Bosnia & Herzegovina: Government announces salary increase plan

Amendments to the RS Labor Law were published in the Republika Srpska Official Gazette on December 29, 2021, while previously announced changes to the Law on Income Tax and the Law on Contributions entered into force on January 1st.

The RS Government made clear that the reduction of contributions is aimed to directly raise employee’s individual salaries after the reduction of the income tax rate and changes applied in the salary calculation model, the income tax base and the Labor Law.

The concept of gross salary has been altered since now it represents the basic salary, increases prescribed by the Labor Law, collective agreement and employment contract, income tax and contributions. The cumulative contribution rate has been reduced from the current rate of 32.8% to 31%, with only the health insurance contribution rate being reduced from 12% to 10.2%.

The law also stipulates that the minimum wage is increased based on length of service (0.3% for each year of service); the minimum salary for 2022 will be 590 BAM.

In addition, the personal income tax rate was reduced from 10% to 8% with a rate of 10% remaining only for the payment of income tax on self-employment. Income from copyright, capital, capital gains and other income is subject to a 13% income tax rate while annual personal deduction was increased from 8,400 KM to 12,000 KM.

The adopted Budget Proposal of the Republic of Srpska for 2022 increased salaries for budget users; for salaries up to 1,000 KM, the increase will be 5%, and 3% for salaries higher than 1,000 KM.

The Government estimates that the implementation of these measures will lead to an 80 million BAM loss of income, from contributions, whereas at the same time, the amendment of the Law on Income Tax will increase the total income amount of about 34.5 million BAM annually from income tax.

For additional information, please contact Ms. Slavica Zeljković, Accountant/Administrator, at our Eurofast office in Banja Luka, Bosnia at


Slavica Zeljkovic

Slavica Zeljković
Eurofast Banja Luka