Employing in the Czech Republic

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Enter the Czech market without the requirement of opening a local entity.

Expanding into
the Czech Republic

Global expansion is a step to make for any business, regardless of what you wish to achieve. The opportunities that can come with an expansion can be both incredibly exciting as well as intimidating and confusing, especially when you consider all of the registration procedures that needs to be done and documentation required.

Czech Republic flag with blue sky backdrop
Czech Republic flag with blue sky backdrop

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Expanding to countries such as the Czech Republic – which is characterized by a skilled and well-educated workforce, multifaceted employment and tax laws, an extensive infrastructure network linking to the rest of Europe, and leading sectors in agriculture, manufacturing, and services – can bring both excitement to the possibilities, but also significant stress to ensuring the entity with the country’s rigorous legal structures and laws.

Ensuring compliance without the sufficient knowledge of the country’s laws also adds to the stress of getting your new entity off the ground and ready to test new markets. Going at it without the proper support can increase the costs, time and risks involved.

Each new markets bring new challenges, and these can be worked through more efficiently and cost-effectively with the support of an International Professional Employer Organization (PEO) such as Bradford Jacobs, especially through our Employer of Record (EOR) framework.

This can be best utilized when businesses are just beginning their expansion process and require more information before committing to incorporating an entity and fully establishing themselves in that market.

Country EOR Guide - Bradford Jacobs

Download our Guide to the Czech Republic

Learn all about expanding into the Czech Republic and see what we can do to make your expansion easier.

Download our Guide to the Czech Republic

Learn all about expanding into the Czech Republic and see what we can do to make your expansion easier.

Country EOR Guide - Bradford Jacobs

Hiring Staff
in the Czech Republic

Hiring Staff
in the Czech Republic

The Main Sectors of the Czech Republic Economy

The country focuses on the following key sectors, which all have a significant impact on the country’s economy:

The manufacturing industry is the main pillar of the Czech’s economy. There is great output from high-tech engineering, machine engineering, and automotive engineering. The Czech Republic is the 12th largest global car exporter and has employed over 150,000 people. One of the largest and most significant products is Skoda Auto which is over 100 years old in automotive history.
Approximately 60% of the employees in the Czech Republic work in the service sector just close to the European average of 75%. This percentage of employed persons qualifies a country to be called highly developed.

With the increase in competition in the automotive industry from countries like Japan, Germany, and Mexico, the service sector has risen to be among the most productive industry in the Czech Republic.

The focus in the services sector is on research and development, ICT and software development, nanotechnology, real estates, consultancy, business (such as finance), and life sciences.

Agriculture contributes dismally to the economy of the Czech Republic at about 3.9%. However, the country has prioritized agriculture by categorizing it as one of the key areas in the national economy. This strategy aims at increasing agricultural production to ensure food security.

The ever-increasing demand for safe and nutritious food has presented an opportunity for this sector to thrive by producing even more to feed her growing population.

The agricultural sector also focuses on sustainable methods of agriculture. In most cases, farming is practiced on the farms occupying about 800 hectares of land.

The Czech Republic is one of the best European destinations for investments in information and communication technologies (ICT). This is confirmed by the strong inflow of projects with high value added from leading global companies in this area and the local tradition of outstanding technical fields. The list of successful investors in the country includes, for example, Microsoft, Skype, Tieto, Red Hat, SolarWinds, IBM, Cisco, Oracle, H2O.ai and MSD IT.

In addition to foreign companies, however, a full range of ICT companies of Czech origin, such as Avast, GoodData, Y Soft, Seznam.cz, Socialbakers and STRV, operate in the Czech Republic. These companies have succeeded in expanding and are now known practically worldwide. The Czech Republic is also home to several top-level research centres that have achieved outstanding results and won awards in the area of information and communication technologies.

The Czech Republic is a signatory of international commitments aimed at environmental protection and stands side by side with the other countries of the EU-27 in the fight against global threats. It has also joined ambitious climate and energy commitments of the European Commission and believes in industry based on clean technologies. This is confirmed by rising government investment in environmental and energy research.
Since the early 20th century, the engineering industry remains one of the cornerstones of the Czech economy. Stable economic environment, high level of manufacturing technological maturity and cutting-edge R&D programs contribute to the creation of the optimal climate for business establishment and further development. This fact has been recognized by the world´s major players such as Siemens, ABB, Honeywell, or Daikin, who have invested in various facilities in the Czech Republic.

The Czech Engineering sector employs over 126 000 workers and around 85% of manufactured products is being exported. More than 5200 machinery companies are manufacturing even the most sophisticated components, which makes the Czech Republic 2nd most specialized in Industrial Machinery, equipment, and tools in the world. That makes the Engineering sector one of the three most important industry sectors in the Czech Republic.

The Czech government set development of new pharmaceutical treatments and diagnostics as one of the top priority areas and allocated public funding of over EUR 2.5 billion in the last decade to strengthen the sector’s research infrastructure. New state-of-the-art research facilities have been completed in Prague, Brno, Olomouc and Plzeň to complement the existing institutes of the Czech Academy of Sciences and universities.

Czech research teams are internationally recognized for their quality research in molecular genetics, immunology, analytical and pharmaceutical chemistry and biochemistry, cardiology, neurology, metabolic diseases and, more recently, medical applications of nanotechnologies.

The success of companies and research institutes operating in the Czech Republic in the life-sciences sector stems from the country’s track record in R&D and high-quality education. According to Ministry of Education statistics for 2016-2017, more than 50,000 students are enrolled in natural science study programs at universities, including Charles University in Prague, which was established in 1348 and thus ranks among the oldest universities in Europe.

The Main Sectors of the Czech Republic Economy

The country focuses on the following key sectors, which all have a significant impact on the country’s economy:

Lednice Chateau with beautiful gardens and parks
The manufacturing industry is the main pillar of the Czech’s economy. There is great output from high-tech engineering, machine engineering, and automotive engineering. The Czech Republic is the 12th largest global car exporter and has employed over 150,000 people. One of the largest and most significant products is Skoda Auto which is over 100 years old in automotive history.
Approximately 60% of the employees in the Czech Republic work in the service sector just close to the European average of 75%. This percentage of employed persons qualifies a country to be called highly developed.

With the increase in competition in the automotive industry from countries like Japan, Germany, and Mexico, the service sector has risen to be among the most productive industry in the Czech Republic.

The focus in the services sector is on research and development, ICT and software development, nanotechnology, real estates, consultancy, business (such as finance), and life sciences.

Agriculture contributes dismally to the economy of the Czech Republic at about 3.9%. However, the country has prioritized agriculture by categorizing it as one of the key areas in the national economy. This strategy aims at increasing agricultural production to ensure food security.

The ever-increasing demand for safe and nutritious food has presented an opportunity for this sector to thrive by producing even more to feed her growing population.

The agricultural sector also focuses on sustainable methods of agriculture. In most cases, farming is practiced on the farms occupying about 800 hectares of land.

The Czech Republic is one of the best European destinations for investments in information and communication technologies (ICT). This is confirmed by the strong inflow of projects with high value added from leading global companies in this area and the local tradition of outstanding technical fields. The list of successful investors in the country includes, for example, Microsoft, Skype, Tieto, Red Hat, SolarWinds, IBM, Cisco, Oracle, H2O.ai and MSD IT.

In addition to foreign companies, however, a full range of ICT companies of Czech origin, such as Avast, GoodData, Y Soft, Seznam.cz, Socialbakers and STRV, operate in the Czech Republic. These companies have succeeded in expanding and are now known practically worldwide. The Czech Republic is also home to several top-level research centres that have achieved outstanding results and won awards in the area of information and communication technologies.

The Czech Republic is a signatory of international commitments aimed at environmental protection and stands side by side with the other countries of the EU-27 in the fight against global threats. It has also joined ambitious climate and energy commitments of the European Commission and believes in industry based on clean technologies. This is confirmed by rising government investment in environmental and energy research.
Since the early 20th century, the engineering industry remains one of the cornerstones of the Czech economy. Stable economic environment, high level of manufacturing technological maturity and cutting-edge R&D programs contribute to the creation of the optimal climate for business establishment and further development. This fact has been recognized by the world´s major players such as Siemens, ABB, Honeywell, or Daikin, who have invested in various facilities in the Czech Republic.

The Czech Engineering sector employs over 126 000 workers and around 85% of manufactured products is being exported. More than 5200 machinery companies are manufacturing even the most sophisticated components, which makes the Czech Republic 2nd most specialized in Industrial Machinery, equipment, and tools in the world. That makes the Engineering sector one of the three most important industry sectors in the Czech Republic.

The Czech government set development of new pharmaceutical treatments and diagnostics as one of the top priority areas and allocated public funding of over EUR 2.5 billion in the last decade to strengthen the sector’s research infrastructure. New state-of-the-art research facilities have been completed in Prague, Brno, Olomouc and Plzeň to complement the existing institutes of the Czech Academy of Sciences and universities.

Czech research teams are internationally recognized for their quality research in molecular genetics, immunology, analytical and pharmaceutical chemistry and biochemistry, cardiology, neurology, metabolic diseases and, more recently, medical applications of nanotechnologies.

The success of companies and research institutes operating in the Czech Republic in the life-sciences sector stems from the country’s track record in R&D and high-quality education. According to Ministry of Education statistics for 2016-2017, more than 50,000 students are enrolled in natural science study programs at universities, including Charles University in Prague, which was established in 1348 and thus ranks among the oldest universities in Europe.

Commercial Laws in
the Czech Republic

  • The Financial Administration Tax Office – Tax Offices represent regional and organizational units of the first level in the Financial Administration, working under the Ministry of Finance. Tax Offices provide the following activities:
    • perform the administration of taxes
    • carry out the proceedings about administrative offences
    • transfer collected tax incomes
    • perform supervision over lotteries and other gambling games
    • keep records and registers, which are needed for the performance of activity of the financial administration bodies
    • collect and enforce pecuniary compliance imposed by them
    • perform financial control
    • perform investigations according to the Accounting Act and imposes fines,
    • fulfill a role of Liaison Office for the recovery of financial claims and provide international assistance in the administration of taxes
    • review the economy of Regions, the Capital of Prague and regional councils of regions cohesiveness and performs a supervision over the reviewing of economy of municipalities, voluntary associations of municipalities and the city districts of the Capital of Prague
  • The Financial Administration Specialized Tax Office –Specialized Tax Office represents the Tax Office on the national level, working under the Ministry of Finance. The Specialized Tax Office is a respective Tax Office for the selected taxpayers. The seat of the Specialized Tax Office is Prague. Specialized Tax Office provides similar activities to the Tax Offices for selected taxpayers. The selected taxpayers are:
    • bank institutions
    • insurance companies
    • legal entities with turnover higher than CZK 2,000,000,000.
  • The Ministry of Labor and Social Affairs (MoLSA) – is responsible for social policy (e.g. people with disabilities, social services, social benefits, family policy), social security (e.g. pensions, sickness insurance), employment (e.g. labor market, employment services, employment of foreigners), labor legislation, occupational safety and health, equal opportunities for women and men, migration and the integration of foreigners, the European Social Fund and other social or labor-related issues.
  • The State Labor Inspection Office – the authority under the Ministry of Labor and Social Affairs competent to supervise the enforcement of labor legislation.

The Czech Labor Code is the main influence on employment law and contracts, supplemented by government acts, statutes, and European Union (EU) directives. Employees’ mandatory minimum rights are strictly protected and cannot be downgraded unilaterally. The State Labor Inspectorate ensures companies comply with regulations – plus health and safety and workplace conditions – and can stage summary inspections of employers’ premises.

Employers must provide a written contract at the start of employment detailing the type and scope of role, location where the work will be undertaken and the start date. Other details not covered in the initial contract must be provided in writing within one month of work commencing. These include remuneration, overtime, working hours and breaks, paid vacations, notice periods, termination, and severance agreements.

Outside of ensuring contracts at least comply with the Labor Code, employers can provide benefits above the mandatory minimums. Any internal policies or work codes regarding employees’ responsibilities must be in writing. Modifying such work codes or workplace policies requires the relevant labor union’s permission.

A contract must be in place before Czech or foreign employees start work. The minimum information which must be on the initial contract includes the type of work, the location/locations where the employment will take place, and he start date of employment. At this point the employee is entitled to all statutory rights. Within one month of starting work, the employer must supply written confirmation of other details including:

  • Detailed job description
  • Working hours and entitlement to breaks
  • Paid vacations
  • Confirmation of payment schedule

Changes to the contract’s terms have to be mutually agreed in writing. Although not legally required, contracts should be bilingual for foreign employees with one in Czech as the State Labor Inspectorate may demand to see them during an inspection.

Income Tax:

Individuals are considered tax residents if their permanent home is in the Czech Republic, or they usually reside there. Individuals who stay in the country for 183 days either continuously or in separate spells in a calendar year are liable for taxes.

The tax and immigration authorities share information on individuals’ moving in and out of the country and there are no tax concessions for expats. Residents must declare worldwide income from full- or part-time employment, rents, investments, and all other remuneration.

Health and Social Insurance: Mandatory participation in the Czech healthcare system applies to all Czech nationals; employees of employers based in the country; employees from other European Union countries; employees working for companies based in other EU countries and the self-employed from other EU nations. Employer / employee social insurance contributions go towards pension, unemployment and sick pay funds, health insurance covers medical care.

Employers contribute the equivalent of 24.8% of employee earnings towards social security and 9% for health insurance. Employees contribute 6.5% to social security and 4.5% to the health fund.

For more information on tax contributions and benefits Download Our Czech Republic Country Guide…

Commercial Laws in
the Czech Republic

Hluboká nad Vltavou in Czech Republic
  • The Financial Administration Tax Office – Tax Offices represent regional and organizational units of the first level in the Financial Administration, working under the Ministry of Finance. Tax Offices provide the following activities:
    • perform the administration of taxes
    • carry out the proceedings about administrative offences
    • transfer collected tax incomes
    • perform supervision over lotteries and other gambling games
    • keep records and registers, which are needed for the performance of activity of the financial administration bodies
    • collect and enforce pecuniary compliance imposed by them
    • perform financial control
    • perform investigations according to the Accounting Act and imposes fines,
    • fulfill a role of Liaison Office for the recovery of financial claims and provide international assistance in the administration of taxes
    • review the economy of Regions, the Capital of Prague and regional councils of regions cohesiveness and performs a supervision over the reviewing of economy of municipalities, voluntary associations of municipalities and the city districts of the Capital of Prague
  • The Financial Administration Specialized Tax Office –Specialized Tax Office represents the Tax Office on the national level, working under the Ministry of Finance. The Specialized Tax Office is a respective Tax Office for the selected taxpayers. The seat of the Specialized Tax Office is Prague. Specialized Tax Office provides similar activities to the Tax Offices for selected taxpayers. The selected taxpayers are:
    • bank institutions
    • insurance companies
    • legal entities with turnover higher than CZK 2,000,000,000.
  • The Ministry of Labor and Social Affairs (MoLSA) – is responsible for social policy (e.g. people with disabilities, social services, social benefits, family policy), social security (e.g. pensions, sickness insurance), employment (e.g. labor market, employment services, employment of foreigners), labor legislation, occupational safety and health, equal opportunities for women and men, migration and the integration of foreigners, the European Social Fund and other social or labor-related issues.
  • The State Labor Inspection Office – the authority under the Ministry of Labor and Social Affairs competent to supervise the enforcement of labor legislation.

The Czech Labor Code is the main influence on employment law and contracts, supplemented by government acts, statutes, and European Union (EU) directives. Employees’ mandatory minimum rights are strictly protected and cannot be downgraded unilaterally. The State Labor Inspectorate ensures companies comply with regulations – plus health and safety and workplace conditions – and can stage summary inspections of employers’ premises.

Employers must provide a written contract at the start of employment detailing the type and scope of role, location where the work will be undertaken and the start date. Other details not covered in the initial contract must be provided in writing within one month of work commencing. These include remuneration, overtime, working hours and breaks, paid vacations, notice periods, termination, and severance agreements.

Outside of ensuring contracts at least comply with the Labor Code, employers can provide benefits above the mandatory minimums. Any internal policies or work codes regarding employees’ responsibilities must be in writing. Modifying such work codes or workplace policies requires the relevant labor union’s permission.

A contract must be in place before Czech or foreign employees start work. The minimum information which must be on the initial contract includes the type of work, the location/locations where the employment will take place, and he start date of employment. At this point the employee is entitled to all statutory rights. Within one month of starting work, the employer must supply written confirmation of other details including:

  • Detailed job description
  • Working hours and entitlement to breaks
  • Paid vacations
  • Confirmation of payment schedule

Changes to the contract’s terms have to be mutually agreed in writing. Although not legally required, contracts should be bilingual for foreign employees with one in Czech as the State Labor Inspectorate may demand to see them during an inspection.

Income Tax:

Individuals are considered tax residents if their permanent home is in the Czech Republic, or they usually reside there. Individuals who stay in the country for 183 days either continuously or in separate spells in a calendar year are liable for taxes.

The tax and immigration authorities share information on individuals’ moving in and out of the country and there are no tax concessions for expats. Residents must declare worldwide income from full- or part-time employment, rents, investments, and all other remuneration.

Health and Social Insurance: Mandatory participation in the Czech healthcare system applies to all Czech nationals; employees of employers based in the country; employees from other European Union countries; employees working for companies based in other EU countries and the self-employed from other EU nations. Employer / employee social insurance contributions go towards pension, unemployment and sick pay funds, health insurance covers medical care.

Employers contribute the equivalent of 24.8% of employee earnings towards social security and 9% for health insurance. Employees contribute 6.5% to social security and 4.5% to the health fund.

For more information on tax contributions and benefits Download Our Czech Republic Country Guide…

FAQ

An Employer of Record (EOR) in the Czech Republic is a service that enables companies to hire employees in the Czech market without establishing a local legal entity. The EOR takes legal responsibility for these employees, handling aspects like compliance with Czech laws, tax contributions, and payroll. This allows the hiring company to maintain operational control over the employees while the EOR manages administrative and regulatory requirements. This arrangement is particularly beneficial for companies looking to quickly enter and operate within the Czech market without navigating the complex local legal requirements themselves.

To hire talent in the Czech Republic using talent acquisition solutions along with an Employer of Record (EOR), businesses can leverage services that handle the complexities of local employment laws, taxation, and compliance. This approach is beneficial for companies not based locally. The EOR manages the administrative aspects, allowing the company to focus on selecting the right talent through recruitment strategies tailored to the local market, including advertising, interviewing, and evaluating candidates to meet company needs effectively.

To manage payroll in the Czech Republic, businesses can choose between handling payroll internally, using remote payroll, or outsourcing to a local payroll processing company. For many foreign companies, the most effective solution is to use an Employer of Record (EOR) like Bradford Jacobs, which takes care of both payroll processing and compliance with local employment laws. This service handles everything from tax filings to employee payments, ensuring compliance with Czech payroll regulations, tax laws, and social security requirements.

To hire employees in the Czech Republic, it is not necessary to establish a local entity if you use an Employer of Record (EOR) service. An EOR can legally employ staff on your behalf, handling all local employment law, payroll, and tax obligations. This allows you to focus on your business operations without navigating the complexities of setting up a subsidiary or branch office in the Czech Republic.

FAQ

An Employer of Record (EOR) in the Czech Republic is a service that enables companies to hire employees in the Czech market without establishing a local legal entity. The EOR takes legal responsibility for these employees, handling aspects like compliance with Czech laws, tax contributions, and payroll. This allows the hiring company to maintain operational control over the employees while the EOR manages administrative and regulatory requirements. This arrangement is particularly beneficial for companies looking to quickly enter and operate within the Czech market without navigating the complex local legal requirements themselves.

To hire talent in the Czech Republic using talent acquisition solutions along with an Employer of Record (EOR), businesses can leverage services that handle the complexities of local employment laws, taxation, and compliance. This approach is beneficial for companies not based locally. The EOR manages the administrative aspects, allowing the company to focus on selecting the right talent through recruitment strategies tailored to the local market, including advertising, interviewing, and evaluating candidates to meet company needs effectively.

To manage payroll in the Czech Republic, businesses can choose between handling payroll internally, using remote payroll, or outsourcing to a local payroll processing company. For many foreign companies, the most effective solution is to use an Employer of Record (EOR) like Bradford Jacobs, which takes care of both payroll processing and compliance with local employment laws. This service handles everything from tax filings to employee payments, ensuring compliance with Czech payroll regulations, tax laws, and social security requirements.

To hire employees in the Czech Republic, it is not necessary to establish a local entity if you use an Employer of Record (EOR) service. An EOR can legally employ staff on your behalf, handling all local employment law, payroll, and tax obligations. This allows you to focus on your business operations without navigating the complexities of setting up a subsidiary or branch office in the Czech Republic.

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