As a result of the declared state of emergency and the introduction of measures to prevent the spread of epidemic of the virus (coronavirus SARS-Cov2 which spreads disease COVID-19a), large number of employers and employees found themselves facing difficulties a short time after.


The introduction of restrictions of freedom of movement and freedom of assembly, limitation of working hours and obligations regarding work organization in companies, cafes, restaurants, bars, shopping malls, markets etc., undoubtedly created financial problems for employers and the financial projections are such that performance of business is not sustainable in the long run.

Additionally, the government imposed measures of limitation of retail prices and margin for certain products, medicine and certain disinfectants export ban, ban on export of certain groceries and protective equipment. Measures that are also affecting companies are the long-term quarantine of the employees that come from abroad, restriction on public transport which causes issues of employee’s transportation, and closed borders for passengers and employees to go for the business trip abroad.

Considering the same or similar measures are currently in force in the entire world, the economic decline is inevitable and the financial consequences are starting to be visible. According to the Organisation for Economic Co-operation and Development (OECD) official reports, the economic shock and uncertainty resulting from the epidemic has already exceeded those in global crises in 2001, due to the terrorist attack in the US, and in 2008 during the financial crisis also in the US. Economic growth is expected to halve, while the world’s largest economies will fall into recession.
termination of employment agreement




Regulation on Tax Measures during State of Emergency to Mitigate the Economic Consequences of COVID-19 Disease caused by the SARS-Cov2 Virus (Official Gazette of the RS, No. 38/2020), grants that taxpayers under the program of rescheduling the payment of tax debt, during the state of emergency beginning with the installment due in March 2020, will not be under threat of enforcement nor interest calculation in case they did not make payment. However, this Regulation and moratorium on bank loans and leasing are the only measures of financial reliefs to companies, while the measures in the form of subsidies, exemptions or reimbursements for tax and other levies are not introduced. Apart from the text published by the Ministry of Labor explaining the rights and obligations of workers and employers during a state of emergency and appeals to employers not to dismiss employees, there are no specific measures which causes the concern in the Union of Serbian Employers (UPS).

Certain companies are imposed restrictions by the government (e.g. cafes, restaurants and other may sell food and beverage exclusively using counters or delivery service) or forbidden to perform business activity (shopping malls, as well as boutiques, restaurant chains and cafes in shopping malls or other large indoor facilities, private kindergartens etc.).


All the issues may be resolved by introducing the different models of organizing work in company, which represent alternatives to the dismissal of the employees and they may be applied before deciding to go with the termination of employment agreement. All the models of reorganizing work in companies that are alternatives to dismissals and termination of employment agreement, are discussed in a previous separate blog in detail.

Some of the employers managed to fully or partially continue to perform business activities by implementing modalities of work such as work from home or part-time work, stipulated by the
Employment Act. However, large number of employers completely suspended their work and it is uncertain that they will be able to pay salaries and compensation of salaries to employees, even if they decided to go with minimum salary.

In connection with this, the question of termination of an employment agreement is inevitable.


Although Minister of Labor Zoran Đorđević has announced that the list of employers who have unlawfully terminated employment agreements will be published, lawful and legal termination and dismissal of employees in the private sector cannot be prohibited. This ban cannot be imposed due to imperative provisions of the Employment Act and the fact that employer is financing the business and decides on money allocation. So far, private sector employers have only been advised not to lay off their employees, and to try to keep workers employed for as long as possible.





According to the Employment Act employment contract may be terminated if there is a valid reason related to the employer’s needs and that it is a result of technological, economic or organizational changes, which caused the cessation of the need for specific job or decrease in work volume. Therefore, the employee can be laid-off only if there is a cease of performance of a particular work or reduction in work volume because of the technological, economic or organizational changes. In the course of the state of emergency, economic changes within company and entrepreneur will usually be the reason for dismissals.

In case company terminates the employment agreement, it may not hire another person to perform the same job activities within three months from the day of termination. The employee who has
been laid off has the priority to sign the employment contract during these three months.

However, while terminating employment contract based on economic changes in company, the employers should be really careful for multiple reasons. Firstly, it is necessary that technological, economic or organizational changes really occurred and made the performance of particular work unnecessary. This has to be determined in each particular case. Secondly, in order to terminate the employment agreement lawfully, it is necessary to accurately conduct procedure of termination, which means legal argumentation and reasoning has to be perfect to protect employers. Otherwise, mistakes and omissions may reflect negatively as court proceedings and litigations may arise.

Employers, both companies and entrepreneurs, who have a larger number of employees, has to be extremely cautious considering that dismissal procedure with these businesses is far more complex and involves a strict legal procedure for dealing with employee redundancies.

Click for more to read about all the models of reorganizing work in companies as alternatives to dismissal of employees and termination of employment agreement, which are discussed in a separate blog in detail.

There is no doubt that a large number of employers are facing disruptions in the business caused by government measures to prevent the spread of virus, which will greatly affect the survival of business entities. However, in spite of this fact, we would like to stress that there are other ways to keep as many employees as possible at the moment which we discussed in a separate blog, and to decide to go with the termination of the employment agreements only if necessary.

*The content of this blog is for informative purposes only and does not constitute legal advice.


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