Some 14.5% of Serbian employees worked under temporary contracts in 2025, compared with an EU average of 9.9%. Nearly one in seven employees therefore lacked an open-ended employment relationship, placing Serbia close to the top of the European ranking and 4.6 percentage points above the EU benchmark.
Only North Macedonia and the Netherlands recorded higher shares among the countries covered by the comparison, but the similarity is misleading. Dutch temporary employment is embedded in a wealthy, highly formalised labour market with stronger social protection, higher wages and a large agency-work sector. Serbia’s fixed-term employment is more often associated with employer caution, limited bargaining power and uncertainty about future investment or contracts.
Temporary employment is not inherently problematic. Companies need flexibility for seasonal work, construction projects, temporary replacements, new product launches and periods of uncertain demand. Fixed-term contracts can provide an entry point for young employees and allow businesses to test new positions before making permanent commitments.
The problem arises when temporary status becomes a substitute for normal employment. Serbian labour law generally limits fixed-term contracts to 24 months, subject to exceptions, but employers can use interruptions, agencies, project structures or changes in job descriptions to extend insecurity. Enforcement and the employee’s willingness to challenge the arrangement are decisive.
The macroeconomic data make the issue more important. Serbia had approximately 2.836 million employed people in the first quarter of 2026 and 276,300 unemployed, producing an unemployment rate of about 8.9%. The employment rate was 50.7%, while youth unemployment remained high at 23.1%.
Compared with the first quarter of 2025, employment declined by approximately 51,100 people and unemployment fell by 13,100, while the population outside the labour force increased by 40,500. A lower number of unemployed people therefore did not reflect an equivalent increase in jobs. Part of the change came from people becoming inactive or leaving the working-age population.
This is a familiar demographic pattern across the Western Balkans. Emigration and ageing can reduce unemployment without creating a stronger labour market. Companies simultaneously report shortages of engineers, drivers, technicians and construction workers, while employment participation remains low among younger people, women, older workers and some rural communities.
A high share of temporary contracts intensifies the mismatch. Employees are less likely to invest in occupation-specific training when they do not know whether they will remain with the company. Employers, in turn, may be reluctant to finance extensive training for workers they regard as temporary. The result can be a low-productivity equilibrium in which both sides avoid long-term commitments.
The effect extends into household finance. Banks assess employment stability when approving mortgages and larger consumer loans. A worker earning above-average pay on a series of short contracts may find it harder to borrow than a lower-paid permanent employee. That constrains housing demand, delays family formation and reduces the willingness to make long-term purchases.
Serbia’s housing affordability problem is therefore partly a labour-contract problem. Young workers may have enough income to pay rent but lack the contractual security required for a mortgage. They remain in rented accommodation or live with family, while savings are diverted towards property deposits rather than investment or consumption.
Temporary workers also have less bargaining power over wages and conditions. They may avoid raising safety concerns, joining unions or refusing excessive overtime because renewal depends on managerial discretion. In manufacturing and construction, that can weaken health-and-safety performance. In professional services, it encourages staff turnover and the loss of institutional knowledge.
Foreign investors do not all use temporary employment in the same way. Companies with stable export programmes and sophisticated production often prefer a permanent core workforce because quality and training matter. Businesses dependent on subsidies, low-value assembly or volatile customer orders may seek maximum flexibility. The contract structure can therefore reveal the depth of an investment more accurately than the opening-day job announcement.
Public institutions are also significant users of temporary arrangements. Schools, hospitals, municipal companies and administrations may keep staff on short contracts because of hiring controls, budget uncertainty or political discretion. This undermines the public sector’s ability to retain teachers, medical staff and technical specialists.
The state’s policy response cannot be limited to prohibiting fixed-term work. Excessively rigid employment rules can discourage formal hiring and push companies towards undeclared work, agencies or self-employment structures. The objective should be to ensure that temporary contracts correspond to a genuine temporary need and that transition to permanent employment becomes the normal outcome when the job continues.
Enforcement needs better data. Tax and social-security records can identify employers that repeatedly use fixed-term contracts for the same positions. Labour inspectors can then focus on sectors and companies with unusually high renewal rates. Digital records reduce the need for random inspections and make systematic avoidance easier to detect.
Public subsidies offer another lever. Companies receiving state assistance should disclose the number of permanent and temporary employees, average gross compensation, employee turnover and the duration of jobs created. Employment incentives should reward sustained positions rather than headcount on a particular reporting date.
Government procurement can apply similar criteria. Contractors delivering major infrastructure or EXPO 2027 projects should demonstrate legal employment, timely salary payment, safe accommodation for foreign workers and appropriate insurance. Temporary project employment may be legitimate, but it should not obscure responsibility across layers of subcontractors.
The European comparison also highlights Serbia’s convergence challenge. Matching EU labour standards is not simply a matter of changing legislation before accession. It requires institutions capable of applying the rules and companies productive enough to offer stable employment. A low-wage economy with uncertain contracts may attract cost-sensitive investment, but it struggles to retain skilled people.
For employers, permanent contracts can create commercial value. Lower turnover reduces recruitment and training costs, improves quality and supports process knowledge. In electronics, automotive manufacturing, energy and engineering, mistakes can cost much more than the savings achieved through workforce flexibility. Stable teams are particularly important during commissioning, customer audits and the ramp-up of new products.
The current wage trend makes this more relevant. Average net earnings reached RSD 118,398 in May, but the median was RSD 93,277. A worker below the average and without a permanent contract experiences a much weaker version of Serbia’s reported wage recovery. The combination of moderate pay and limited security shapes decisions about migration.
Serbia’s demographic position means employers will gradually lose the ability to treat permanent employment as a concession. Skilled workers with international options already demand clearer career paths, training and stable contracts. Companies that do not provide them will rely increasingly on imported labour or accept persistent vacancies.
The 14.5% temporary-employment rate is therefore more than a labour statistic. It affects credit growth, housing, productivity, workplace safety and the country’s ability to retain human capital. Serbia has reduced headline unemployment considerably over the past decade. The quality and durability of the jobs now determine whether that achievement becomes a foundation for convergence or another reason for workers to leave.
