Mandatory contributions are a type of direct taxes which represent public payments to the state and characterize a large part of the income of the Republic of Croatia. They are the basic income that finance expenses for health insurance, pension insurance and employment. In the Republic of Croatia, contributions for compulsory insurance are the second most important category of budget revenue, right after tax revenue. The fundamental difference between contributions and taxes is that taxes do not have a predetermined purpose for spending them, while contributions do. By paying pension insurance contributions employees obtain pension rights, while by paying health insurance contributions they acquire health service rights. Contributions are divided into salary contributions paid by the employee and salary contributions paid by the employer. Salary contribution payed by employee are contribution for pension insurance based on generational solidarity, also called first pillar, and contribution for pension insurance based on individual capitalized savings, also called second pillar. Salary contributions payed by employer include contributions for health insurance, pension insurance contributions for benefited length of service first pillar and pension insurance contributions for benefited length of service second pillar. Every employee working for employer has the right of compensation for his work and all other rights that come from it. Income from self-employment refers to difference between receipts and expenses that occure in the same tax period. Furthermore, employees whose job is dangerous to life and health have the right to insurance tenure with an increased duration, or in practice known as benefited tenure.There are also various incentives for hiring employees, which are regulated as exemptions from the obligation of paying all or part of the salary contribution and they lower labor cost for employers. Today in the Republic of Croatia, it is possible to use a large number of incentives for hiring people, especially those under 30 years of age.