Termination of an Employment Contract in Serbia: Lawful Procedure and Key Risks for Employers

Termination of an employment contract is one of the most legally sensitive decisions an employer can make. Even when there is a justified business reason or a serious breach by the employee, a dismissal decision may be annulled if the facts are not precisely established, the evidence is insufficient or the prescribed procedure has not been followed.

The lawfulness of termination therefore does not depend only on whether the employee breached an obligation or whether the need for the employee’s work has ceased. The employer must choose a legal ground that corresponds to the actual facts, collect evidence, observe deadlines and allow the employee to respond when the law requires it. Lawful regulation of termination of employment is only one part of the broader area of employment law for employers in Serbia, which also includes employment contracts, internal acts, records, salaries, leaves of absence and employment disputes.

In a potential dispute, the court examines the existence of the dismissal ground, the manner in which the decision was adopted, the content of the warning and the dismissal decision, and whether delivery was properly carried out.

Termination should therefore not be treated as an administrative confirmation of a decision already made, but as a legal procedure that must be verifiable on the basis of documentation.

When may an employer terminate an employment contract?

The Labor Law provides several grounds on which an employer may terminate an employee’s employment contract. The reason may relate to the employee’s abilities and work results, responsibility for breach of work duties, or the employer’s business needs.

These grounds are not interchangeable. Each of them has specific conditions, evidentiary requirements and prior steps.

The employer should therefore not choose the ground that seems simplest, but the one that corresponds to the established facts.

Failure to achieve work results and lack of required knowledge

An employer may consider termination if the employee does not achieve the required work results or lacks the knowledge and abilities needed to perform the job.

However, general dissatisfaction with the employee’s work is not enough. Phrases such as “does not meet expectations”, “is not sufficiently engaged” or “does not contribute to the team” do not show what exactly the employee was expected to do and where the employee failed.

The expected results should be known in advance, sufficiently specific and objectively achievable. The employer should take into account the job description, available resources, market circumstances and the employee’s authority.

For example, it is not enough to state that a sales employee failed to meet the sales plan. The employer should show what the plan was, when the employee was informed of it, whether it was achievable and which activities the employee failed to undertake.

Before termination based on deficiencies in work, the employee should receive a written notice describing the deficiencies, giving appropriate instructions and allowing a reasonable period for improvement. After that period expires, the employer must be able to compare the expected and achieved results.

It is important to distinguish poor work performance from breach of a work duty. An employee may make reasonable efforts and still fail to achieve a result due to circumstances beyond their control. Conversely, deliberate refusal of an instruction or neglect of duties may be a matter of the employee’s responsibility.

Breach of work duties and non-compliance with work discipline

A breach of work duties means a violation of an obligation prescribed by law, a general act or the employment contract. Non-compliance with work discipline includes conduct that is not in line with workplace rules or is of such nature that continuation of employment is no longer possible.

The employer must establish:

• what the employee did;
• when and where the event occurred;
• which obligation or rule was breached;
• what consequences arose;
• which evidence supports the allegations.

It is not enough to state that the employee showed an “irresponsible attitude toward work” or that there was a “loss of trust”. Such assessments must be linked to a specific event.

For example, instead of claiming that the employee handled business documentation irresponsibly, the employer should state which documentation was involved, when it was given to an unauthorized person, which rule was breached and which evidence confirms the event.

Not every mistake is sufficient reason for termination. The employer should consider the seriousness of the breach, the consequences, the employee’s previous conduct, the degree of responsibility and any mitigating circumstances.

Where the circumstances justify it, milder measures provided by law may be applied instead of termination.

Technological, economic and organizational changes

Termination is also possible when, due to technological, economic or organizational changes, the need to perform a certain job ceases or the required number of employees is reduced.

The change must be real and documented. It is not enough for the decision merely to state that a “business rationalization” has been carried out.

When a position is abolished completely, the employer should show what changed in the organization and why the work is no longer needed as a separate position.

When several employees perform the same work and only the number of employees is reduced, objective and verifiable criteria must be applied.

For example, if three employees perform the same duties and after reorganization only two are needed, the employer must explain which criteria were used for comparison and why a particular employee was declared redundant.

The criteria must not be adjusted afterwards to fit the selected employee. Their application must be documented so that the decision can be reviewed. The reality of organizational changes and the lawfulness of determining redundant employees were also considered in the decision of the Supreme Court Rev2 105/2021.

Redundancy must not serve as a substitute for a procedure that should be conducted because of the employee’s conduct or results. If the real reason is dissatisfaction with a particular employee, a formal reorganization will not necessarily protect the employer from a conclusion that rights were abused.

Before termination, the employer must pay the statutory severance payment. Where the statutory conditions regarding the number of redundant employees are met, a redundancy program must also be adopted.

Which procedure must precede termination?

There is no single procedure applicable to every termination. Breach of work duties, failure to achieve results and cessation of the need for certain work require different preliminary steps.

Still, several checks are important in almost every case.

Checking the legal ground and internal documentation

Before starting the procedure, the employer should verify whether the specific facts correspond to a statutory ground for termination. Employment law support may include checking contracts and internal acts, preparing the warning and dismissal decision, and assessing the risk of an employment dispute.

The employer should review:

1. the employment contract and annexes;
2. the work rules;
3. the rulebook on organization and systematization of jobs;
4. the collective agreement, if applicable;
5. the employee’s job description;
6. internal policies and procedures;
7. previous warnings, reports and evaluations;
8. decisions on reorganization or reduction of headcount.

It is particularly important to check whether the obligation allegedly breached by the employee was actually prescribed and whether the employee was aware of it.

An internal act cannot be amended retroactively in order to declare conduct that has already occurred a breach of work duty.

Establishing facts and collecting evidence

The employer must be ready to prove the facts on which the decision is based. A manager’s subjective impression, an assumption or an unverified report is usually not enough.

Relevant evidence may include:

• business electronic communication;
• working-time records;
• minutes and reports;
• business documentation;
• documented targets and work results;
• data from business systems;
• statements of persons with direct knowledge;
• documentation on organizational changes.

Evidence must be obtained lawfully. The use of electronic communication, video surveillance or data from business devices requires a check of privacy and personal data protection rules.

The fact that certain data technically exists does not automatically mean that it may be used without legal risk.

Warning the employee before termination

Before terminating employment due to breach of work duties or non-compliance with work discipline, the employer must warn the employee in writing of the existence of grounds for termination.

The warning should contain:

• the legal basis;
• a precise description of the event;
• the time, place and manner of the breach;
• relevant facts and evidence;
• the deadline for the employee’s response.

The employee must be given at least eight days from receipt of the warning to respond. The content of the warning and the sequence of procedural stages were also discussed in the decision of the Supreme Court Rev2 2834/2022.

The warning is not a notice that termination has already been finally decided. Its purpose is for the employee to understand what is alleged and to have a real opportunity to present a defence.

A statement that the employee “repeatedly breached work discipline in the previous period” is not sufficiently specific if concrete events are not listed. The employee cannot respond to an allegation whose scope and content cannot be identified.

Considering the employee’s response

The employer should wait until the given deadline expires and consider the employee’s response before adopting the dismissal decision.

This does not mean that the employer must accept the defence. However, if the employee presents facts that may change the assessment of the event, they should be checked.

Where the defence contains relevant assertions, it is useful to explain in the reasoning of the decision why they were not accepted.

Adopting the decision on termination

The employment contract is terminated by a written decision that must contain reasoning and instructions on legal remedy.

The decision should contain:

• the statutory and internal legal basis;
• precisely established facts;
• assessment of relevant evidence;
• comments on the employee’s material assertions;
• reasons why termination was applied;
• the date of termination of employment;
• instructions on legal protection.

The decision must not be based on new events or breaches about which the employee was not previously warned.

The factual basis of the warning and the decision must correspond. The employer may explain already stated facts in more detail, but should not add a new breach about which the employee had no opportunity to respond. The importance of the factual basis of the warning and the decision is also reflected in the decision of the Supreme Court of Cassation Rev2 1569/2018.

The decision must be adopted by the director or another duly authorized person.

Observing deadlines for termination

Special deadlines under the Labor Law apply to termination due to failure to achieve work results or lack of required knowledge and abilities, as well as to termination due to breach of work duties or non-compliance with work discipline.

On these grounds, the employer may terminate employment within six months from the day it became aware of the facts constituting the ground for termination, and no later than one year from the occurrence of those facts.

These deadlines should not automatically be applied to every other ground for termination, such as redundancy, for which different substantive and procedural conditions apply.

It is important to document when the competent person at the employer became aware of the relevant event. Prolonged informal investigation or tolerance of a known breach may lead to expiry of the deadline.

Delivery of the dismissal decision to the employee

The decision is delivered to the employee personally, at the employer’s premises or at the employee’s registered residence or place of stay.

If such delivery is not possible, the employer prepares a written note on the attempted delivery. The decision is then posted on the employer’s notice board and is deemed delivered after eight days from posting.

The warning before termination is delivered in the same manner.

Evidence of delivery attempts should be kept, including return receipts, official notes and information on posting.

Improper delivery may call into question the date of termination of employment and the lawfulness of the procedure.

Most common mistakes employers make when terminating employment

1. The dismissal ground is formulated vaguely

Allegations of unprofessionalism, negligence or loss of trust are not enough without a description of specific events. The consequence may be a conclusion that the employee was not given an opportunity to defend themselves or that the stated reason cannot be judicially reviewed.

2. There is no proper legal basis

A problem arises when the employer relies on an obligation that is not prescribed by law, contract or a valid general act. Before starting the procedure, the content and validity period of the acts on which the decision will rely should be checked.

3. The decision is based on assumptions

Suspicion or a manager’s subjective assessment is not the same as evidence. Evidence should be collected before sending the warning so that the employee can respond to the facts on which the procedure is actually based.

4. The warning is merely formal

A warning that repeats statutory wording but does not describe a specific event does not allow an effective defence and may lead to annulment of the decision.

5. The statutory response deadline was not given

Adopting the decision before expiry of at least eight days from delivery of the warning is a serious procedural risk.

6. New facts appear in the decision

The employee must have an opportunity to respond to the events on which termination is based. A new breach cannot appear for the first time in the final decision.

7. Termination deadlines were missed

If the employer waits too long after becoming aware of the facts constituting the ground for termination, it may lose the possibility to rely on them.

8. Poor performance and employee fault are confused

Failure to achieve a result does not automatically mean that the employee culpably breached a work duty. Incorrect legal qualification may make the decision unlawful.

9. Redundancy is not genuinely explained

A general statement on rationalization is not enough. A documented organizational change is required, and where employees are compared, verifiable criteria must be applied.

10. Special protection of the employee was not checked

Before adopting the decision, the employer must check whether the employee is on protected leave, has the status of a trade union representative or whether other circumstances restrict termination.

11. Severance was not paid before termination

Where employment ends due to cessation of the need for work, statutory severance must be paid before termination. Later payment may not remove the initial unlawfulness.

12. The decision was not properly delivered

An employee’s refusal to receive the document does not mean that the employer may skip the statutory delivery procedure.

When may an employer not terminate employment?

It is necessary to distinguish:

• a circumstance that must not be the reason for termination;
• a period in which the employee enjoys special protection;
• the existence of another ground for termination that is not related to the protected status or exercise of a right.

Temporary inability to work due to illness is not in itself a justified reason for termination. This, however, does not mean that sick leave automatically removes every other statutory ground for termination.

If the employee committed a serious breach of work duty before going on sick leave, the sick leave does not erase that event. The employer must nevertheless prove especially carefully that the decision is not connected with the employee’s health condition.

A procedure started immediately after sick leave begins may carry increased evidentiary and reputational risk. The employer should document when it learned of the breach, when the internal check began and why the procedure was initiated.

During pregnancy, maternity leave, childcare leave and special childcare leave, the employee enjoys special statutory protection. If employment was concluded for a fixed term, its duration is extended until the expiry of the relevant leave.

Special attention is also required for trade union representatives and employees participating in trade union activities. Union membership or lawful union activity must not be a reason for termination.

The same applies where the employee contacted an inspection authority, court or other competent body, reported irregularities or sought protection from discrimination or workplace harassment. Termination must not be retaliation for exercising a statutory right.

Formally stating a neutral reason will not protect the employer if the sequence of events, communication or other documentation shows that the real motive was discrimination or retaliation.

What consequences may unlawful termination have?

The consequences of unlawful termination may be divided into several groups.

Employment-law consequences

The court may annul the dismissal decision and, where statutory conditions are met, order the employer to reinstate the employee.

Financial consequences

The employer may be required to pay lost salary compensation and the corresponding taxes and contributions.

In certain situations, damages may be awarded instead of reinstatement. The law also specifically regulates the case where there was a ground for termination, but the employer breached the prescribed procedure.

Costs of proceedings

An employment dispute may involve attorney fees, expert-witness costs and court costs. Financial exposure increases with the duration of the dispute and the period for which the employee claims lost salary.

Organizational and reputational consequences

An annulled dismissal may disrupt work organization, especially if the position has meanwhile been filled or a reorganization has been carried out.

The dispute may also negatively affect trust among other employees, team relations and the employer’s reputation on the labor market.

Practical checklist before adopting a decision

Before signing the decision, the employer should check:

1. Is there a clear statutory ground for termination?
2. Does that ground correspond to the actual facts?
3. Is it supported by the contract and valid internal acts?
4. Have the facts been precisely established?
5. Is there lawfully obtained evidence?
6. Is the appropriate procedure applied for the specific ground?
7. Is the warning sufficiently specific?
8. Was the employee given the full response deadline?
9. Were the employee’s statements considered?
10. Do the facts from the warning and the decision correspond?
11. Were the termination deadlines observed?
12. Does the employee enjoy special protection?
13. Is the decision adopted by an authorized person?
14. Does the decision contain complete reasoning and instructions on legal remedy?
15. Has proper delivery been prepared?
16. Have all obligations toward the employee been calculated?

An unclear or negative answer to any of these questions is a reason to check the procedure further before making the final decision.

When is legal support needed?

Legal review is especially important when:

• the employee disputes the facts;
• the employee claims discrimination or harassment;
• the employee is on sick leave or protected leave;
• termination is based on failure to achieve results;
• several employees perform the same work;
• a reorganization is being implemented;
• there is an obligation to adopt a redundancy program;
• internal acts are not updated;
• the procedure involves a manager or a person with access to confidential data;
• a court or inspection procedure has already been announced.

Legal support is not important only when a dispute has already arisen. Its greatest value is often in preventive review of the legal ground, evidence, deadlines, warning and draft decision.

JP Law supports employers in assessing dismissal grounds, preparing the necessary documentation and conducting the procedure, as well as in representation in employment disputes.

Conclusion

Lawful termination of an employment contract requires a justified and provable reason, an appropriate procedure and precise documentation.

The greatest risk arises when the employer first decides that employment should end and only then tries to find an appropriate legal ground. This approach often leads to a vague warning, incorrect qualification of the dismissal ground or incomplete reasoning.

Before starting the procedure, the employer should check the employment contract, internal acts, evidence, deadlines and any special protection of the employee.

JP Law can help employers assess legal risk, prepare the warning and dismissal decision, and conduct the procedure in accordance with the Labor Law. For an assessment of a specific case, you may contact the JP Law legal team.

Frequently asked questions about termination of employment

Can an employer give immediate termination to an employee?

It depends on the reason. In cases of breach of work duties and non-compliance with work discipline, termination is preceded by a written warning and a response deadline. Other grounds have different prior conditions.

Is a warning before termination always mandatory?

No. A warning is mandatory for termination due to breach of work duties and non-compliance with work discipline. For failure to achieve work results, a separate procedure applies, including notice of deficiencies and a period for improvement.

How much time does the employee have to respond to the warning?

The employer must give the employee at least eight days from delivery of the warning.

Can an employee be dismissed while on sick leave?

Sick leave is not in itself a reason for termination, but it does not automatically exclude every other reason that arose independently of the health condition. Such a case requires particularly careful verification of facts and the real motive of the decision.

What if the employee refuses to receive the decision?

Refusal to receive the document does not stop the delivery procedure. The employer must document the attempted delivery and proceed in the manner prescribed by the Labor Law.

What are the consequences of unlawful termination?

Possible consequences include annulment of the decision, reinstatement, payment of lost salary, payment of taxes and contributions, damages and costs of proceedings.

Do poor work results automatically justify termination?

No. The employer must show that expectations were known and achievable, that the employee was warned of deficiencies and that a reasonable period for improvement was given.

May an employer hire another person after declaring an employee redundant?

The employer may not hire another person for the same job within three months from termination of employment. If the need for that work arises earlier, priority belongs to the employee whose employment ended.