Hiring employees in the Czech Republic comes with a lot of administrative requirements. First, you’ll likely need to set up a local legal entity through which you can engage employees. You’ll need to complete various registration processes, including registering for payroll taxes and social security. You’ll also need to ensure that you comply with the relevant labour laws and regulations once your workers are onboarded. There is an easier way: hiring employees through an employer of record (EoR) in the Czech Republic.
An employer of record hires employees on behalf of other organisations. They’re often used by businesses wanting to expand into a country where they don’t (yet) have a legal or corporate presence. Using an employer of record in the Czech Republic can simplify the process of hiring Czech employees since you won’t need to set up a local legal entity.
If you use an employer of record in the Czech Republic, the EoR will become your workers’ legal employer. They will be responsible for ensuring compliance with Czech labour laws, including those governing working hours, benefits, and termination procedures. They’ll also handle administrative processes like payroll and tax withholding on your behalf. However, you’ll still be responsible for the day-to-day management of the employees.
If you want to hire in the Czech Republic, you’ll need a thorough understanding of the labour laws that govern work in that country. You’ll need to ensure that you withhold and pay the correct taxes and social security contributions on behalf of your employees. And, if you want your Czech expansion to be a success, you should also seek to understand the cultural norms and expectations around work that are common in the Czech Republic. In this guide, we’ll take you through everything you need to know to hire in the Czech Republic, with or without an EoR.
Like in all countries, hiring in the Czech Republic involves jumping through a lot of administrative hoops. You’ll need a thorough understanding of the labour laws that apply to your Czech employees and the processes you’ll have to follow. Read on for some of the main things you’ll need to know about before engaging your Czech team.
Most labour laws in the Czech Republic are laid out in the Czech Labour Code (Zákoník práce). Employers should familiarise themselves with the rules on things like working hours, rest periods, leave entitlements, and remuneration before hiring in the Czech Republic.
Employers in the Czech Republic are required to issue each employee with an employment contract. They must give a copy to the employee and retain a copy for their records. There are specific rules on the minimum information that a Czech employment contract must contain. An employment contract can be concluded in English (or any other language) as long as the employee understands it.
In the Czech Republic, both employers and employees contribute to social security funds, which pay for things like healthcare and pensions. Employees must also pay income tax, which employers are required to withhold from their wages. The Czech Republic uses a progressive tax rate of 15–23% depending on income.
Hiring in the Czech Republic involves several registration requirements for employers. For example, employers must register with the Czech Social Security Authority and register for payroll tax. Employers are also required to take out an occupational insurance policy for their workers.
Employers in the Czech Republic can carry out various types of background checks to verify information provided by candidates and to confirm their suitability for a role. However, there are some limitations on the background checks that can be carried out.
Employers in the Czech Republic must ensure that the people they employ have the right to work in the country. Nationals of EU and EEA countries and Switzerland have the right to work in the Czech Republic, but employers must still notify the relevant labour authorities if they hire someone from one of these countries. Workers from other countries typically need to obtain a work permit to work in the Czech Republic. Employers must also follow certain procedures to hire people from outside the EU.
In some cases, employers are also required to carry out different types of background checks in the Czech Republic. For example, criminal record checks are required for some sensitive roles. Employers must request pregnancy information from potential employees if they’re hiring for a job that can’t be performed by a pregnant employee (as defined by the Labour Code).
Here are some of the other types of background checks that employers can carry out in the Czech Republic:
In the Czech Republic, employee background checks can only be performed to seek information that is directly related to the role in question. The law specifically prohibits employers from requesting certain personal information. For example, criminal records checks can only be carried out when there is a specific reason for doing so related to the nature of the work.
Before hiring workers, it’s important to consider the different options for employment in the Czech Republic. For example, if you only want to hire a worker on a short-term basis to complete a one-off project that’s not central to your business’s mission, it may be better to hire an independent contractor.
On the other hand, if you’re looking for long-term support and expect to exercise control and direction over the worker, you’ll likely need to hire an employee. We’ll explore the differences between these employment options below.
The three main options for employment in the Czech Republic are:
Under Czech law, there are two other options for employment. Workers can be hired under either an ‘agreement on work performance’ or an ‘agreement on work activity’. These types of agreements are more flexible from the employer’s perspective, particularly regarding termination procedures. Employers also only have to pay social security and health insurance contributions for workers on this type of contract once they reach a certain remuneration threshold.
An agreement on work performance can be used for workers who work up to 300 hours per calendar year, and an agreement on work activity can be used for workers who work no more than 50% of full-time hours on average.
When an employee is misclassified as an independent contractor, they miss out on key employee benefits and protections. Local and national tax authorities also can’t collect the tax and other contributions that would be due if they were properly engaged under an employment contract.
For this reason, the misclassification of employees as independent contractors in the Czech Republic can have serious consequences for an employer. Specifically, they can be fined up to CZK 10,000,000 (around EUR 400,000) for the offence.
The characteristics that suggest a worker is an independent contractor or an employee are different in every country. In the Czech Republic, the Labour Code provides guidelines that employers can use to assess their worker classifications. According to the Labour Code, a worker is likely to be an employee if:
There are no statutory language requirements for employment contracts in the Czech Republic. That means that employers can choose to conclude their employment contracts in any language, as long as the employee in question understands its terms. It’s possible to determine the language on a case-by-case basis, using different languages for different employees.
The exception is for posted workers, for whom employers must retain a copy of the employment contract in either Czech or Slovak at the workplace. Communications with works councils, trade unions, and other employee representatives must also be in Czech.
Czech is the main language spoken in the Czech Republic. It is closely related to Slovak. Many people in the Czech Republic also speak English or German.
The Czech Republic is ranked 26th in the world for English language proficiency, according to language education company Education First. This puts the country in the ‘high proficiency’ category. However, it is in the lower half of European countries for English proficiency.
It is possible for foreign businesses to engage employees in the Czech Republic without setting up a local entity. However, they must meet various registration requirements and pay income tax deducted from their employees’ salaries. Employers in the Czech Republic must also pay health insurance and social security contributions on behalf of both them and their employees.
Setting up payroll in the Czech Republic requires registration with various regulatory bodies. Here are the main steps to follow:
There is no formal obligation to set up a local bank account to run payroll in the Czech Republic. It’s possible to pay both employees and the relevant taxes and charges from a foreign account. However, setting up a Czech bank account might make the payroll process easier.
Hiring employees in the Czech Republic usually means setting up a legal entity, which can be costly and time-consuming. Employers can avoid this hassle by working with an Employer of Record (EoR), like CXC.
Through our EoR solution, you can confidently hire employees in the Czech Republic, without worrying about compliance issues. We’ll handle everything from payroll to benefits to employment contracts on your behalf — so all you have to think about is finding the right person for the job.
With our EoR solution, you can engage workers anywhere in the world, without putting your business at risk. No more worrying about local labour laws, tax legislation or payroll customs — we’ve got you covered.
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