Federation of BiH faces labor market shifts and new regulations

The Federation of Bosnia and Herzegovina is undergoing significant labor and social policy shifts. According to the Federal Institute of Statistics, the second quarter of 2026 saw a 3.3% decrease in employment and a 7.8% increase in unemployment compared to the first quarter. Of the 1.847 million working-age residents, 124,000 are currently unemployed, with women representing 52% of the unemployed population.

New legislative changes are set to reshape employment and business operations. A proposed Labor Law aims to make permanent contracts the standard, limiting fixed-term contracts to a maximum of three within a two-year period. Additionally, a new Law on Payment Accounts prohibits companies with blocked accounts from using compensation, assignment, or cession to settle mutual obligations, with fines reaching 10,000 KM.

In the social sector, a new pension model effective July 1, 2026, will categorize minimum pensions into six tiers based on years of service. For example, those with less than 20 years of service will receive at least 451.22 KM, while those with 40 or more years will receive at least 714.43 KM. This system utilizes a solidarity principle to ensure a minimum floor for workers with shorter service histories.

Meanwhile, the Association of Employers of FBiH is calling for the reduction of over 2,350 fiscal and para-fiscal levies to ease the burden on businesses and improve transparency.