When an employer is faced with an underperforming employee or needs to downsize due to economic shifts, a critical question arises: how can you dismiss an employee while ensuring the entire process remains strictly compliant with the law?
In the Federation of Bosnia and Herzegovina (FBiH), labor legislation heavily favors employee protection. A minor administrative error, a missed statutory deadline, or a lack of written evidence on the employer’s part can easily cause a termination to be overturned in court.
Labor disputes in FBiH courts take several years on average to resolve. If a court rules that a termination was unlawful, the financial exposure for the employer is substantial. The court will order the employee’s reinstatement along with back pay for all lost wages, full pension and health insurance contributions, default interest, and multi-year legal fees.
This guide outlines the legal framework, statutory requirements, and step-by-step procedures to help you protect your business and avoid costly procedural errors.
When Can an Employer Lawfully Terminate an Employment Contract?
Under the FBiH Labor Law, an employer cannot terminate an employment contract without a legally valid reason. Reasons must be specific, verifiable, and grounded in law. The law distinguishes termination grounds based on employee conduct, capability, or operational requirements.
The primary legal grounds for termination include:
Economic, Technical, or Organizational Reasons (Redundancy)
Also referred to as operational grounds. These occur when a specific role is no longer required due to a decreased workload, business restructuring, or the introduction of new technologies.
Inability to Perform Job Duties
Applicable when an employee continuously fails to meet performance expectations due to a lack of required knowledge, skills, or physical/psychological capability.
Breach of Work Duties (Minor or Serious)
Applicable when an employee intentionally or negligently violates duties outlined by law, the company’s Rulebook on Labor, or the employment contract.
How to Terminate a Permanent Employment Contract
Terminating an employee on a permanent contract requires heightened caution. Permanent contracts carry the highest level of statutory protection and represent the standard employment relationship in FBiH.
To lawfully terminate a permanent contract, you must adhere strictly to statutory procedures.
Operational Grounds & Redundancy
The employer must produce concrete evidence demonstrating a genuine reduction in workload or the elimination of the position. If an employer terminates a permanent contract on operational grounds, they are legally prohibited from hiring another individual for the same position for one year from the termination date without first offering the position to the terminated employee.
Severance Pay
An employee continuously employed under a permanent contract for at least two years with the same employer is entitled to statutory severance pay in cases of redundancy. Under Article 111 of the FBiH Labor Law, severance pay is governed by the employment contract, Rulebook on Labor, or collective agreement, but cannot be less than one-third of the employee’s average monthly salary (calculated over the final three months) for each completed year of service.
Notice Period
Employers must observe statutory notice periods, except when termination is driven by a severe breach of duty that makes continuing the employment relationship impossible.
Common Employer Errors in Labor Disputes
Many employers mistakenly assume that poor performance, behavioral issues, or “causing friction” in the workplace are sufficient grounds for immediate dismissal. However, courts do not rule on impressions or verbal claims – they rely exclusively on written documentation and strict procedural compliance.
The most frequent mistakes that lead employers to lose court cases include:
Failure to Issue a Written Warning
For performance issues or minor misconduct, the law requires employers to first issue a written warning detailing the possibility of dismissal. The warning must clearly state the specific performance deficiencies, actions required, and a reasonable period to improve.
Missing Statutory Time Limits
Under Article 100 of the FBiH Labor Law, strict deadlines apply. Termination for breach of duty must be issued within 60 days of discovering the breach, and no later than one year from the date the breach occurred. Missing these deadlines renders the termination automatically unlawful.
Non-Compliance with Internal Labor Regulations
Companies employing more than 30 people are required to maintain a formal Rulebook on Labor. This document must explicitly define what constitutes minor and serious breaches of duty. An employee cannot be dismissed for an action that was not predefined as a breach in the Rulebook.
Denial of the Right to Defense
Before terminating an employee for misconduct or poor performance, the employer must provide them an opportunity to state their defense, except under exceptional statutory circumstances.
Step-by-Step Lawful Termination Procedure
To ensure a termination withstands judicial scrutiny, follow these steps.
Document the Issue Thoroughly
Gather solid written proof for every claim. Collect written witness statements, internal memos, email logs, performance tracking reports, committee findings, or inventory audit results.
Issue a Formal Written Warning
For minor breaches or sustained underperformance, serve a written warning specifying the infractions and establishing a concrete timeline for performance improvement.
Provide a Notice of Opportunity to Respond (Right to Defense)
Send the employee a written notice detailing the reasons for potential termination. Provide a reasonable timeframe (typically 3 to 5 business days) for them to submit a written statement or present an oral defense alongside their trade union representative or legal counsel.
Issue a Reasoned Decision on Termination
The formal Decision on Termination of Employment Contract must be issued in writing with an explicit legal and factual justification. The explanation must reference specific dates, evidence, and legal provisions rather than generic statements.
Observe Notice Periods and Severance Obligations
Unless dismissing an employee summarily for a severe breach of duty, the employer must honor the applicable notice period. Under FBiH law, the notice period cannot be shorter than 7 days if initiated by the employee, nor shorter than 14 days if initiated by the employer (up to a maximum of 30 days, or up to 90 days if specified by a collective agreement or Rulebook on Labor for long-tenured employees).
An Alternative to Legal Risk: Mutual Termination Agreements
Whenever feasible, employers are advised to explore a mutual termination agreement. A mutually agreed separation eliminates the legal exposure associated with unilateral dismissals and labor court claims.
By engaging in open dialogue and establishing clear terms – such as an agreed departure date or a negotiated exit package – both parties secure legal clarity and closure.
The Importance of Professional Legal Counsel
Labor termination procedures in FBiH leave no margin for technical oversights. An incorrectly calculated notice period, improper service of documents (e.g., mailing a decision without a formal delivery receipt), or vague phrasing in the decision can cause a court to void the entire termination.
Partnering with an experienced employment lawyer ensures:
- Accurate assessment of legal risks before initiating disciplinary steps.
- Compliant drafting of all legal instruments (warnings, notices to defend, and termination decisions) aligned with the FBiH Labor Law and internal company policies.
- Professional representation during mutual termination negotiations.
- Robust legal defense should a workplace dispute proceed to court.
Need help from an experienced employment lawyer?
Law office Hašarić provides complete legal support to employers in Sarajevo and throughout the Federation of BiH – from drafting regulations and contracts, to conducting dismissal procedures and representing employers before the competent courts.
Contact us for a consultation and ensure comprehensive legal protection for your business.
Disclaimer:
The information contained in this article is for informational purposes only and does not constitute legal advice. Legislation is subject to change, and for specific legal situations, direct consultation with an attorney is recommended. Our law office assumes no responsibility for any decisions made based on the information presented in this text.
