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Global Expansion's Employer of Record services provide the ability to quickly grow, manage, and pay international teams, without the need for a local entity. Our award-winning tech platform plus integrated support services make hiring, managing and paying your global workforce a breeze.

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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.

Need assistance hiring in Czech Republic? Contact us about our International  EOR Service

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.

New Year’s Day 1st January
Restoration Day of the Independent Czech State 1st January
Good Friday  10th April
Easter Sunday 12th April
Easter Monday 13th Apri
Labor Day  1st May
Victory in Europe Day  8th May
Saints Cyril and Methodius Day  5th July
Jan Hus Day  6th July
St. Wenceslas Day 28th Septembe
Independent Czechoslovak State Day 28th October
Struggle for Freedom and Democracy Day 17th November
Christmas Eve 24th December
Christmas Day  25th December
2nd Day of Christmas  26th December

 

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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.

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Minimum Salary in the Czech Republic

The minimum monthly gross wage in Czechia was CHK 14,600 in 2020, having doubled from CHK 7,185 in 2005.

Salary ranges in Czechia

This range is accurate for 80% and upwards of all employees in the Czech Republic during Q3 of 2022. These are gross salaries.

Lowest average wage

The lowest average salary in Czechia is CZK 18,301 monthly, or USD 789.56.

Median wage

The median salary is CZK 34 993 per month, equaling USD 1,588.10.

Highest average wage

Czechia’s highest average wage sits at CZK 62 659 a month, or USD 2.703,61.

Czechia Salary Ranges Visualized

Lowest average wage
18,301 CZK
Median wage
34 993 CZK
Highest average wage
62 659 CZK

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.

Income Tax in the Czech Republic

Individuals who have a home in the Czech Republic and intend to stay permanently, or who stay in the Czech Republic for 183 days or more during the relevant calendar year, are considered tax residents. Czech tax residents must generally pay Czech income tax on their worldwide earnings. Non-residents are generally taxed only on income considered to be of Czech origin.

Tax residents are taxed on their worldwide income (with certain exceptions for employment income earned outside the Czech Republic); nonresidents are taxed only on income earned in the Czech Republic. There are five basic sources of income:

  • employment
  • entrepreneurial activities
  • capital
  • leased assets
  • other

General taxable income is defined as the difference between gross income and allowable expenses incurred in obtaining the income, other than for employment income, for which the tax base equals the gross taxable remuneration.

Dividend and interest income earned in the United States are taxed separately under a lump-sum withholding system. The tax rates are 15% and 23%, respectively. The 23% tax rate applies to earnings that exceed 48 times the average wage for the calendar year (CZK 1,867,728 for 2022).

Annual Tax Bands, CZK

Tax Rate(%)

Over

Not Over

 

0 1,867,78 15
1,867,78 N/A 23
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Social Security in Czech Republic

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).

Social Security Contribution Rates

     Contribution

Group 1083

Social Security 
(pensions, unemployment benefits, sickness)

Health Insurance

Employer(%) Group 1083

24.8%

9%

Employee(%) Group 1083

 

6.5%

4.5%
Self-employed Group 1083 29.2% 13.5%
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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).

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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.

Need assistance hiring in Czech Republic? Contact us about our International  EOR Service

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

EU Blue Card

  • The blue card is issued to workers with higher professional or university education who have an employment contract for at least one year, for the statutory weekly work hours, and who have an agreed upon gross monthly or annual salary amounting to at least a 1.5 multiple of the gross annual salary in the Czech Republic announced in a Ministry of Labor and Social Affairs communication.
  • The blue card is valid for the term of employment set in the employment contract plus 3 months, but to a maximum of 2 years.
  • An application for an EU Blue Card is to be filed by a foreign national at an embassy, or when locally present, at the Ministry of the Interior (Department for Asylum and Migration Policy) offices in the territory of the Czech Republic.
  • Individuals who have lived in-country on the basis of a long-term visa or a long-term residence permit, as well as EU Members with another Blue Card, are eligible to apply for this type of visa to the Czech Republic.

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.

Employee Card

Vector 75

EU Blue Card

Vector 75
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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.

VAT

General Rate

Group 1083

21%

Reduced Rate Group 1083 10%
15%

 

Value Added Tax

21%

General Rate

15%

Reduced Rate

10%

Reduced
Rate

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.

Interest

Unless the rate is reduced under an applicable tax treaty, interest paid to a nonresident is subject to a 15% withholding tax. Interest paid to a tax haven resident is taxed at 35%.

Royalties

Unless the rate is reduced under a tax treaty or an exemption applies under the EU interest and royalties directive, royalties paid to a nonresident are subject to a 15% withholding tax. When royalties are paid to a resident of a tax haven, the rate is 35%.

Technical Service Fees

Income paid to a nonresident for technical services rendered in the Czech Republic is subject to a 15% withholding tax, while income paid to a resident of a tax haven is subject to a 35% withholding tax.

Withholding Tax

 

Dividends

  • Dividends paid to a nonresident are subject to a 15% withholding tax
  • A 35% rate applies where the dividends are paid to a resident of a tax haven
  • Dividends paid to a resident that do not qualify as exempt are subject to a 15% withholding tax
Interest
  • Interest paid to a nonresident are subject to a 15% withholding tax
  • A 35% rate is levied on interest paid to a resident of a tax haven
Royalties
  • Royalties paid to a nonresident are subject to a 15% withholding tax
  • A 35% rate applies where royalties are paid to a resident of a tax haven

Technical Service Fees
  • Income paid to a nonresident for technical services provided in the Czech Republic is subject to a 15% withholding tax
  • A 35% rate applies if it is made to a resident of a tax haven

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.

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Mandatory Benefits overview

  • Group 1113

    Annual Leave

  • Group 1113

    Public Holidays

  • Group 1113

    Maternity Leave

  • Group 1113

    Paternity Leave

  • Group 1113

    Sick Leave

  • Group 1113

    Notice period

  • Group 1113

    Severance Pay

  • Group 1113

    Pensions

  • Group 1113

    Unemployment benefits

  • Group 1113

    Sickness benefits

  • Group 1113

    Health Insurance

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).

Employee Benefits Management

PAYE is an effective way for employers to deduct accurate contributions at source, ensuring accurate contributions. Employers are required to supervise and manage employee benefits. Employers must approve or deny requests for annual leave or any other non-annual leave (e.g., sick leave, maternity leave, etc.).

Employers must also supervise and manage social security contributions, which include pensions, unemployment benefits, sickness benefits, and healthcare.

Payroll Compliance

There are numerous factors to consider when it comes to payroll in the Czech Republic. During this process, all local laws and regulations must be followed at all times. According to the Written Particulars of Employment Directive (Council Directive 91/533/EEC of 14 October 1991), employers must:

  • Provide employees with a written statement of the terms and conditions of employment
  • Disclose to their employees all relevant information pertaining to their work, such as working conditions and salary, in accordance with the aforementioned directive prior to formally signing an employment contract
  • Pay salaries/wages that are equal to or higher than the statutory minimum wage (i.e. CZK 16,200 for 2022).
  • Conduct independent payroll audits to improve compliance. Recognizing and validating the total number of active employees, corroborating and validating accurate payments, reviewing the payroll process, analyzing payroll reports and bank reconciliations, and ensuring regulatory compliance are all part of the payroll audit.
  • Comply with the GDPR Act, which was approved by the Czech Republic's government in April 2019.

Our Role

Global Expansion’s international EOR and PEO solution can help you run payroll in the Czech Republic with ease. We will not only ensure accurate payroll administration but also ensure regulatory compliance. Hence, this will save you the time and money needed to understand income tax and employment laws and regulations. In just a few clicks, your employees will be onboarded and enrolled into our payroll system in a seamless manner.

Additionally, we can invoice for clients locally, i.e. we can enroll any new employee quickly and efficiently, regardless of whether they are an expatriate or a Czech resident.

Payroll Accrual in Czech Republic

Country Accruals Additional Information

24.8

Social Security

9

Health insurance

8.33

Christmas Bonus

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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

Annual Leave

Vector 75

Maternity Leave

Vector 75

Paternity Leave

Vector 75

Sick Leave

Vector 75

Overtime

Vector 75

Severance

Vector 75

Social Security

Vector 75

Accrued Benefits in Czech Republic

Christmas Bonus % 0%
Christmas Bonus Over Vacations % 0%
Severance per Year%

Employees are entitled to severance pay equal to one month's pay after completion of one year of employment 

8.33%
Vacations %

The basic annual leave period is four weeks (20 working days) (5.49% of annual salary)

5.49%
Of annual
salary
Notice %

Employees are entitled to 2 months of notice period for one year of service or more

16.66%
Christmas Bonus Over Notifications % 0%
Vacations Plus % 0%

Total percentage of Salary (yearly)

The total employment accruals as a percentage of salary per annum

30.39%

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.

 

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