Salary calculation is a seemingly complex process consisting of several standardized steps. Although exact rates and tax brackets differ depending on legislation, the order of operations is almost identical across the entire region.
It all starts with your agreed Gross salary. This is the amount from the employment contract. This amount can be increased by certain supplements (Sunday work, overtime, past work, etc.), but when all these supplements are added up, we get the final Gross 1 base for that month.
The first step of the mathematical calculation is the subtraction of contributions that are the responsibility of the worker. Most often, this is pension insurance (HZMO (Croatian Pension Insurance Institute)).
Income = Gross 1 - Pension InsuranceNot all of your income is taxed. The state guarantees you a monthly non-taxable minimum that serves for basic life needs (personal deduction). This amount is higher if you support children (or other family members) and in case of disability.
Tax base = Income - Personal deductionsTax rates are applied to the calculated Tax Base from step 3 (depending on the specific law of Croatia, the Tax Administration prescribes rate brackets). After the income tax is calculated, it is subtracted from the income amount.
Your final salary is calculated by the last operation:
Net Salary = Income - Income TaxFor regularly employed workers, this entire process must legally be done by your employer (company) at each salary payment. The employer is the one who forwards pension and health funds directly to the state budget/funds on your behalf, and pays you only the amount remaining after the last step (Your Net).