Busines performance for the year 2023
Salary is in accordance with the second paragraph of Article 126 of the Employment Relationships Act (ZDR-1) and consists of the base salary, a portion of the salary for work performance, and supplements. An integral part of the salary is also payment for business performance if it is agreed upon by a collective agreement or employment contract. Informally, terms such as Christmas bonus or thirteenth salary are also used for business performance.
The payment of the business performance portion of the salary depends on the performance of the economic entity (employer), as derived from the linguistic interpretation of the concept. Business performance is therefore a reward that the employer allocates to employees based on the overall good performance of the company.
While work performance is tied to the individual work results of an individual employee or group of employees.
Taxation of the payment of business performance ZDR-1 specifies that all payments, both for work performance and business performance, must be made in cash. However, this does not apply to the tax-favored payment of business performance under ZDoh-2.
Starting from January 1, 2023, according to the 12th point of the first paragraph of Article 44 of the Income Tax Act – ZDoh-2, payment for business performance up to the amount of 100% of the average monthly salary of employees in Slovenia is not included in the taxable income, if the following conditions are met:
business performance must be paid in connection with employment in cash or nature, it can be paid a maximum of twice a calendar year to all eligible employees, and the right to payment for business performance must be determined in the employer’s general act or collective agreement. Payment of business performance that does not meet the above conditions is treated as another income from employment and is fully included in the employee’s taxable income.
Mandatory contributions for social security are calculated and paid on the entire amount in any case.
Establishment of criteria for the payment of business performance If the right to payment of the business performance portion of the salary is determined in the employer’s general act, the criteria for obtaining the right and the amount of payment must be uniformly defined for all employees. This must also apply to managerial employees.
Since ZDoh-2 does not define the term employee, it is necessary to turn to the primary legislation, namely ZDR-1, to define this term. According to Article 5 of ZDR-1, an employee is a natural person who is in an employment relationship based on a concluded employment contract. If a managerial person also meets the conditions under which they are considered an employee in accordance with ZDR-1, the condition in accordance with the first paragraph of Article 44 of ZDoh-2 is met only if the right and criteria for payment of the business performance portion of the salary are also defined for managerial personnel in the employer’s general act.
If the right to the business performance portion of the salary, criteria, and criteria are determined in a collective agreement, which is by its nature a contract concluded based on an agreement reached between the parties (employers and employees or representative unions), there is no need for the conditions for obtaining this right, criteria, and criteria to be uniformly defined for all employees, as they have an active role in concluding collective agreements.
Work performance
It is important to distinguish business performance from work performance. Criteria for the payment of work performance must be predetermined, so that employees know what results are expected of them and for what work results they will be rewarded. The formulation of criteria is left to the employers, as different activities have different work processes that require different criteria suitable for measuring work performance. The payment of work performance is always part of the salary and must be paid in cash and fully included in the employee’s annual taxable income.
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Urška Jerič
Payroll and HR Services
Promotiv d.o.o.
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