes;
• ten social security systems;
• ten termination frameworks.

That creates more than administrative burden.

It increases legal exposure.

Companies need to understand:

• notice periods;
• leave entitlements;
• mandatory salary components;
• language requirements;
• dismissal procedures;
• remote work obligations;
• local reporting obligations.

EOR providers reduce that complexity and enable international hiring without immediate local incorporation.

However, companies should not treat EOR as a purely administrative solution.

EOR creates important legal questions.

For example:

• Who acts as the functional employer?
• Who bears responsibility for labour disputes?
• Who owns intellectual property created by employees?
• Could the arrangement create tax exposure?

Importantly, EOR structures do not automatically create permanent establishment exposure.

However, long-term and operationally integrated presence may justify additional tax analysis depending on applicable rules and treaty protection.

Example in Practice

Imagine a US company that hires one employee in Serbia through an EOR arrangement to test the local market and avoid incorporation.

Over the following year, the Serbian team expands to 12 employees.

Local team members begin leading projects, participating in sales activities, and becoming integrated into daily business operations.

At that point, companies often ask:

Does EOR still remain the most efficient structure — or is it time to establish a Serbian entity?

There is no universal answer.

However, companies should reassess:

• headcount growth;
• duration of local presence;
• operational independence;
• tax exposure;
• regulatory complexity.

When Does EOR Stop Making Sense?

EOR may work well when a company:

• tests a market;
• hires a small local team;
• wants speed;
• delays incorporation decisions;
• evaluates long-term opportunities.

However, once a company starts building a permanent Serbian operation, develops management presence, enters local contracts, or expands local decision-making, incorporation may become the more sustainable structure.

In many situations, EOR works extremely well as a first step.

It does not necessarily remain the final one.

Intellectual Property: Who Owns the Work Product?

One of the most common misconceptions in international engagements is:

“If I paid for the software, design, logo, or content, I automatically own it.”

In practice, ownership is often more nuanced.

When companies engage freelancers, consultants, developers, or independent contractors, intellectual property transfer usually requires clear contractual regulation.

Otherwise, the client may receive only limited usage rights rather than full ownership and control.

Employment relationships often follow different rules. Even then, companies should avoid relying exclusively on default legal provisions.

Serbian copyright legislation contains specific rules regarding work created within employment relationships. Software, databases, design work, and digital products require particular attention.

For that reason, agreements should clearly define:

• what work product is created;
• whether IP rights transfer;
• who receives those rights;
• territorial scope;
• duration of transfer;
• exclusivity;
• whether compensation includes IP assignment.

This becomes especially important in:

• IT;
• software development;
• design;
• architecture;
• marketing;
• digital products;
• creative industries.

Clear ownership rules usually cost less than post-project disputes.

Data Protection and Confidentiality

Cross-border workforce arrangements frequently involve access to data located in multiple jurisdictions.

Employees, contractors, or service providers working from Serbia may access customer data, employee records, internal business information, or platform user information stored elsewhere.

Companies should therefore determine the individual’s legal role from the outset.

For example:

• employee;
• processor;
• sub-processor;
• independent controller.

Serbian Personal Data Protection Law applies in various situations where processing activities take place in Serbia.

In practice, companies often implement:

• non-disclosure agreements (NDA);
• data processing agreements (DPA);
• data transfer arrangements;
• internal security policies;
• access management rules;
• retention and deletion procedures.

Where EU-related personal data is involved, companies should also assess whether GDPR requirements apply.

Data governance should not begin after expansion. It should become part of the engagement structure from day one.

Foreign Exchange Compliance and International Payments

Another common misconception assumes that international payments remain invisible to local authorities or do not require documentation.

In practice, companies should take a different approach.

Serbian foreign exchange rules regulate payments, collections, and transfers between residents and non-residents.

As a result, businesses should maintain proper legal and commercial documentation supporting every international inflow.

Typical examples include:

• agreements;
• invoices;
• service reports where appropriate;
• supporting business documentation;
• tax records.

This becomes particularly relevant for:

• freelancers;
• consultants;
• entrepreneurs;
• Serbian companies receiving recurring international payments.

Good documentation supports both tax and operational certainty.

Internet Templates: Why Standard Agreements Are Often Not Enough

Many businesses and freelancers still rely on free templates downloaded online.

Most of those templates follow foreign legal systems and do not necessarily fit Serbian law or cross-border business structures.

Problems frequently arise where agreements contain:

• foreign governing law clauses;
• foreign court jurisdiction;
• arbitration mechanisms disproportionate to the value of the dispute;
• unclear termination rights;
• vague payment provisions;
• incomplete intellectual property clauses;
• missing confidentiality and data protection provisions.

Templates may accelerate drafting.

They rarely replace legal structuring.

Checklist Before Starting Cross-Border Employment

Before hiring internationally, engaging remote workers, implementing EOR structures, or organising cross-border teams, companies should consider the following:

• ☐ Who acts as the formal employer and does the structure reflect operational reality?
• ☐ Where is work actually performed and which jurisdiction may assert regulatory or tax authority?
• ☐ Does the arrangement create tax exposure, including tax residence or permanent establishment (PE) considerations?
• ☐ Are intellectual property rights properly documented and transferred?
• ☐ Are confidentiality and data protection documents in place (NDA / DPA)?
• ☐ Is immigration analysis required, including residence and work authorization?

In practice, answers to these questions often determine whether the chosen structure remains efficient over time or later creates regulatory, tax, or operational difficulties.

Conclusion

International workforce flexibility does not eliminate legal rules.

In fact, the more flexible the engagement model becomes, the more carefully companies should structure it from employment, tax, and compliance perspectives.

Businesses engaging employees, freelancers, contractors, or remote teams across jurisdictions face overlapping obligations and should evaluate:

• employment classification;
• immigration and work authorization;
• tax consequences;
• social security exposure;
• foreign exchange compliance;
• data protection;
• intellectual property.

In most situations, legal analysis at the beginning of cooperation remains simpler, faster, and less expensive than resolving issues during tax audits, labour inspections, or disputes.

Frequently Asked Questions (FAQ)

Can a foreign company hire employees in Serbia without opening a local company?

In certain situations, yes. Depending on the structure, companies may consider remote work arrangements, contractor models, or Employer of Record (EOR) solutions. However, the appropriate model depends on employment, tax, immigration, and operational considerations.

Does remote work from Serbia automatically create permanent establishment (PE) risk?

No. Remote work alone does not automatically create permanent establishment exposure. However, factors such as duration, authority, business integration, and applicable tax treaties should be assessed individually.

What is the Single Permit system in Serbia?

Serbia introduced a Single Permit framework that combines temporary residence and work authorisation into one procedure for eligible employment-related cases.

When should a company consider moving from EOR to a Serbian entity?

Companies often reassess EOR structures when they expand local headcount, develop local management functions, enter local contracts, or establish long-term operational presence.

Can freelancers and contractors be reclassified as employees?

Potentially yes. Authorities may review the actual relationship rather than relying only on contractual labels.

Who owns intellectual property created by contractors in Serbia?

Ownership depends primarily on applicable law and contractual arrangements. Payment alone does not automatically transfer intellectual property rights.

Is legal analysis necessary before starting cross-border employment?

In many cases, yes. Early legal review often reduces tax exposure, compliance risk, restructuring costs, and disputes later.

Author

Jelena Eremić – Legal Associate at STATT.

Jelena works on immigration, international business, and regulatory matters, with a focus on practical legal solutions for international clients and cross-border business structures.

Legal Review

Mina Radojević Vlačić – Attorney at Law at STATT.

This article has been reviewed for legal consistency and professional accuracy.