by AdminIs There Such a Thing as Free Transportation?
Introducing free public transportation in Belgrade has raised numerous legal and financial questions for employers and employees alike. The key issue is how this decision aligns with the existing legal framework regulating the reimbursement of transportation costs for employees. Previously, employers had a clear legal obligation to pay employees a minimum amount for transportation based on the cost of a public transportation ticket. Now, with free transportation for all individuals in Belgrade starting from January 1, 2025, the question arises as to whether this obligation still applies, given that the reference cost no longer exists.
Employers must now determine whether they are still required to provide transportation allowances to their employees and under what conditions this might be feasible. The lack of a reference cost, which was previously the price of a public transportation ticket, presents a new challenge. Employers are left to navigate these new circumstances and establish appropriate procedures that uphold the intent behind providing transportation allowances.
Has the Ministry of Labor Responded?
In response to the new situation, the Ministry of Labor has issued an opinion stating that “without addressing how employees commute to and from work, the law stipulates the transportation costs that employers must reimburse, determined based on the cost of a public transportation ticket. The law assumes that commuting costs always exist (unless the employer provides transportation), and therefore, employees are entitled to reimbursement of these costs.”
However, the Ministry’s opinion appears insufficiently comprehensive, as it fails to provide clear instructions for practical implementation. Additionally, the opinion is imprecise and does not fully consider all relevant regulations or the legal nature of transportation allowances, leading to legal uncertainty and practical difficulties. The Ministry further clarifies that “employees have not automatically lost the right to transportation allowances; rather, the issue of determining the method and amount of reimbursement needs to be resolved.” This places the responsibility on employers to establish the conditions and amounts for transportation allowances through internal regulations and employment contracts. According to the Ministry, employers should “refer to the last paid transportation allowance” prior to the implementation of free transportation in Belgrade. However, this recommendation lacks a clear basis, as it is not grounded in actual costs.
The Ministry’s opinion concludes that the obligation to reimburse transportation costs for employees is not in question; rather, the issue lies in determining the method and amount of such reimbursement. Employers are required to “regulate the criteria for transportation cost reimbursement in their internal regulations and employment contracts, referring to the amount of the last paid allowance for that purpose.” This means that employers must clarify how transportation allowances will be paid and whether and to what extent they will be provided.
This approach leaves room for various interpretations and practices, creating additional complexities for employers, as the criteria and methods for determining transportation allowances remain unclear and ungrounded in specific parameters.
Furthermore, the Ministry highlights Article 80, Paragraph 2 of the Law on State Administration, which stipulates that opinions issued by state administrative bodies are not legally binding. Consequently, the fact that the Ministry’s opinion is non-binding,coupled with the existing uncertainties, results in both employers and employees facing challenges in implementation, creating room for divergent interpretations and legal uncertainty.
Transportation Allowance or Additional Income?
Traditionally, transportation allowances were intended to cover employees’ actual commuting expenses, rather than serving as part of their salary. In this regard, Article 18, Paragraph 1, Point 1 of the Law on Personal Income Tax provides for a tax exemption for documented transportation expenses incurred for commuting to and from work, up to the cost of a monthly public transportation ticket or the actual transportation costs. However, under current circumstances, where employees no longer incur the cost of a monthly public transportation ticket, any amount paid by the employer in connection with free public transportation would be considered additional income, subject to taxation and social security contributions. Consequently, employers wishing to continue paying transportation allowances in accordance with the Ministry’s non-binding opinion would face increased tax liabilities, as such payments would be treated as employee benefits not based on actual expenses.
In this context, additional clarification from the Ministry of Finance is expected.
Does This Lead to Employee Discrimination?
Another issue is the potential discrimination against employees who commute using public transportation that is not free or who are only entitled to reimbursement of actual commuting costs under the employer’s internal regulations or employment contracts. While these employees use the reimbursement to cover actual transportation costs, employees living and working in Belgrade who use only public transportation would effectively receive an additional benefit if their employer were to pay a transportation allowance despite free transportation. This issue requires a detailed analysis and potential adjustments to employers’ internal regulations to ensure equal treatment of all employees and fairness in applying the regulations, thus maintaining a balance and protecting employees’ rights.
Legal Uncertainty for Employers and Employees
In the current circumstances, although public transportation in Belgrade is now free, the legal treatment of transportation allowances remains unclear. Employers face legal uncertainty and potential additional costs in the form of taxes and contributions on allowances that were previously tax-exempt. Until official institutions provide concrete legal interpretations, both employers and employees remain uncertain about the future status of this right.
Employers are advised to consult legal experts in a timely manner to ensure compliance with the law, while employees should be aware of their rights and ways to protect them.