Definitive Guide to Hiring in Czech Republic

Hiring Employees in the Czech Republic

For companies that want to hire employees and run payroll in the Czech Republic without first establishing a business entity or subsidiary, Global Expansion provides Employer of Record services (EOR Czechia).

Our EOR services streamline and simplify the global hiring process. We handle the core global HR tasks - compliance, contracts, payroll, global benefits, and more - so that you forgo hours of ongoing admin, human error, and compliance risk.

In Czechia, companies would historically establish a subsidiary or branch office to legally hire in that country. With Global Expansion, this step is no longer necessary. We have subsidiaries all over the world and therefore can legally hire on your behalf. The employees are ours only on paper and report directly to managers within your company.

Labor Laws in the Czech Republic

Employment laws in the Czech Republic are uniquely suited to the country’s way of life, and crucial to understand if you want to employ local talent in this country. Get the details on Czech employment laws and policies here.

Employment Contracts in Czechia

1. Agreement to Complete a Job (DPP - Dohoda o provedení práce)

   DPP is typically used for temporary project workers. Due to the limit of 300 work hours per calendar year with one employer, individuals can have multiple DPPs with the same employer. A single employer can only work 300 hours under all DPPs.

   With DPP, individuals don't have to pay health and social insurance if their gross income (before taxes) is less than CZK 10,000 per month.

2. Agreement to Perform Work (DPČ - Dohoda o pracovní činnosti)

   DPČ works well for a larger-scale collaboration. A DPČ role is for a maximum of 20 hours per week. Employees are not entitled to wage compensation if their employer currently does not assign them any work duties. In addition, employees are not entitled to paid leave or company benefits unless expressly stipulated in the agreement.

   Prior to signing a new agreement, the current "main" employer must agree. This is not required if the agreement is to be completed in a field other than the primary job.

Employee Probation Period

An employment contract may include a trial, or probationary, period of up to: 3 consecutive months following the date the employment relationship began for non-management workers; or 6 consecutive months for management personnel. In the case of a management worker, 6 consecutive months must elapse after the start date of the employment connection.

Annual Leave in the Czech Republic

Annual leave in the Czech Republic is typically 4 weeks or 20 days per year. This is based on working a full year with a normal working week of 40 hours. Each full week worked builds up the accrued yearly leave. Likewise, employees that don’t work a full year or work less than 40 hours per week, do not build up the standard amount of 4 weeks.

When employees work more than 40 hours per week, is it possibly to accrue additional leave, up to 5 weeks or 25 days total. Regardless, it is common for employers to grant 5 weeks of paid leave instead of 4 weeks to full-time workers.

Days of unexcused absence are grounds for proportional reduction of paid leave.

Holidays in Czech Republic

Here is the full list of public holidays in the Czech Republic.

Maternity Leave in Czech Republic

A female employee has the right to 28 weeks of (unpaid) maternity leave to care for a newborn child. If a female employee has two or more children as a result of a single pregnancy, she is entitled to 37 weeks of maternity leave instead.

Maternity leave cannot be less than 14 weeks long and cannot be terminated earlier than six weeks after the child is born. If a child is stillborn, this still grants 14 weeks of maternity leave.

During this period, the employee is not entitled to salary or wage compensation, but is entitled to sickness insurance benefits instead.

New mothers in the Czech Republic are currently entitled to 20 weeks of financial postnatal maternity support, which can also be split with the father as shared parental leave after the sixth week.

Paternity Leave in Czech Republic

Male employees in Chezchia have a right to right to 28 weeks of unpaid paternity leave to care for a newborn child. If the mother has two or more children as a result of a single pregnancy, both parents are entitled to up to 37 weeks of parental leave instead.

In 2018, Czechia introduced a new law that grants the father of a newborn child up to 7 calendar days of special leave, which must begin within the first 6 weeks of the child's birth.

This leave is available to employees with sickness insurance (the majority for whom is paid by their employer). During this special leave, they receive up to 70% of their regular salary from the Czech Social Security Office.

Sick Leave in Czech Republic

Starting on July 1, 2019, employees in the Czech Republic will be entitled to a salary reimbursement for the first 14 calendar days of sickness. Beginning on the 15th calendar day of sickness, the employee receives a sickness payment from the Czech Social Security Office.

Employees are eligible for sickness benefits for a maximum of 380 consecutive calendar days. After this period, they lose the right to “normal” sickness benefits.

Working Hours in Czech Republic

According to Czechia’s Labour Code, a typical workweek consists of 40 hours.

The Code reduces the length of usual weekly working hours for a number of employee types (such as those on a two-shift, three-shift, or continuous work schedule). In general, shifts cannot exceed 12 hours in duration. The employer must determine working hours and the start and conclusion of shifts in advance.

Overtime in Czech Republic

The Labor Code states that a worker cannot be required to work more than 8 hours of overtime per week or 150 hours per year. During a 26-week period, overtime work cannot average more than eight hours per week. This period may be extended to 52 weeks by collective bargaining.

For overtime work, employees are entitled to their salary for the work performed. In addition they must receive either:

• a premium of at least 25% of their average earnings
• time off proportional to the hours of overtime worked

Termination of Employment in the Czech Republic

The New Labor Code (Act No. 262/2006 Coll.) , which came into effect on the 1st January 2007, constitutes the principal legislative act governing employment relationships in the Czech Republic. Under the Code, an employment relationship may be terminated by:

• agreement
• termination notice
• immediate cancellation
• termination during the trial period
• collective dismissal

These circumstances of termination are explained in more detail below. An employment relationship concluded for a fixed term may also be terminated by the expiry of the agreed term.

If both the employer and the employee agree to end the job, the job ends on the date that was agreed upon by both parties. When an employee's job ends, they are entitled to their required or contractual (if longer) notice period, payment in place of any unused holidays, and a severance payment.

A collective dismissal is defined as the following number of terminations of employment relationships, on the basis of notice given in accordance with section 46 (1) a) to c), during a period of 30 days:

• 10 dismissed employees in companies employing 20 to 100 employees;
• at least 10% of the employees in companies employing 101 to 300 employees;
• at least 30 employees in companies employing more than 300 employees.

An employer must begin consultations with the competent trade union body or the employees' council at least 30 days before serving notices of dismissal when considering collective redundancy. These consultations are intended to reach an agreement on measures to avoid or reduce the negative consequences of collective dismissals, as well as to mitigate their social impact.

Notice Period in the Czech Republic

The notice period in Czechia must be at least 2 months for both the employer and the employee. Termination notices must be in writing and delivered to the other party; otherwise, they are void. If a notice of termination is given, the employment relationship ends when the notice period expires.

In most cases, the notice period begins on the first day of the calendar month following the delivery of the termination notice and ends on the last day of the appropriate calendar month.

Employers are required to notify their workforce at least 30 days in advance of any planned collective dismissals (within 30 days, dismissals of at least 10 workers in companies with 20-100 employees, at least 10% in companies with 101-300 employees, or at least 30 workers in companies with more than 300 workers).

Severance in Czech Republic

An employee whose employment relationship is terminated by notice given by his employer for redundancy or by agreement for the same reasons is entitled to receive severance pay from the employer.

Severance pay is 1 month for the first year of employment, 2 months for the second year, and 3 months for those who have worked for the employer for more than 3 years. Average monthly earnings are considered average earnings for the purpose of calculating severance pay for the employee in question.

Czech Republic Salary and Wages

Accurately estimate your costs when employing in the Czech Republic in 2023. Includes base salary, dependents, benefits, taxes, social contributions, and payroll costs. Monthly or yearly calculation period.

Average Salary in the Czech Republic

According to the Czech Statistical Office, in December 2022 the average gross monthly salary is CZK 39.858 or USD 1.720,45.

Czech Republic Salary Comparison

Employees with more than 5 years of experience earn 36% more than those with less than 5 years of experience. When employees reach the 10-year mark, their salary increases by 21%. Those over the age of 15 receive a 14% raise. In the Czech Republic, male employees earn around 6% more than female employees.

13th Month Salary in Czech Republic

There is no legal obligation to pay the 13th or 14th month's salary. However, the majority (since 2018) of Czechian companies grant their employees a 13th month bonus for Christmas.

Individuals employed by a Czech company are required to pay social security taxes. Unless the European Union (EU) regulation or social security treaty states otherwise, most seconders working in a Czech company are required to pay Czech social security and health insurance.

Social security contributions fund three separate funds: pensions, unemployment benefits, and sickness benefits. Entrepreneurs have the option of contributing to the sickness fund.

Medical care is covered by health insurance. Individuals have the option of selecting the licensed company to which they will pay health insurance contributions. Mandatory contributions are calculated using the individual's gross remuneration, which includes the majority of benefits and allowances. Income subject to income tax generally requires contributions to the social security and health insurance systems.

Social Security Contribution Rates

Employer contributions are 24.8% for social security and 9% for health insurance. Employee contributions are 6.5% for social security (old-age pension) and 4.5% for health insurance.

The assessment base for calculating contributions to the social security system has a maximum annual cap of 48 times the average monthly wage per year.

This limit applies to both employees and business owners. A self-employed person is required to pay 42.7% of the assessment base (determined as 50% of the income tax base) in mandatory contributions (13.5% for health insurance, 28% for old-age pension, and 1.2% for unemployment).

Deductible Expenses in Czech Republic

Standard Deductions

Except for employment income, necessary expenses incurred in earning income are generally deductible.

Deductions are normally based on actual expenditure; however, for certain categories of income, a fixed percentage of gross income may be claimed as a deduction (e.g., lump-sum deductions of 80% for agricultural income or craft activities, 60% for a limited number of trading and entrepreneurial activities, 40% for activities under a special statutory provision, 30% for renting a property).

The lump-sum expense deductions, however, are only applicable up to the maximum amount of the respective percentage out of CZK 2 million (i.e., maximum CZK 1,600,000, CZK 1,200,000, CZK 800,000, or CZK 600,000, respectively).

Personal Deductions

For Czech tax residents, personal tax bases and tax deductions are generally available. To use them, tax non-residents must have at least 90% of their worldwide income from Czech sources.

Donations made to specific organizations or individuals for the purpose of financing science, education, culture, and so on are tax deductible for individuals up to a maximum of 15%* of the tax base, provided the total value of the donations exceeds 2% of the tax base or is at least CZK 1,000.

Blood donation is also considered a charitable donation, with each blood collection valued at CZK 3,000. The maximum limit has been temporarily increased to 30% of the tax base for the years 2020 and 2021.

A deduction for mortgage interest is available under certain conditions, up to CZK 150,000 per year for housing needs 'procured' after January 1, 2021. CZK 300,000 per year for 'procured' housing needs before January 1, 2021.

A deduction of up to CZK 24,000 per year is applicable for private contributions paid on private life insurance under certain conditions.*1 A deduction of up to CZK 24,000 per year is applicable for private contributions paid to a private pension insurance fund under certain conditions. Furthermore, pension and life insurance contributions made by the employer are tax-free for the employee up to CZK 50,000 per year.

Business Deductions

Deductible expenses for an entrepreneur are generally the same as those allowed under the corporate income tax system. Fixed assets, for example, can be depreciated at the statutory rate. Entrepreneurs in the Czech Republic can also deduct travel expenses (within statutory limits), insurance costs, and research and development (R&D) costs.

Immigration Czech Republic

Learn about immigration requirements in the Czech Republic, work visa requirements, work permits and more.

A Czech employment visa is required for all non-EU nationals seeking employment in the Czech Republic. The two types of employment permits are an Employee Card and a EU Blue Card.

Employee Card

• The permit is valid for a maximum of 2 years, and it can be renewed
• Applicants are required to submit an employee contract of at least 15 hours a week and with a salary above the legal minimum wage
• Employers that wish to hire foreign employees must firstly report the vacancy to the Labor Office. If the vacancy has not been fulfilled within 30 days of being declared, it automatically goes into the register of vacancies available for foreigners

Visa requirements Czech Republic overview

Learn about the visa policy in the Czech Republic and all the ways to obtain a regular or a work visa for the Czech Republic.

Value Added Tax (VAT) in the Czech Republic

On supplies of goods and services within the Czech Republic, VAT is generally charged at 21%. Certain supplies (for example, groceries, lodging, and construction work related to social housing) are taxed at a 15% rate, with a second reduced rate of 10% applicable for certain categories of goods.

From May 1, 2020, the second reduced VAT rate of 10% will also apply to drinking water, catering services, soft drinks and draft beer, shoe and clothing repairs, hairdresser services, e-books, and other similar items.

Exports are generally VAT-free with a credit. Some supplies are exempt from credit, such as real estate leasing (with some exceptions), financial and insurance services, education, health, and welfare.

Withholding Tax in Czech Republic

Dividends

Dividends paid to nonresidents are subject to a 15% withholding tax unless reduced by an applicable tax treaty. When dividends are paid to a resident of a tax haven, the rate is 35%. Dividends paid to residents who are not exempt are subject to a 15% withholding tax.

Mandatory Benefits in Czech Republic

It’s important to understand the legal requirements of hiring employees in the Czech Republic (whether it’s remote or in-office) so that your business remains compliant. As part of Global Expansion’s International PEO and Employer of Record (EOR) solution, we guarantee employees are registered with the appropriate government agency, and that they receive mandatory benefits.

Additionally, all tax deductions associated with the employee are processed at the source, meaning our in-country entity will be responsible for paying all taxes to the authorities on behalf of the new hire.

Payroll In Czech Republic

Here’s what you need to know to run payroll in Czechia.

Payroll Administration

For employment taxes, the Czech Republic uses a Pay As You Earn (PAYE) system. In the Czech Republic, the tax year is either the calendar year or the fiscal year. The tax return must be filed by the first of April the following year, or by the first of July if prepared and filed by a certified tax adviser or a solicitor. As a result, employers are required to collect and pay the aforementioned taxes to the General Financial Directorate (GFD).

Payroll Accrual in Czech Republic

Country Accruals Additional Information

Description

Social security taxes are obligatory for an individual employed by a Czech company. Most secondees working in a Czech company are obligated to pay Czech social security and health insurance unless the European Union (EU) regulation or social security treaty states otherwise. The rules on participation in the Czech social security and health insurance system are complex, and each secondee's situation should be reviewed individually.

Social security contributions provide funding for three separate funds:

• pensions
• unemployment benefits
• sickness (together with other benefits)

Entrepreneurs can choose whether to contribute to the sickness fund. Health insurance covers medical care. An individual can choose the licensed company to which one will pay health insurance contributions. Mandatory contributions are calculated from the individual's gross remuneration, including most of one’s benefits and allowances.

Income that is subject to income tax is generally subject to contributions into the social security and health insurance system. The contribution rates for the employer are 24.8% for social security and 9% for health insurance. The contribution rates for the employee are 6.5% for social security and 4.5% for health insurance.

The maximum annual cap for the assessment base for calculation of contributions into the social security system is 48 times the average monthly wage per year (i.e. CZK 1,701,168 for 2021). This cap applies to both employees and entrepreneurs. As of 2013, there is only a cap for social security contributions. The limit for the payment of insurance premiums for public health insurance was canceled.

Payroll Accruals Additional Information

Accrued Benefits in Czech Republic

Why use Global Expansion to hire in the Czech Republic

Establishing a branch office or subsidiary in the Czech Republic can be time-consuming, expensive and complex. With such a robust labor market in place, one must pay great attention to detail when structuring employment because Czechian labor laws are complex.

The company also has a responsibility to comply with specific employment practices dictated by Czechian law to maintain its good standing as an equal opportunity employer.

Global Expansion makes it easy for you to expand into the Czech Republic. We'll help you hire your candidate of choice, handle HR matters and payroll, and ensure that you comply with local laws without the burden of setting up a foreign branch office or subsidiary. In addition, you'll have complete control and direction over your employees.

We enable you to stay in control of everything. Our International Employer of Record (EOR) solution provides you with peace of mind to focus on running your company and the security to enter new markets.