The Croatian Parliament adopted a completely new Act on Combating Undeclared Work on 19 June 2026, under an urgent procedure. The Act was submitted to parliamentary procedure ahead of the tourist season, and one of the reasons for the urgency was alignment with the recent amendments to the Aliens Act. After three years of application of the previous act, the aim of the new legislation is more effective oversight and a stricter penalty policy towards employers who repeatedly violate regulations on declaring employment.
Below we provide an overview of the most important new developments and practical guidance for bringing business operations into compliance.
1. New, Proportionate Penalty System
Instead of the previous uniform approach, the act introduces a proportionate system of penalties depending on how many times an employer is found to have undeclared work:
- The existing financial penalties of €2,650 and €6,630 remain in force for first offences,
- A new, significantly higher penalty of €8,000 per undeclared worker is introduced for an employer found to have illegal work for the third time within a period of three years.
The legislature’s message is clear – tolerance towards employers who systematically and repeatedly violate regulations is decreasing, while the existing framework is retained for first offences.
2. Change to the Model of Public Disclosure of the “Blacklist”
The manner in which data on employers found to have undeclared work is publicly disclosed is changing. In addition to the disclosure itself, sanctions are now extending beyond financial penalties:
- Employers who appear on the list of offenders lose the ability to use active employment policy measures (incentives and programmes of the Croatian Employment Service),
- This directly links illegal work with the loss of access to state employment incentives, which for many employers represents an additional, indirect cost alongside the financial penalty itself.
3. Obligation to Supplement Registration to Full Working Hours
A new development that directly affects everyday HR practice: if a worker is already employed by another employer on a part-time basis, the employer is obliged to register them for pension insurance up to full working hours. This is particularly important for employers who hire workers who already have another job (e.g. a student or a worker with two part-time engagements) – the existing employment status of the worker must be checked before the contract is concluded and, if necessary, the registration must be adjusted to full working hours.
4. More Precisely Defined Powers and Conduct of the Inspectorate
The act clarifies the provision governing the conduct of the competent inspectorate during oversight of employment registration, with the aim of eliminating legal gaps and facilitating the application of statutory provisions. Additionally, the determination of undeclared work is now carried out exclusively on the basis of a Decision of the State Inspectorate, which more clearly defines the formal process for establishing an offence.
What This Means for Your Business
For employers, particularly in seasonal industries such as tourism, hospitality, and construction, we recommend:
- checking that all workers – including seasonal, freelance, and those working for shorter periods – are properly registered before they begin work,
- reviewing contracts for services, business cooperation agreements, and similar contractual arrangements that could in practice conceal an actual employment relationship,
- checking the employment status of new workers who already have other part-time employment, in view of the potential obligation to supplement registration to full working hours,
- maintaining internal records of any previous offences, given that a third offence within three years now carries a significantly higher price.
Conclusion
The new Act on Combating Undeclared Work clearly signals that oversight of illegal work will not be easing up, and repeated offences carry significantly greater financial risk – both directly, through penalties, and indirectly, through the loss of access to active employment policy measures. A timely review of HR processes and documentation today is cheaper than a penalty tomorrow.
Do you need a compliance check of your employment contracts, records, or HR processes in line with the new act? Contact us – we would be happy to help you ensure your business complies with the law.
Note: This text is for informational purposes only and does not constitute legal advice for any specific case.
