Temporary employment accounted for 14.5% of Serbia’s workforce in 2025, placing the country well above the European Union average of 9.9% and among the highest rates recorded in Europe. Nearly one in seven employees worked under fixed-term contracts, leaving Serbia 4.6 percentage points above the EU benchmark.
Among the countries included in the comparison, only North Macedonia and the Netherlands reported higher shares of temporary employment. While the figures appear similar, the labor market conditions differ, with temporary work in the Netherlands operating within a higher-income economy featuring stronger social protection, higher wages and a more developed agency employment sector.
Employment Data Highlights Structural Challenges
Temporary employment continues to serve legitimate business needs, including seasonal activity, construction projects, employee replacement, product launches and periods of uncertain demand. Fixed-term contracts can also provide entry opportunities for younger workers while allowing employers to evaluate new positions before making permanent hires.
Prolonged reliance on temporary contracts changes the character of employment relationships. Serbian labor legislation generally limits fixed-term contracts to 24 months, subject to specific exceptions, although interruptions between contracts, agency employment, project structures and changes in job descriptions can extend temporary employment. Enforcement of labor regulations and employees’ willingness to challenge contractual arrangements remain important factors.
Labor market statistics underscore the significance of employment quality. During the first quarter of 2026, Serbia recorded approximately 2.836 million employed persons and 276,300 unemployed, resulting in an unemployment rate of 8.9%. The employment rate stood at 50.7%, while youth unemployment reached 23.1%.
Compared with the first quarter of 2025, total employment declined by approximately 51,100 people, while unemployment decreased by 13,100. Over the same period, the number of people outside the labor force increased by 40,500, indicating that lower unemployment did not correspond directly with higher employment.
Demographic Trends Influence Labor Supply
The changes reflect broader demographic developments affecting the Western Balkans, where aging populations and emigration reduce unemployment without necessarily expanding employment opportunities. At the same time, employers continue reporting shortages of engineers, drivers, technicians and construction workers, while labor-force participation remains comparatively low among younger people, women, older workers and some rural populations.
High levels of temporary employment can reinforce these labor market imbalances. Employees working under short-term contracts may be less inclined to invest in occupation-specific training without long-term employment certainty, while employers may limit investment in workforce development for staff considered temporary. The result affects productivity by reducing long-term investment in employee skills.
Employment stability also influences household finance. Financial institutions consider contract security when evaluating mortgage and larger consumer loan applications. Workers receiving above-average salaries under successive temporary contracts may encounter greater borrowing constraints than lower-paid employees with permanent positions, affecting housing demand and longer-term household spending decisions.
Housing affordability is also linked to employment conditions. Younger workers may earn sufficient income to meet rental costs while lacking the permanent employment required to qualify for mortgage financing. As a result, some remain in rented accommodation or continue living with family while allocating savings toward future property purchases rather than consumption or other investment.
Contract Structure Affects Workforce Stability
Temporary employees generally have less leverage in negotiating wages and working conditions because contract renewals depend on employer decisions. This can influence workplace behavior, including willingness to raise safety concerns, participate in labor unions or decline overtime. In manufacturing and construction, these factors can affect occupational health and safety, while professional services may experience higher employee turnover and reduced retention of institutional knowledge.
Foreign investors adopt different employment strategies depending on business models. Companies operating stable export programs and advanced manufacturing facilities frequently rely on permanent workforces to maintain production quality and retain skilled employees. Businesses focused on lower-value assembly operations, subsidy-supported investment or highly variable customer demand may place greater emphasis on workforce flexibility through temporary contracts.
Public-sector employers also make extensive use of temporary employment arrangements. Schools, hospitals, municipal enterprises and public administrations may retain personnel on short-term contracts because of recruitment restrictions, budget uncertainty or administrative decisions, affecting their ability to retain teachers, healthcare professionals and technical specialists.
Policy Measures Focus on Enforcement and Transparency
Policy responses extend beyond restricting fixed-term employment. Excessively rigid labor regulations can discourage formal hiring while encouraging undeclared work, agency employment or self-employment arrangements. Ensuring that temporary contracts correspond to genuine short-term business needs and transition to permanent employment when positions become ongoing remains a key objective.
Greater use of tax and social security data could improve enforcement by identifying employers repeatedly using temporary contracts for the same positions. Labor inspections could then focus on sectors and businesses with unusually high contract renewal rates, supported by digital records that allow systematic monitoring.
Employment subsidies represent another policy instrument. Companies receiving government assistance could be required to disclose the number of permanent and temporary employees, average gross wages, workforce turnover and the duration of jobs created. Public incentives could therefore be linked to sustained employment rather than workforce levels reported at a single point in time.
Government procurement could apply similar requirements. Contractors involved in major infrastructure developments and EXPO 2027 projects could demonstrate compliance with legal employment standards, timely wage payments, appropriate accommodation for foreign workers and adequate insurance coverage. Temporary employment associated with project-based work would remain permissible while improving accountability throughout subcontracting chains.
Permanent Employment Gains Strategic Importance
The comparison with European labor markets also highlights broader convergence challenges. Alignment with EU labor standards depends not only on legislative changes but also on institutions capable of enforcing employment regulations and companies productive enough to sustain permanent jobs. Economies characterized by lower wages and widespread temporary employment may attract cost-sensitive investment while facing greater difficulty retaining skilled workers.
For employers, permanent employment can reduce recruitment and training costs while improving product quality and preserving operational knowledge. Stable workforces are particularly valuable in electronics, automotive manufacturing, energy and engineering, where experienced personnel support commissioning activities, customer audits and new production programs.
Current wage developments reinforce these considerations. Average net earnings reached RSD 118,398 in May 2026, while the median wage stood at RSD 93,277. Workers earning below the national average and employed under temporary contracts experience a different level of income security than headline wage figures suggest, influencing decisions on borrowing, career development and migration.
Serbia’s demographic trends are also changing employer recruitment strategies. As the working-age population declines and skilled workers continue to pursue international employment opportunities, businesses increasingly face pressure to offer clearer career paths, workforce training and permanent employment. Employers unable to provide these conditions may rely more heavily on foreign labor or continue operating with persistent vacancies.
