Who this guide is for
This guide is written for the owner of a sole proprietorship or an LLC who has been running the business alone so far and is now taking on a first paid employee. No accounting background is required: every term is explained the first time it appears.
By the end you will know which type of contract you need, what it must contain, how you notify the Tax Administration of Kosovo (TAK) and the pension fund, how the pension contribution and wage tax are calculated, what the employee actually costs you, and the monthly deadline you cannot afford to miss. If along the way you realise the books no longer fit in a notebook, have a look at our monthly accounting service and at how we organise the work.
1. Choose the type of contract
The Law on Labour (No. 03/L-212) recognises three types of contract, and the wrong choice creates problems later, when the time comes to terminate.
- Contract for an indefinite period — no expiry date. The normal form for continuing work: a salesperson, a technician, a production worker.
- Contract for a definite period — with a start and an end date; under Article 10 it cannot exceed ten years. Use it when the need really is temporary: a project, a season, covering for someone on leave.
- Contract for specific tasks and duties — for a defined piece of work, not for a position. Article 10 limits it to a maximum of one hundred and twenty (120) days within a year.
Do not use a fixed-term contract simply "to be on the safe side": if the work is continuing, an indefinite contract is both simpler and safer.
Within any of the three types you may set a probationary period — a window in which both sides see whether the arrangement works. Article 15 caps it at a maximum of six (6) months. During that time the employee is paid and declared as normal; being on probation does not mean working without a contract.
2. Draft the contract properly
The employment contract must be concluded in writing and signed by the employer and the employee (Article 10). A verbal agreement protects no one — least of all you. Article 11 sets out what the contract must contain, and every one of these elements is required:
- Details of the employer and of the employee
- Description of the job and of the duties
- Place where the work is performed
- Working hours and schedule
- Start date of employment
- Duration of the contract
- Amount of the basic salary
- Duration of leave entitlements
- Termination of the employment relationship
Two points cause more misunderstandings than any others: the salary is stated gross — that is, the amount before the pension contribution and the tax are withheld — and full working time is forty (40) hours per week (Article 20), while overtime cannot exceed eight (8) hours per week (Article 23). Paid annual leave is at least four (4) weeks per calendar year (Article 32), while the notice period for termination by the employer depends on the length of service and is governed by Article 71 — it is not for you to set below the statutory minimum.
3. Register the employee with TAK and the pension fund
Once the contract is signed, the employer is obliged to declare the employee to TAK and to the pension savings fund. This is done through the monthly payroll — the document listing the employees, their gross salaries, the tax withheld and the contributions.
The payroll is submitted through EDI, TAK's electronic declaration system, using form WM. If the business does not yet have EDI access, it is opened at TAK before the first filing.
Do not postpone the filing until "there are a few employees". An undeclared worker accumulates no pension savings and has no proof of service, while the business exposes itself to penalties. TAK has also made available an online tool through which the employee can verify whether the employer has declared them.
4. Calculate the salary: the 5+5 contribution and the tax brackets
The calculation has three steps, and their order matters.
- Pension contribution — 5% is withheld from the employee's salary and 5% is paid by the employer on top of the gross. Both go into the employee's individual pension account.
- Taxable base — gross salary less the employee's contribution. The tax is not calculated on the full gross.
- Wage tax — progressive monthly brackets: 0% up to 250 euros, 8% on the portion between 250 and 450 euros, and 10% on the portion above 450 euros. The brackets apply in sequence; the whole salary is not taxed at a single rate.
As of 1 July 2026, the minimum wage is 500 euros gross per month (roughly 3 euros per hour). The table shows how the figures work out at three salary levels, including the real cost to the business — always higher than the gross, because the employer's contribution is added on top.
| Gross salary | Employee 5% contribution | Taxable base | Wage tax | Net salary | Cost to the employer |
|---|---|---|---|---|---|
| 500.00 € | 25.00 € | 475.00 € | 18.50 € | 456.50 € | 525.00 € |
| 700.00 € | 35.00 € | 665.00 € | 37.50 € | 627.50 € | 735.00 € |
| 1,000.00 € | 50.00 € | 950.00 € | 66.00 € | 884.00 € | 1,050.00 € |
Illustrative calculation using the monthly brackets in force, for a primary employer and with no other deductions.
If you want to test your own figures before signing the contract, use the salary calculator — enter the gross amount alone and it returns the net, the tax and the total cost.
5. Check whether you are the primary or the secondary employer
Where an employee works in two places, they designate one employer in writing as the primary one; the others remain secondary. You report that designation in the payroll.
- The primary employer withholds tax under the progressive brackets above, that is with the tax-free portion up to 250 euros.
- The secondary employer withholds tax at a single rate of 10% on the whole amount, with no brackets.
If you treat as primary an employee who has designated someone else, too little tax is withheld and the difference is later assessed with interest. Ask for the written designation on day one. You will find similar cases in our personal income tax questions.
6. Pay and declare by the 15th
The Law on Labour permits salaries to be paid by bank transfer or in cash, provided the employer keeps a register of payments (Article 55), but the tax law is stricter: under Article 6 of Law No. 08/L-257 on tax administration and procedures, every salary paid to an employee must go through a licensed financial institution. In practice, pay salaries by bank transfer.
The declaration and payment of withholding tax and pension contributions are due by the 15th of the following month. If the July salary is paid on 5 August, the declaration and payment fall due by 15 August. This deadline and the others are set out in our tax deadline calendar.
7. Interns
Under Article 16, practical work lasts a maximum of one (1) year for a person with university or postgraduate education and six (6) months for a person with secondary education. The employer may, by agreement with the person concerned, engage an intern without salary compensation, but remains obliged to provide protection and safety at the workplace.
The practical rule: if the intern receives regular monthly compensation and performs the same duties as an employee, treat the arrangement as ordinary employment and declare it in the payroll.
8. Foreign employees
Employing a foreign national requires additional documentation before the work begins: a residence permit for the purpose of employment and a work permit, while licensed professions also require prior licensing. Your job offer or employment contract forms part of the application file.
On the tax side, once the permits are in order, the foreign employee is declared in the payroll like any other. Because the procedures change, verify the current requirements with the competent institution before you fix a start date.
The three mistakes we see most often
- The contract is left for "later". The employee starts on Monday and the contract is signed two months on. If an accident or a dispute occurs in the meantime, the business has no protection.
- The salary is negotiated net. "I'll pay you 600 in hand" sounds clear until the real cost emerges. Always negotiate the gross figure and present the net as the result.
- The 15th is forgotten. Late filing brings interest and penalties that were entirely avoidable — the most common source of unexpected liabilities towards TAK.