Slovakia, located in the heart of Central Europe, has climbed the ranks in attracting foreign direct investment (FDI) in recent years. Nearly half (45%) of economic activity in Slovakia is generated by cross-border business, one of the highest in the OECD, and multinational companies (MNCs) gravitate to the country due to its highly stable investment environment, advanced infrastructure, high productivity and well developed workforce.
- Slovakia is not only centrally located in Europe, it also boasts well-connected highway and railway systems that connect businesses with the main supply chains of Europe and put over 600 million customers within a 2,000-kilometer radius.
- The country has been a member of the Eurozone since 2009, with the introduction of the euro translating to lower transaction costs, reduced risks of currency volatility and higher levels of investment stability.
- Companies benefit from attractive regional investment incentive policies, a preferential tax regime for research and development (R&D) activities and other financial support mechanisms to stimulate foreign investments.
- Productivity levels in Slovakia are well above the OECD average and rank among the highest in the region, according to OECD data. For MNCs, this unlocks higher output rates at lower labor costs compared to many other markets in Europe.
What do multinational companies (MNCs) need to know when expanding or hiring in Slovakia for the first time?
Slovakia’s Labor Code officially defines the country’s labor framework. Special acts regulate employment-related matters such as minimum wage, collective bargaining agreements (CBAs) and temporary employment via agencies. The National Labor Inspectorate is the official government agency responsible for the enforcement of employment statutes and regulations.
The Central Office of Labor, Social Affairs and Family also plays a role in the labor market, including helping people find a job. The agencies of the Public Health Authority conduct inspections for working conditions relating to health and safety at the workplace, which all employers are subject to.
Are bonuses mandatory in Slovakia?
Bonuses are paid at the discretion of the employer and are exempt from taxes and social insurance contributions if they are not less than the employee’s average monthly earnings. The maximum amount of the exemption is EUR 500. Bonuses are not mandatory in Slovakia.
How does employee termination work in Slovakia?
An employment relationship can be terminated in writing by both parties in the following circumstances:
- By mutual agreement
- During the probation period
- Termination with notice (by either party)
Immediate termination can only be used in exceptional circumstances as defined in the Labor Code. The employer must terminate the employment within two months from becoming aware of the circumstances leading to immediate termination (and the latest within one year).
A termination initiated by the employer (with notice or immediate) must be pre-negotiated with employee representatives. If this negotiation does not take place, the termination will be deemed invalid. Employee representatives are required to negotiate termination with a notice within seven working days from the employer’s written request and within two working days for immediate termination.
Employees in Slovakia are protected from termination if they fit any of the following circumstances:
- incapable of work due to illness or injury
- carrying out duties during a crisis situation
- pregnant or maternity leave
- performing voluntary military training/service
- pursuing public office
How do redundancy or severance payments work in Slovakia?
If termination is triggered by redundancy or inadequate abilities of the employee, the employer will be responsible to pay a severance varying from one to four months of pay. This will depend on the duration of employment:
- Two to five years: one month
- Five to 10 years: two months
- 10 to 20 years: three months
- More than 20 years: four months
For a termination by mutual agreement, the required severance also varies:
- At least two years: one month
- Two to five years: two months
- Five to 10 years: three months
- 10-20 years: four months
- More than 20 years: five months
The employer must present the employee with a written notice of his or her dismissal. Employers should note that a payment in lieu of giving notice is not permitted in Slovakia.
What makes the Employer of Record (EOR) hiring model an attractive option in Slovakia?
While MNCs want to capitalize on Slovakia’s stable investment environment, there are some challenges and liabilities associated with operating a business and managing a headcount locally. For example, employers are bound to the provisions of the European Union’s General Data Protection Regulation (GDPR) when handling employee data.
Instead of spending the time and money to establish a legal entity, some companies find the EOR hiring model to be a more efficient, cost-effective solution for hiring in Slovakia. By engaging an EOR like GoGlobal, the MNC avoids the arduous process of setting up a company and also relieves the HR team from learning the laws for administering payroll in-country. The company also mitigates many HR risks and pitfalls.
The EOR arrangement is sometimes just temporary, serving as an interim solution while the company officially sets up shop and gets settled. Other times, it can serve as a permanent solution for tapping into Slovakia’s talented, productive workforce.
What makes the GoGlobal experience different?
At GoGlobal, our approach to HR is unique. With remote teams all around the world, we embrace a global mindset while maintaining a dedicated team of local experts on the ground in every market we serve. Therefore, thanks to this business model, our team in Slovakia fully knows the local regulatory environment as well as cultural customs in the workplace. They are also in the same timezone as client-workers and speak their language. This lays the groundwork for a positive and customized hiring experience for all parties.
How does the hiring process with GoGlobal work?
We are ready to join our clients on their journey into Slovakia, helping them to localize their employee experience. Before we onboard the new worker, GoGlobal’s team in Slovakia will arrange a meeting with him or her to go over the specifics of the EOR arrangement. Once the worker is onboarded, this same dedicated team serves as the point of contact. We’re always happy to address any issues that come up in payroll, benefits or taxation.
What is GoGlobal’s goal in serving clients and client-workers?
When we serve our clients and our client-workers, we strive to deliver agility, efficiency and peace of mind. By applying our tested and proven EOR solution in Slovakia, MNCs relieve their internal HR teams from having to learn the specifics of the country’s labor landscape. We assume the risks and perform the end-to-end functions of payroll and HR processing, including contributions to statutory benefits, tax withholdings and the administration of benefits.
When clients partner with us in Slovakia, they free up their teams’ resources so they can focus on core business-growth activities and tap into burgeoning market opportunities.