PEO services in FYR Macedonia: A flexible approach to a rigid framework

The FYR Macedonia legislation prohibits foreign companies to register as foreign employers only in the country. All local employments must be performed through a resident company duly registered according to local legislation. As a result, it is a prerequisite for foreign companies wanting to hire staff in FYR Macedonia to incorporate a resident entity, be it a branch of the mother company or a standalone limited liability company.

This criterion, coupled with other requirements such as the fact that transferring payroll-related payments must be done from a locally denominated bank account held in a FYR Macedonian commercial bank, has resulted in a number of foreign investors opting to use local professional employment services, including Employer on Record/PEO services.

Professional companies providing PEO services in FYR Macedonia are subject to the Law on Agencies for Temporary Employments which prescribes the criteria these companies must fulfil as well as their obligations towards clients and employees. The law defines the maximum duration of employment contracts that Employer on Record companies can conclude with employees, as well as, the banking guarantee safeguards in case employees go unpaid for a set period of time.

The main advantage of using PEO services is the elimination of the requirement of incorporating a FYR Macedonian company, thus lowering the cost both during the setup of the legal entity but also the ongoing maintenance costs such as mandatory accounting. Additionally, non-resident companies opting to use Employer on Record services can also take advantage of other benefits. In addition to being able to negotiate the terms of the service agreement signed with the PEO provider within a much more flexible legal framework than the one applicable to standard employment contracts, clients can often terminate such agreements more easily if a corporate decision so dictates.

It is worth keeping in mind that the cost for these services is typically set as a percentage of the gross salaries of employees employed on behalf of the final client. Therefore, projects requiring large headcounts may be grounds for serious consideration of incorporating a company as a more cost efficient approach. Clients considering Employer on Record services are advised to seek professional assistance tailored to their specific needs. Depending on the scope of the project and expected duration of it, Employer on Record services may prove to be the right decision for many foreign investors. Eurofast can assist in determining the cost effectiveness of both scenarios as well as provide advisory services related to payroll and employment services.

Elena Kostovska, Eurofast Skopje office
T. +389 2 2400225