On 5 October 2026, the Republic Fund for Pension and Disability Insurance (Republički fond za penzijsko i invalidsko osiguranje) released a detailed explanation addressing why social security contributions were not collected for certain employees holding the status of qualified newly hired persons (kvalifikovano novozaposlena lica). The issue stems from the interaction between Article 38 of the Law on Contributions for Mandatory Social Insurance and the 2026 Budget Law incentives, which provide a full exemption from employer pension and health contributions for up to 24 months for hiring unemployed individuals under 30 or over 50 with specific qualifications. The Fund identified a systemic gap: employers who correctly applied the exemption in payroll software failed to submit the mandatory Form M-1 (Report on Engagement of Qualified Newly Hired Persons) within the 15-day deadline after employment commencement. Without this form, the Fund’s automated controls could not validate the exemption, leading to contribution arrears notices. The clarification confirms that late submission of Form M-1 is permissible with a written justification, and the exemption will be applied retroactively, provided the employee meets all statutory criteria (unemployment registration, qualification level, age brackets). Employers are urged to reconcile payroll records for hires since 1 January 2026 and submit missing forms by 31 October 2026 to avoid enforcement actions.
Key Takeaways
- Form M-1 Is Mandatory Gateway: The contribution exemption is not automatic; timely filing of Form M-1 activates the relief. Absence of the form triggers default contribution liability.
- Retroactive Relief Available: Employers can cure past omissions by submitting Form M-1 with justification before 31 October 2026, securing full exemption retroactivity for eligible hires.
- Eligibility Criteria Strict: Only hires registered with the National Employment Service, possessing recognized qualifications, and falling within age brackets (under 30 or over 50) qualify; misclassification risks full contribution recovery plus interest.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement