Expanding into a country or hiring a workforce abroad can lead your business to great profits, but unfamiliar laws and regulations can counteract your company’s goals and plans. Companies targeting the Czech Republic for their Global Expansion face unravelling the red tape surrounding work permit, visa, and immigration laws if they intend to move existing staff into their new territory.
Few companies have these resources or the time. At Bradford Jacobs, we want to eliminate this complicated part. By using our PEO service we can arrange all needed visas and permits including the entire application process without your physical presence. We are experts in hiring staff, applying for work visas in the Czech Republic and ensuring employees meet Czech work visa requirements with the correct documentation. Our team is trained to research the latest information on Czech visas and work permits and therefore, we created a guide to introduce you to the rules and requirements. This guide highlights the complexities of obtaining the necessary documentation.
What types of Work Visas and Permits for Czech Republic are there?
The Czech Republic (Czechia) is a member of the European Union, giving licenses to EU citizens to travel for vacations, visits, as students or for employment without the necessity of a Work Permit or entry visa. There are also certain exemptions for other countries (including Schengen area members) who are not part of the EU and can visit Czechia for up to 90 days in any 180-day period without a visa, to visit family, for pleasure, business meetings or sporting events – but not for employment.
From 2022, these citizens will, however, need to apply for a European Travel Information and Authorization System (ETIAS) Visa. Third Country Nationals not on the visa exempt list must visit an embassy in their home country for information about required documentation. They can apply for:
Schengen Visa for travel up to 90 days within a 180-day period for leisure and business purposes.
Long-term Visa For those wanting to stay longer than 90 days, for the purpose of education.
A Special Work Visa. For those who are non-EU (Third Country Nationals) applying for a work/residence permit. This will be issued to allow employees to enter the Czech Republic to collect their permits.
EU Blue Card – Is a long-term residence permit, for those highly skilled persons with a university education wanting to work, for at least one year, in the position for which the Card was issued; from the EU Blue Card Vacancies Database through the Ministry for Labor and Social Affairs portal. Qualifying earnings are 1.5 times the national average; for 2021 CZK 53,417 (€2,078, US$2,415). Employee Card – allows employees to work in a job specified by the Card and covers the duration of the employer and employee relationship (up to two years – extendable). This card is intended for all third-country employees regardless of their level of education and acts as a long-term residence permit.
Intra-Corporate Transfer (ICT) Card – allows employees working for a company which has branches or is based in the EU to move to another EU country to work. For those requiring an entry visa and once the permit has been sanctioned, a special work visa is automatically issued upon completing the long-term visa form (no extra documentation is required) to allow the employee to enter the Czech Republic to collect the Work Permit/Residence Permit.
For employers: An employment contract is also required to obtain a Work Permit, which doubles as the Residence Permit.
How to obtain a Czech Republic Work Permit
Those wanting to work in the Czech Republic begin the application process in their home country. (However, exceptions can be made for those already in the country). They require a Work Permit, for which a job offer is required, followed by the employment contract. This requires cooperation between the prospective employer and employee regarding documentation. For foreigners requiring an entry visa and once the permit has been sanctioned, a special work visa is automatically issued on completion of the visa form (no extra documentation is required) to allow the employee to enter the Czech Republic to collect the Work Permit/Residence Permit.
Gather all necessary documents for the Visa/Work Permit
Obtain application forms – they will need to be submitted in person
Make an appointment at the local Czech Embassy for an interview
Passports with two blank pages for visas
Also, the employee needs to have been granted a work permit before entering the Czech Republic otherwise the employer may have to pay to return them to the home country. The Work Permit is also the Residence Permit.
Labor Market Test: The vacancy must first have been offered to Czech or EU citizens through the Ministry of Labor and Social Affairs register for job vacancies (advertised for 30 days). Also, an employer needs permission from the Labor office to employ foreign nationals. The Work Permit is non-transferable so if the employee leaves, a new one must be applied for regarding any new employer. There are two types:
EU Blue Card is for highly qualified and skilled, experienced staff valid from one to two years and has a minimum salary of 1.5 times the national average (2021 CZK 53,417, €2,078, US$2,415) – renewable. Vacancies can be found on the EU Blue Card Vacancies Database through the Ministry for Labour and Social Affairs portal.
An Employee Card, which is for all third-country nationals irrespective of qualifications valid for up to two years (renewable). Also, a directive for the EU Intra Company Transfer (ICT) Card was issued in 2017 to help mobilize multinationals’ workforce.
NOTE: Not all non-European Union citizens require visas or work permits/residence permits to stay and work in Czechia. Some countries have their exemptions, and this should be checked.
How to Apply for Work Permit for Czech Republic
Once an employee has a job offer and has concluded his employment contract, the application process can begin for the Work Permit, as long as the employer has permission from the Labor Office to employ foreigners and the vacancy must first have been offered to Czech or EU citizens through the Ministry of Labor and Social Affairs register for job vacancies (advertised for 30 days). The following documents need to be submitted to a Czech Republic embassy which is able to process the Card. All documents should be original or authorized copies with an official translation.
EU Blue Card / Employee Card documentation:
Application form – completed and signed
Passport or similar identification document
Proof of accommodation for the length of residence in Czechia
Employment contract with details of the type of employment, duration, and place of work
Financial stability for the duration of stay
Authorized copies of diplomas and qualifications for occupation as required
Travel medical insurance
A police report with criminal record details and a medical report on the employee’s health may be requested.
Processing time for EU Blue Card is 90 days and for Employee Card 60 days. Work Permits double as Residence Permits. Once sanctioned, a special work visa is automatically issued on completion of the long-term visa form (no documentation is required) to allow the employee to enter the Czech Republic to collect the Work Permit/Residence Permit. A medical insurance document is required with proof of premiums paid before travel. Foreign nationals will also need to register with the Foreigners’ Police Inspectorate.
How much is a Czech Republic Work Permit / Visa?
Short Term Schengen Visa: €80 (valid for 90 days in a 180-day period)
Long-term Visa D Visa: CZK 2,500 (€97, US$113) (valid for periods of longer than 90 days for study, visit, seasonal work or working holiday, leisure, or business purposes).
For Employment: The Employee Card and EU Blue Card – a fee of CZK 5,000 (€194, US$226).
This may be requested in cash or postal order when collecting the card at the Department of Asylum and Migration Policy in the Ministry of the Interior within three days of arriving in Czechia. This includes the application fee and issuance fee. However, service charges (consular fees) may also be involved at the home country Embassy and costs may vary.
Working Permit / Visas for Czech Republic
EU Citizens and citizens living in Nordic countries do not require any Visa, Work Permit or Residence Permit to live, work or travel within the Czech Republic (Czechia). Third-country nationals require a Work Permit, Residence Permit and Visa to enter the country. The process starts with getting a job and securing an employment contract so a Work Permit can be applied for. Also, the employer needs permission to employ third-country nationals and the vacancy must first have been offered to Czech or EU citizens through the Ministry of Labor and Social Affairs register for job vacancies (advertised for 30 days).
There are two types of permits:
EU Blue Card is available to highly qualified or skilled people for one to two years. Qualifying earnings are 1.5 times the national average. In 2021, it is CZK 53,417 (€2,078, US$2,415). This Card is also renewable.
Employee Card is available to all third-country nationals irrespective of their qualifications as long as they are skilled for the relevant job. It is valid for two years and is renewable.
These Work Permits also double as Residence Permits to allow citizens to live and work in Czechia.
It is also important to note a few things regarding your visa/permit applications:
All documents to apply for a work permit should be original or authorized copies with official translation
Once sanctioned, a special visa (unless exempt) is automatically issued on completion of the long-term visa form (no extra documentation is required) to allow the employee to enter the Czech Republic to collect the Work Permit/Residence Permit
A medical insurance document is required with proof of premiums paid before travel
Foreign nationals also need to register with the Foreigners’ Police Inspectorate
There is a daunting mass of bureaucracy surrounding visa and work permit applications. Bradford Jacobs will ensure your employees are onboarded with the correct documents to avoid complications that could prove costly and waste time for your expansion into the Czech Republic.
Business Visa for Czech Republic
To visit the Czech Republic (Czechia) for business purposes – meetings, conferences, contract signing etc. EU citizens do not require a visa. Also, there are many exempt countries whose citizens can travel for business without a visa for 90 days out of a 180-day period. From 2022, these citizens must apply for a European Travel Information and Authorization System (ETIAS) Visa.
All other nationals require a Business Schengen Visa.
Completed and signed application form
Passport with three months validity after leaving the Schengen area
Travel insurance policy
Proof of accommodation while in Czechia
Proof of financial stability during the stay in the Schengen area
Receipt of visa fee
Letter explaining the purpose of the stay
A letter of invitation to attend meetings, events or from companies
For a full list and explanation of the paperwork required, click here. You can apply to the local Czechia Embassy or Consulate in your home country.
Global Expansion is a great way to grow your business, and the Czech Republic offers many appealing opportunities. However, the tax laws can be complex and require time-consuming research. With over 20 years of experience in the front rank of international payroll providers, Bradford Jacobs ensures our clients comply with every level of tax and employment law across the globe. Our knowledge is vital for foreign companies expanding into the Czech Republic. Using our PEO service, we will take care of the complicated legwork so that you can focus on your business goals.
We have made it our goal to keep track of the latest tax policy changes to ensure complete compliance. To keep you informed and updated, we created this guide which includes the basic facts regarding tax regulations in the Czech Republic.
Overview of Taxes in the Czech Republic
* Although a member of the European Union, the Czech Republic is not in the European Monetary Union’ Eurozone’ and has the Koruna, CZK, as its currency.
Individual Income Tax: Up to CZK 141,764 monthly (€5,520, US$6,428) – 15.0%; Above – 23.0%
Social Insurance Taxes:
– Employer: 33.8% (Social Security & Health Insurance)
– Employee: 11% (Social Security & Health Insurance)
Corporate Income Tax (CIT): General rate – 19.0%; Dividends from non-resident companies – 15.0%; Certain investment funds – 5.0%;
Withholding Tax (WHT): On dividends, interest etc. to foreign entities
Value Added Tax (VAT): General rate on goods and services – 21.0%; Foodstuffs, medications, publications etc. – 15.0%; Entry to cultural events and other categories – 10.0%
The Czech Republic Individual Tax – Single & Married
Individuals are considered tax residents if their permanent home is in the Czech Republic or if they usually reside there. Individuals who continuously stay in the country for 183 days or in separate spells in a calendar year are liable for taxes. Non-residents are responsible for the same tax rates, usually withheld by their employer and remitted to the General Financial Directorate. Married couples cannot file joint returns; however, a resident taxpayer can claim CZK 24,840 (€966, US$1,126) against income if their spouse’s annual taxable income does not exceed CZK 68,000 (€2,650, US$3,080).
Taxpayers supporting a disabled spouse whose income is under CZK 68,000 (€2,650, US$3,080) can claim an annual allowance of CZK 24,840 (€966, US$1,126).
There are also allowances for children living with the taxpayer, of CZK 15,204 (€591, US$690) for one child, CZK 19,904 (€774, US$902) for the second and CZK 24,204 (€942, US$1,097) for subsequent children.
Taxable income for residents and non-residents in CZK is as follows (in both Euros (€) and US Dollars (US$)):
There are no local taxes in the Czech Republic applying to individual taxpayers.
Employee Social Insurance Taxes are as follows:
Social Security Fund – 6.5%
Health Insurance Fund – 4.5%
Czech Republic Individual Tax Rules
Czech residents are taxed on their worldwide income, and non-residents only on income earned in the country.
The main categories of personal tax are employment income, rental income, capital income such as dividends, and the sale of securities or property.
The tax year is from January 1 until December 31
Tax filing and payments are due by April 1 of the following year, May 1 if filed electronically, or July 1 if sent by an accountant or solicitor with their power of attorney registered by April 1
Tax rate for residents and non-residents is 15% for monthly taxable income up to CZK 141,764 (€5,520, US$6,428) and 23% above that
Married couples cannot file joint returns; however, a resident taxpayer can claim CZK 24,840 (€966, US$1,126) against income if their spouse’s annual taxable income does not exceed CZK 24,840 (€966, US$1,126)
The general rate is 21%, which is applied to most goods and services. Other categories changed in 2020, with a reduced rate of 15% using certain foodstuffs, medications, books, and newspapers. Hotel accommodation and entry to sporting and cultural events are subject to 10% VAT since July 2020, with this band also applying to such services as catering and hairdressing.
Czech Republic Employers’ Social Security and Statutory Contributions
Social insurance: Employers contribute 24.8% of employee earnings towards the national social security fund and 9% to the health insurance fund.
National Minimum Wage: The Czech Republic has a government-mandated national minimum wage of CZK 15,200 (€592, US$690) per month, applying to employees working the standard 40 hours per week. The national minimum wage brings up the wages for the lowest paid workers, as different minimum wages apply to eight other employment groups as defined by government decree, according to the role’s difficulty, responsibility, and complexity. Minimum monthly salaries range from CZK 16,800 (€654, US$761) for Group 2 (e.g., artisans and on-site workers) to CZK 30,400 (€1,183, US$1,378) for Group 8 employees such as financial and sales directors.
Czech Republic Corporate Taxes
Corporate Income Tax: The rate is 19%. The 19% also applies to capital gains from selling shares. All companies are subject to CIT on their profits, including branches of foreign companies. Resident companies are liable for CIT on their worldwide income, while non-resident companies are taxed on Czech-sourced profits. Resident companies are responsible for 15% CIT on dividends from non-resident companies, with 5% CIT applied to some investment funds. Payments are due on the same date as filing, three months after the end of the tax year. The deadline can be extended by one month for electronic filing or three months if the company is represented by a registered tax advisor or subject to statutory accounting audits.
Withholding Tax (WHT): Czech resident companies withhold tax on dividends, interest and royalties paid to foreign entities at varying rates, depending on the country involved.
Corporate Deductions and Capital Allowances: Depreciation is covered by corporate tax legislation. Assets are classified into six groups and must have a ‘useful life’ of more than one year and an original minimum price of CZK 80,000 (€3,118, US$3,605). Deductible corporate expenses include start-up costs, interest costs, bad debts, charitable contributions, travelling, and meal expenses paid to employees, vehicles, and real estate taxes. Losses in a tax year can be carried forward to offset profits for up to the following five years.
Do not waste time worrying about your move into the Czech Republic. The Czech Republic’s tax regulations demand expert advice for incoming foreign companies. Businesses cannot risk stumbling into mistakes over payroll and taxation, with the chance of fines and sanctions. Contact us today to learn more about how we can help you with payroll and tax issues!
Global expansion into the Czech Republic generally means that you need to set up an in-country entity. However, by partnering with us you create the possibility to bypass this process and utilize our expertise. By using our PEO service we take care of the complicated paperwork. Expanding into a new country is always an adventure, but we believe this adventure should be exciting instead of just frustrating and time-consuming. Therefore, we have been supporting companies in over a hundred countries with their Global Expansion plans.
In this guide, we will share what documents you need and procedures to follow to establish an entity in the Czech Republic, but also where you will need to register your business address and company name. We will also break down the advantages and disadvantages of setting up an entity in Czechia.
How to set up a Czech Republic Subsidiary:
Various formalities and documents must be completed before the subsidiary can obtain a Czech identification number from the Commercial Register. These include:
Presenting the subsidiary’s Memorandum and Articles of Association with an extract from the commercial register of the parent company
Minimum share capital of at least 1 CZK presented on registration. By comparison, a joint stock company requires minimum share capital of CZK 200,000 (€7,850, US$9,580)
Parent company’s formal decision to launch a subsidiary and confirming the number and identity of shareholders, a minimum of one with no upper limit
Registered Czech office address
Named executive director (not necessarily a Czech) and proof of clean criminal record from home country or last residency
Open a business bank account
The subsidiary is established by notarized deed, which can be performed under power of attorney. Shareholders and directors do not need to be in Czech Republic at the time.
The company must be registered with the General Financial Directorate of the Czech Financial Administration for taxation and with the Czech Social Services Administration. Registering for VAT is compulsory if turnover exceeds CZK 1,000,000 (€39,240, US$47,550). Companies must comply with the Czech Act on Accounting, which regulates all businesses, and produce annual accounts, which under certain conditions must be independently audited.
What you need to set up a Czech Subsidiary
A limited liability company is the typical choice for a Czech subsidiary. What is needed? Check the following:
Articles of Incorporation
Registration with the Commercial Register
Names of the director(s)
List of shareholders, whose individual shares must be logged with the Czech Commercial Register, which may issue share certificates
Resolution from the director(s) on the organizational structure of the subsidiary
Company name and proof of registered address
A business bank account
Deposit share capital of at least 1 CZK presented on registration for a subsidiary – but, by comparison, a joint stock company requires minimum share capital of CZK 200,000 (€7,850, US$9,580)
Application for relevant permits at the Trade Licensing Office
Extracts clearing directors of criminal activity or liability for debts
Benefits of setting up a Czech Republic Subsidiary
Subsidiaries in the Czech Republic are typically set up as limited liability companies. These are separate legal entities from foreign parent companies, which are generally free from responsibility for debts or liabilities of their subsidiary beyond the individual contributions of the shareholders.
Also, the foreign parent company’s financial statements and accounts do not need to be lodged with the Czech financial authorities.
Subsidiaries can have a different name from the parent company, pursue the same or different business activities and conclude their own contracts. Subsidiaries are treated as residents for taxation and will be liable for 19% corporation tax on their business profits. The subsidiary must register with the General Financial Directorate (GFD) of the Czech Financial Administration for taxation and the Czech Social Services Administration (CSSA).
Other benefits for a subsidiary:
Easier to obtain regulatory approvals, loans and finance and enter into contracts with other Czech and European Union companies
More impact with clients and suppliers, as subsidiaries imply more permanency than branches
Employees feel there is more stability and job security than from being with a branch
In the wider commercial sense opening a subsidiary makes a statement of a company’s commitment to expanding into foreign markets. Via its subsidiary, the parent company has the advantage of exploring the potential of the Czech market and further afield into the Central and Eastern Europe economic bloc.
However, there is a more straightforward option to the risks and costs of setting up a subsidiary in the Czech Republic by working with Bradford Jacobs. Using a global Professional Employer Organization (PEO) such as Bradford Jacobs means staff can be sourced, placed in their roles, and be up-and-running within days, rather than months, and with all the difficulties of payroll, taxation, and compliance under control thanks to our Employer of Record (EOR) services.
Czech Republic Subsidiary Laws
All companies must be registered in the Commercial Register and with the Trade Licensing Office. Other Acts in play include those on Commercial Companies and Cooperatives, Business Corporations Act, the Civil Code and Corporate Governance Code. General requirements for a limited liability company include:
Registration and Documentation:
Register the unique company name with the Czech Registry Court and Commercial Register to obtain a Tax Identification Number (TIN)
Present the subsidiary’s Memorandum and Articles of Association or Incorporation with an extract from the commercial register of the parent company to the Czech Commercial Register
Provide parent company’s formal decision to launch a subsidiary and confirm the number and identity of shareholders, a minimum of one with no upper limit
Register a Czech office address
Application for relevant permits at the Trade Licensing Office
List of shareholders, whose individual shares must be logged with the Czech Commercial Register
Accounts and Taxation:
The company must be registered with the General Financial Directorate of the Czech Financial Administration for taxation and with the Czech Social Services Administration
Registering for VAT is compulsory if turnover exceeds CZK 1,000,000 (€39,240, US$47,550)
Filing returns for the tax year, which runs from January 1 till December 31. Returns are due by April 1 of the next year, May 1 if filing electronically or July 1 if sent by an accountant or solicitor with their power of attorney registered by April 1
The subsidiary will be liable for corporate taxes at the standard rate of 19% on its worldwide profits
Subsidiary shareholders are liable for income tax on their dividends
Must file annual returns with the tax authorities
Designate an executive /managing director (not necessarily a Czech) and proof of clean criminal record from home country or last residency
Shareholders should hold at least one meeting annually regarding such as financial statements, dividends, losses or electing auditors
Require minimum of one shareholder (with no upper limit) and one managing director
There are many factors that make entering the Czech market an attractive proposition. The Czech Republic, landlocked in the region of central and eastern Europe, ranked 48th in the world with a Gross Domestic Product of 276 billion US dollars. The Czechs are members of the European Union (EU) but not of the Eurozone, using instead its traditional currency of the Koruna. ‘Czechia’ – the official short form adopted by the Czech government in 2016 – ranked 18th in Europe for GDP in 2021 and is a key player in the Central and Eastern European (CEE) economic block. Alongside Hungary, Poland and Slovakia, the Czechs form the ‘V4 Group’ which spearheads integration with other EU member states.
There are speedier and more cost-effective alternatives to launching a subsidiary, with Bradford Jacobs opening the door to a hassle-free route into the Czech Republic. Work alongside our Professional Employer Organisation (PEO) recruitment specialists, then utilises our Employer of Record (EOR) in-country experts to handle every aspect of compliance. Employers can depend on our in-depth knowledge of the Czech economy and how to navigate its challenging legislative issues that revolve around statutes, collective agreements, and European Union directives. Here we have set out some basic summaries of what you need to make the transition into the Czech market, whichever sector you operate in.
Starting a Business in the Czech Republic
Czechia is ranked first among CEE economies for Foreign Direct Investment. The automotive industry accounts for close to 80% of Czech exports, with service industries contributing around 60% of GDP in 2021. Other key sectors are aviation, transport engineering, pharmaceuticals, machinery, and tools. A limited liability subsidiary is a usual choice for foreign companies starting a business in the Czech Republic. The subsidiary operates under the Czech Commercial Code and Trade Licensing Act as a resident Czech company and is a separate legal entity from the foreign parent company. The company is a legal entity once it is entered into the Commercial Register.
Initial requirements for starting a business and before operating payroll, include:
Providing the subsidiary’s Memorandum or Association and an extract from the commercial register of the parent company
Opening a business bank account for any share capital
Parent company’s formal decision to launch a subsidiary and confirmation of the number and identity of directors and shareholders
Registered Czech office address
Named executive director (not necessarily a Czech) and proof of clean criminal record from home country or the last country they resided
The subsidiary is established by a notarised deed, which can be by power of attorney allowing shareholders or directors to be outside the country at the time.
The company must be registered with the General Financial Directorate of the Czech Financial Administration for taxation and with the Czech Social Services Administration. Registering for VAT is compulsory if turnover exceeds CZK 1,000,000 (€39,240, US$47,550).
Expanding Business into the Czech Republic
Opening a business in any overseas territory brings issues. Moving staff across the world means lengthy processes to obtain visas and work permits. When employees are in place, who will handle payroll? How will your company deal with regulations on taxation, entitlements and benefits, termination, and severance? Drawing up your Global Expansion blueprint is not enough. Your business plan will have to answer all these questions. In the Czech Republic, issues surround strictly applied taxation and employment laws, which are subject to government laws, collective bargaining, and trade union agreements. In this complex geographical and economic landscape where will you find distributors, manufacturers, and offices?
There is a simple alternative: by partnering with a Professional Employer Organization (PEO) and Employer of Record (EOR) such as Bradford Jacobs, companies can plot a time-efficient and cost-effective path to locating and employing staff in the Czech Republic.
Czech Republic Business Facts
Capital – Prague
Population – 10.7 million
Regions – there are 13 regions plus Prague. These include: Karlovy Vary, Liberec, Moravian-Silesian, Pardubice, Ústí, Vysočina, Zlín, South Bohemian, Hradec Králové, Olomouc, Pilsen, Central Bohemia and Southern Moravia
Official language – Czech
Religion – mainly a mixture of unaffiliated, Roman Catholicism and other Christian groups
Economy and world ranking – GDP US$276 billion – ranked 48th in the world
Leading sectors by GDP – service sector 56.2%; industry 32%; agriculture 1.9%. Key sectors include aviation, transport engineering, pharmaceuticals, machinery, and tools
Main exports include – commodities: iron and steel, oil and fuel, wood, aluminium. Also, vehicles and vehicle parts, computers, broadcasting apparatus, office equipment
Main imports include – commodities: oil and fuels, iron and steel, aluminium, and copper. Also, broadcasting equipment, vehicle spares, office equipment, computers, and cars
Main trading partners – Germany, China, Slovakia, Poland, France, UK, Italy
Government – a republic with a parliamentary democracy
Currency – Czech Koruna (Crown)
Advantages and Challenges of the Czech Market
Advantages of expanding into the Czech market include:
Prospects: Part of an economically developing region in central and eastern Europe with prospects of long-term growth and outward-looking business attitudes
Logistics: Ideally positioned for cross-border trading throughout the European Union (EU) and with fellow members of the central and eastern European economies
Workforce: Well-educated and with the second-lowest unemployment rate in the EU at 2.8% as of July 2021, compared with the EU average of 7.6%
Work-Life Balance: Rich in heritage with many UNESCO World Heritage Sites, options for full social life and countryside with lakes, forests, and mountains to explore
Challenges of expanding into the Czech economy include:
Economics: Heavily dependent on exports to other EU members, which were over 80% in 2020
Starting up: In 2020 the World Bank rated the Czechs only 134th out of 189 nations for ease of starting a business
Red Tape: Other World Bank rankings are 157th for construction permits, 103rd for enforcing contracts and 53rd for paying taxes, which can involve over 400 hours of business time
Politics: Element of Euroscepticism in government … although chances of a ‘Czexit’ seem remote
Limited Company / Subsidiary or Branch in the Czech Republic?
International companies moving into the Czech Republic typically choose between opening a limited liability subsidiary or a branch office. There are differences in registration and how they operate. Key points are:
Main characteristics of a subsidiary:
Subsidiaries are independent legal entities from the foreign parent company
Generally, the parent company has no responsibility for the debts or liabilities of the subsidiary
The subsidiary can follow independent business activities from the parent company, under a different name
Subsidiaries are registered under the Czech Commercial Code
Share capital of CZK 1, corresponding to the minimum value of one share
The parent company’s directors provide a declaration of intention to open a subsidiary
All documents for the subsidiary must be notarised, including the parent company’s Articles or Memorandum of Association
Must register for taxation and social security payments with the relevant authorities
The subsidiary is a Czech tax resident and must file annual returns and is liable for corporation tax on its worldwide income
Main characteristics of a branch:
A branch is not a separate legal entity from the parent company, but an extension
The branch must follow the same business activities as the parent company and have the same name
The parent company is responsible for any debts or liabilities of the branch
Business activities must be entered with the Commercial Register
The parent company must ensure its branch complies with the Trade Licensing Act, Civil Code, Commercial Code on Legal Entities, and the Act on Private International Law
Must provide the parent company’s Articles of Incorporation
Branches are liable to Czech taxes only on the profits of their local business
Expert guidance is vital when weighing the options between a subsidiary and a branch in the Czech Republic. There is an alternative route – one that is quicker, stress free, cost-effective and will have you up and running in days rather than weeks or even months. Bradford Jacobs will locate the top talent for your company. Once you select your new employee our Employer of Record (EOR) specialists will handle every aspect of employment law, including payroll and tax.
Legal Structure for Czech Market Entry
Companies operating in the Czech market come under the Civil Code, Commercial Code, Trade Licensing Act and other Acts and Statutes covering all aspects of employment, taxation, and social security. Under the Commercial Code, the main types of legal entities that operate are:
General Commercial Partnership (Unlimited Partnership)
Limited Liability Company
Joint Stock Company
European Joint Stock Company
European Economic Interest Grouping
European Cooperative Society
Legal structure for a limited liability company:
The legal structure for a subsidiary allows it to operate independently from the parent company, under its own name and able to follow its own commercial and business activities. The subsidiary is a distinct and separate legal entity from the foreign parent company and is one of the most common company types in the Czech Republic. Registered capital comprises contributions from shareholders who are liable up to the limit of their contributions.
Legal structure for a branch:
The branch is an extension of the foreign parent company and is not a separate legal entity. The parent company is responsible for any debts or liabilities of the branch, which has the same name as the parent company but must include the Czech language equivalent of ‘organizational unit’ in its title. The branch’s legal framework is regulated by the Civil Code, the International Private Law Act, the Trade Licensing Act, and the Business Corporations Act. The branch is taxed only on its Czech-sourced income.
Opening a Business Bank Account in the Czech Republic
Selecting your bank depends on the services offered and costs/fees charged. Foreign banks dominate the banking vista retaining 85% of the assets. Available banks feature HSBC, Deutsche Bank, and Citi Bank as well as local banks such as CSOB and VUB Banka. Foreigners starting a company will want to open a professional bank account. The company’s responsible manager deposits any share capital, which cannot be used until after company registration is complete – when the account is then activated to operate the business. The party making the initial deposit needs to appear in person at the bank, alternatively a company representative with power of attorney. All banks will have their own requirements. Documents should be notarized by legal authority and certified as a true copy:
Paperwork issued when the company is incorporated
Memorandum or Articles of Association
Details of directors and shareholders
Proof of registered office
Proof of the company’s good standing
Documents are also required from any responsible manager, signatories, officers of the company or owner/shareholders. Any copies should be certified:
Valid passport as photo ID
Utility receipt or bank statement
Some companies open an account with their home bank before transferring this to one of their branches in the Czech Republic, although there can be operational differences depending on the country.
A successful business largely depends on its employees. By creating working contracts that include the right terms and benefits there will be no misconception and the perfect work-life balance can be created. At Bradford Jacobs, this is our aim, and we support companies in over a hundred countries by creating compliant and balanced labour contracts. Our team keeps track of the Czech laws and regulations daily to be duly aware of updates that can be implemented in working contracts. By using our PEO and EOR service we can provide compliant labour contracts for employees in the Czech Republic, including local benefits. To support your plans, we made this guide including the basics of employment contracts in Czechia. After reading this guide you will know everything about the conditions, laws and benefits to include in a Czech employment contract.
How do you hire Czech Republic Employees?
Foreign companies planning to hire employees in the Czech Republic must operate within a strict framework of legislation that gives significant protection to the workforce. Companies must primarily comply with the Labor Code, the State Labor Inspectorate, the Collective Bargaining Act, and the Employment Act. Additionally, there is further specific legislation covering various employment areas.
Czech employees and foreign workers are covered by the regulations.
These considerations come into play during one of the first stages of hiring and onboarding – drawing up a contract with your new employee. Once Bradford Jacobs’ Professional Employer Organization (PEO) recruitment networks have located the best talent for your company, we step in to advise your company on this crucial element of recruitment.
General requirements from the Labor Code apply to all contracts, which include:
A written contract must be in place before employment starts, detailing the start date, the type and location of work, immediately giving the employee all statutory rights
The employer must give written confirmation of other details, such as hours, vacations, and termination within one month of the employee starting work
Fixed-term contracts cannot exceed three years or be repeated more than twice, to exceed a total of nine years, or the contract becomes open-ended
Contracted probation periods cannot exceed three months for non-managerial posts or six months for managers
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
Outsourcing the recruitment and hiring process through Bradford Jacobs’ Professional Employer Organization (PEO) network will give you the security that our in-depth knowledge can deal with all these potential contractual issues. Guarantee a trouble-free move into your new territory by trusting our Employer of Record (EOR) services to handle every aspect of recruitment and contracts.
Types of Employment Contracts in Czech Republic
Employers must provide a written contract at the start of employment detailing the type and scope of the role, the 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 labour union’s permission.
Czech law recognizes two forms of full employment contracts, indefinite, open-ended contracts, and fixed terms. However, there are other forms that are practised, including:
Indefinite, Open-ended Employment Contracts: Where an end date has not been contractually agreed. They can be terminated by agreement. The employee can terminate for any reason; the employer can terminate only for reasons set out in the Labor Code.
Fixed-term Employment Contracts: A fixed-term contract cannot exceed three years and can be renewed only twice for a maximum of nine years covering all three terms. If there is a gap of more than three years between fixed-term contracts between the same employer and employee, the sequence is broken. There can be an exception to the ‘three contracts’ rule where an employee’s fixed-term contract is specifically for summer seasonal work.
Executive Services Agreement: Contractually, executives form an Executive Services Agreement with their employer, with different obligations and liabilities to a regular employee.
Probation Periods within Employment Contracts: Both open-ended and fixed-term contracts can include the terms of a probationary or trial period. The maximum is six months for managerial staff and three months for others. Probation periods cannot be extended even if they were originally agreed to be less than three or six months.
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.
Some aspects are implied in the employment relationship, such as entitlement to extra payments for overtime and night work and notice periods. 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 or locations where the employment will take place
The 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
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.
Collective Bargaining Agreements (CBAs)
Collective Bargaining Agreements are organized between employer organizations and the relevant trade unions in industrial sectors, known as ‘higher level,’ CBAs, and also at the individual company level. Figures from the Czech Statistics Office suggest that around 40%-plus are covered by CBAs, but a similar number percentage are not, with the remainder undetermined.
What Employment Laws exist in Czech Republic?
Employer-employee relationships in the Czech Republic are mainly governed by the Labor Code and the Civil Code. Czech employment laws are also in line with EU directives on working conditions. The State Labor Inspectorate has the power to inspect premises to ensure regulations are in force. Other involved authorities include the Office for Personal Data Protection, the Foreign Police Department, and the Customs Administration.
In addition to the Labour Code, there are individual Acts – on topics such as Employment, Work Inspection, Sickness Insurance, Personal Data Protection, Anti-Discrimination, Specific Health Services and State Holidays – and Decrees.
Common employment laws:
Working Hours & Overtime: Normal working hours in the Czech Republic are set working hours of 40 per week, which are usually distributed over a 5-day working week. The length of a shift, inclusive of overtime, cannot exceed 12 hours.
Flexible working hours and shift work is also managed under this law and is protected in cases of overtime and regulation. Overtime also cannot exceed 8 hours in a week, and 150 hours in a calendar year. Employees are either entitled to a premium of 25% of their average earnings, or time off for the hours worked.
Rest Days & Breaks: Employees in the Czech Republic are entitled to a break of 30 minutes for a meal and rest after 6 hours of continuous work. These breaks are not included in the working hours, and at least one part of it has to be more than 15 minutes. An employee is entitled to at least 11 hours between shifts/workdays, and at least 35 hours in a week.
Health and Safety: In Czechia, it is the employer’s responsibility to ensure the health and safety of the workplace. Employee representation on health and safety issues is also required – either through the workplace’s trade union organization or elected employee representatives.
Annual Leave: Employees are entitled to a minimum of 4 weeks of paid annual leave per year. Public sector employees are entitled to 5 weeks annual leave, whilst academics benefit from 8 weeks of paid leave. Public holidays are not included in leave entitlement.
Sick Leave: In case of injury and illness, the employer is obliged to compensate the employee with sickness benefits (60% of their pay) between the 1st-14th day of their work incapacity. From the 15th day onwards, the Social Security Administration pays benefits. The employee must provide a medical certificate from a physician, proving illness.
Maternity Leave: Pregnant employees are entitled to 28 weeks of maternity (or 37 in cases of multiple births). Benefits are compensated by the Social Security Administration, at 70% of their pay.
Paternity Leave & Parental Leave: There is no law for paternity leave in the Czech Republic, but fathers are entitled to parental leave, along with the mother, until the child reaches the age of three. Parental Leave can begin from the end of maternity leave for the mother and the date of birth for the father. This can be granted to employees on request.
Probation: According to the Labor Code, the maximum time of probation period in the Czech Republic is 3 months.
Termination and Notice: The notice period for employment termination is two months. This can be extended according to the parties’ mutual agreement. This period commences on the first day of the calendar month following the month the notice was delivered to the last day of the relevant calendar month. Dismissal without notice is only done in cases of serious misconduct.
Notices from the employer must be given in writing, signed by someone authorized by the employer, and delivered personally to the employee.
Severance Pay: Severance pay is only granted in cases of redundancy and health reasons concerning an industrial injury, occupational disease, or the threat of an occupational disease. The amount of severance pay that is due in cases of termination for health reasons is 12 times the employee’s average monthly earnings.
Happy and satisfied employees make your business thrive and lead to even better profits. However, the specific benefits for employees in the Czech Republic might not all be familiar to you yet. By using our PEO and EOR service we can provide compliant labour contracts for employees in Czechia including local benefits. When expanding your company’s presence in a new country, you need to ensure compliance both in your employment contracts and benefit guarantees. These involve social security contributions, sick leave, health insurance, and unemployment, to name a few. In the Czech Republic, benefits are guaranteed by national legislation as well as collective agreements with trade unions or workers’ councils. Our guide will explain what benefits and employee compensation are guaranteed, and what can be modified, for any employer who wishes to expand their business into the Czech Republic.
What are Employee Benefits in Czech Republic?
Benefits and entitlements for employees in the Czech Republic are largely based on the Labor Code, the Collective Bargaining Act, and the Employment Act. In addition, other individual Acts include legislation on Work Inspection, Sickness Insurance, Personal Data Protection, Collective Bargaining, Anti-Discrimination, Specific Health Services and State Holidays. The protection for Czech employees also falls within European Union directives and this strict framework of regulations is monitored by the State Labor Inspectorate, which has the right to stage summary inspections of workplaces and to examine documentation. Foreign companies hiring employees in the Czech Republic must operate within this arrangement of legislation and collective agreements that provide safeguards and guarantees for the workforce.
Minimum guaranteed benefits, either from legislation or collective agreements, include:
Termination, notice periods and severance
Maternity allowances and benefits
The Czech Labor Code stipulates that all employees receive written confirmation of all their entitlements within one month of starting employment. The responsibilities of foreign companies reach further than simply complying with tax, social security, and payroll regulations. Failure to comply with specific regulations applying to benefits and entitlements runs the risk of fines and sanctions. It is vital that employers have a firm grasp of what is guaranteed for their employees, as this will affect the employer-employee relationship.
This is where Bradford Jacobs steps in to point you in the right direction, drawing on over 20 years of experience as a Professional Employer Organisation (PEO) and Employer of Record (EOR).
What Compensation Laws exist in Czech Republic?
The employer-employee relationship in the Czech Republic is based on a framework of employment acts, decrees and statutes, collective agreements, and European Union (EU) directives. This combination governs employee compensation benefits:
The Labor Code covers compensation and employee entitlements in such areas as wages, overtime, working hours, breaks and termination. It also lays down requirements for occupational health and safety in the workplace.
The Sickness Insurance Act makes it mandatory for all full- and part-time Czech employees to contribute to the system which provides compensation for illness and maternity and paternity allowances via District Social Security Administrations.
The Collective Bargaining Act lays down the rights and obligations of employers, employer associations, employees, trade unions and workers’ bodies operating within a collective agreement.
The Personal Data Protection Act implements the EU’s General Data Protection Regulation (GDPR) and regulates personal data processing.
The Anti-Discrimination Act prohibits denying employees equal rights in the workplace, or discrimination based on age, with the risk of fines up to CZK one million (€40,000, US$46,375). Similar fines for discrimination can also be applied under the Work Inspection Act.
The requirement for employers to respect employees’ rights stretches further than simply complying with tax and payroll procedures. Regulations and laws also apply to maternity allowances and benefits, holidays, sick pay and severance payments, minimum wages and working hours, while collective or trade union agreements also bring in other considerations. Drawing up contracts is tricky enough, but in the Czech Republic, it is vital for employers to be up to speed with responsibilities to their staff regarding overcompensation, entitlements, and minimum requirements. Do not take the risk of being fined for ignoring these responsibilities. Compensation, entitlements, and benefits include:
National Minimum Wage: The Czech Republic (or Czechia) has a government-mandated national minimum wage of CZK 15,200 (€592, US$690) per month, applying to employees working the standard 40 hours per week. The new hourly minimum rate is CZK 90.50 (€3.52, US$4.10).
The national minimum wage brings up the wages for the lowest paid workers (in Group 1), as different minimum wages apply to eight different employment groups according to government decree based on the difficulty, responsibility, and complexity of the role.
Working Hours and Breaks: 40 hours comprise the maximum in a standard five-day working week, with the working day normally between 08:00 and 18:00. Employees are entitled to a 30-minute break after six hours of continuous work and a minimum of 11 hours rest between consecutive working days, with 35 hours of continuous rest each week.
Sickness Benefit: Payments are made by the employer for the first 14 days of illness, but employees must provide an e-sick note or another certificate. They receive 60% of their average earnings. From day 15, under the Sickness Insurance Act, the benefit is paid by the state’s Social Security Administration (SSA) for up to 380 days.
Overtime: Any hours over the daily rate contractually agreed between parties are considered overtime. However, no more than eight per week and 150 hours in a calendar year are allowed without the employee’s agreement.
Overtime is paid at 125% of the average earnings or, if agreed, time off in lieu. Employees working their rest days or Saturday / Sunday should be paid a minimum of 110% of their average wage. Payment for public holidays is double time or a day off in lieu. Collective agreements may provide higher minimums.
Paid Vacations: Full-time employees working a 40-hour week receive 160 hours of annual leave (four weeks). Those in the public sector are eligible for five weeks and employees in academia for eight weeks. Since January 2021 a pro-rata formula calculates leave for those who have worked less than a year. Employees are also entitled to 13 paid public holidays.
Maternity Leave and Benefit: Female employees are paid for 28 weeks (37 for multiple births) with six to eight weeks pre-natal. The minimum permitted term is 14 weeks; post-natal leave must last for a minimum of six weeks.
Maternity Leave benefits are 70% of the average gross salary of the preceding year if the employee has paid social security insurance for 270 days before leave begins, capped at CZK 43,470 (€1,700, US$1,961) monthly.
Paternity and Parental Leave: The benefit is 70% of the employee’s daily earnings, capped at CZK 8,575 (€334; US$387) for the seven-day leave, which can be taken in one period at any time during the first six weeks post-natal. Leave can be granted to both parents until the child is three, starting after completing maternity leave. However, benefits can be taken until the child is four, provided they are not at daycare/school, to a limit of CZK 300,000 (€11,785; US$14,280). Although both can share the leave, only one parent at any one time can receive a benefit which is paid from tax revenue.
Redundancy, Termination, Severance: The Labor Code allows dismissal only for three reasons – during a trial period, without notice for just cause or with notice. The last two reasons may require union involvement.
Generally, employees cannot be dismissed during sick leave, military or public office duties, pregnancy, maternity, or paternity leave.
An Individual’s severance pay depends on the length of service – one month’s average earnings for less than one year’s service; two months for one to two years’ service; three months’ average earnings for more than two years of employment. Termination due to occupational illness or injury entitles the individual to 12 times the average monthly salary.
Social Security in Czech Republic
The Czech Social Security Administration (CSSA) manages contributions from employers and employees through central and district administrations, with the Ministry of Health supervising medical benefits. The contributions finance separate funds for sickness, unemployment, and pensions.
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, including 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% to health insurance. Employees contribute 6.5% to social security and 4.5% to the health fund.
Statutory Employer Costs in Czech Republic
Employer Payroll Taxes for Social Security:
Social Security Fund – 24.8%
Health Insurance Fund – 9.0%
National Minimum Wage: The Czech Republic (or Czechia) has a government-mandated national minimum wage of CZK 15,200 (€592, US$690) per month, applying to employees working the standard 40 hours per week. This is an increase of CZK 600 (€23, US$27) over the previous rate. The new hourly minimum rate is CZK 90.50 (€3.52, US$4.10).
The national minimum wage brings up the wages for the lowest paid workers, as different minimum wages apply to eight different employment groups as defined by government decree based on the role’s difficulty, responsibility, and complexity. The absolute national minimum of CZK 15,200 applies to Group 1. Minimum monthly wages range from CZK 16,800 (€654, US$761) for Group 2 (e.g.: craftsmen and on-site workers) to CZK 30,400 (€1,183, US$1,378) for Group 8 employees such as financial and sales directors
Corporate Income Tax: The rate is 19%. All companies are subject to CIT on their profits, including branches of foreign companies. Resident companies are liable for CIT on their worldwide income, while non-resident companies are taxed on Czech-sourced profits. The 19% also applies to capital gains from selling shares. Resident companies are liable for 15% CIT on dividends from non-resident companies, with 5% CIT applied to some investment funds. Payments are due on the same date as filing, which is three months after the end of the tax year. The deadline can be extended by one month for electronic filing, or by three months if the company is represented by a registered tax advisor or subject to statutory accounting audits.
What Benefits are guaranteed in Czech Republic?
Some employee benefits are guaranteed by legislation, others are set by individual employer-employee contracts or by Collective Bargaining Agreements (CBAs). Statutory requirements include the following:
National Minimum Wage: The minimum is CZK 15,200 (€598, US$725), but higher minimum rates apply to different employment groups, of which there are eight set by government decree.
Maternity Leave: This is normally 28 weeks (37 for multiple births) with six to eight weeks pre-natal. Leave cannot be less than 14 weeks with a minimum unbroken six weeks taken post-natal. Maternity benefit is 70% of the mother’s wage to a limit of CZK 43,470 (€1,700, US$1,961) monthly.
Paid Vacations: The mandatory minimum is four weeks; employees in public administration are entitled to five weeks and teachers and academic staff to eight weeks. Since January 2021 a pro-rata formula calculates leave for those who have worked less than one year.
Severance Pay: One month’s salary for one year of employment, two months for two years and three months for those who have worked more than two years if termination is due to reorganization of the company. Working Hours: The normal working week is 40 hours in a standard five-day week, with mandatory 30-minute breaks after six hours of continuous work, a minimum of 11 hours of rest between consecutive working days and a 35-hour continuous break each week.
What Restrictions exist for Benefits and Compensation in the Czech Republic?
Maternity Benefits: The mother must be in legitimate employment and have contributed to sickness insurance for a minimum of 270 days in the previous two years. European Union (EU) nationals receive the same benefits if they comply with the conditions. Non-EU citizens, in addition, must have been paying taxes and making contributions for a minimum of one year.
Unemployment Benefits: The unemployed must have worked at least 12 months in the previous two years. Benefits are for a maximum of 11 months and calculated on a sliding scale according to age, net income, and contributions.
Health Insurance in Czech Republic
All Czech companies, companies based there, and all employees must participate in the mandatory health insurance scheme, which is part of the wider social security system. Employers contribute 9% and employees 4.5% to the relevant fund. Other entitlements include a maternity allowance of 70% of the mother’s salary and paid vacation leave.
Legally protected compensation and benefits are an essential factor in ensuring contracts comply with the Czech Republic’s various labour regulations, which can be set by statutes or collective and trade union agreements. Bradford Jacobs ensures compliance with these crucial requirements to avoid delays in becoming operational.
Hiring the right talent in the Czech Republic to expand your company can result in a thriving business with numerous opportunities. However, the recruitment process can be complicated when you have no physical presence in the country yet. Our PEO and EOR services can be a solution for your company.
Recruitment can be a tricky business, especially when a company is venturing into unfamiliar countries and exploring new markets. This is the perfect occasion to bring in a specialist to oversee the process for you.
Bradford Jacobs’ benchmark platforms as a Professional Employer Organization (PEO) have worldwide reach and include a total understanding of the challenging complexities of the Czech economy and employment market. You can trust Bradford Jacobs to put the brightest talent in place for your company.
Our comprehensive knowledge of all Czech employment sectors and understanding of the culture and customs guarantee an untroubled transition. Look through our guide to familiarize yourself with everything an employer needs to know about the recruitment process in Czechia.
Recruiting Top Talent
Finding and recruiting top talent in any overseas territory creates many potential issues for companies building their international profile and looking for Global Expansion.
The Czech Republic is a leading target for international expansion, as a major player in the Central and Eastern European (CEE) economic bloc with a rapidly developing entrepreneurial market.
CEE countries display a pro-business culture, growing consumerism and rising living standards with cost-effective, highly skilled, and productive workers.
The Czech Republic is a prime mover in the ‘V4 Group’ alongside Hungary, Poland, and Slovakia, which led to integration with fellow members of the European Union (EU). The automotive industry accounts for close to 80% of Czech exports, while service industries account for around 60%.
GDP is projected to grow to 276 billion US dollars in 2021, placing the Czechs 48th largest in the world. Other key sectors of the Czech economy are aviation, transport engineering, pharmaceuticals, machinery, and tools.
This potential underlines why Bradford Jacobs’ global experience in recruiting the best candidates for your company is indispensable for taking the smartest route into the Czech Republic – ideally placed for expansion into the EU, CEE and further afield.
Bradford Jacobs’ benchmark platforms as a Professional Employer Organization (PEO) have worldwide reach and include a total understanding of the challenging complexities of the Czech economy and employment market. You can trust Bradford Jacobs to put the brightest talent in place for your company.
The Recruitment Process in Czech Republic
Czech organizations often prefer to recruit staff through postings on their own websites, by head-hunting candidates with the best references and a profile that matches their requirements, and through media ads. Specialist recruiters for certain sectors and sites such as LinkedIn also play a role.
Czech is a difficult language, so recruiters among major Czech companies often look for those fluent in English – the language of business – and German, their nearest trading partners.
Recruitment is the first stage of making your company operational and competitive in the Czech Republic. It is vital to know where to locate the finest talent to be a perfect fit for your company’s expansion plans.
Foreign companies planning to open a subsidiary before locating and onboarding staff face a series of procedures to comply with Czech law and any European Union (EU) directives.
Choosing a unique company name and registering with the Czech Registry Court and the Commercial Register to obtain a Tax Identification Number (TIN)
Proof of business address and ownership or lease agreement for the office
Details of business activities and relevant authorized trade certificates
Notarized Memorandum and Articles of Association
Proof of capital deposited in the bank, if required
Signatures of shareholders, directors, and managers with an extract from the Criminal Registry proving clean record for each
The next steps apply to companies running their own payroll after recruiting staff. They must obtain employer social security and tax numbers, register to pay taxes, and register employees with social security authorities. The necessary formalities include:
Applying to the Ministry of the Interior for an Employee Card, if applicable, for a foreign national planning long-term residence in the Czech Republic
Remitting employees’ withheld deductions to the General Financial Directorate and the Social Services Administration
Filing returns for the tax year, which runs from January 1 to December 31. Returns are due by April 1 of the next year, May 1 if filed electronically or July 1 if sent by an accountant or solicitor who has registered their power of attorney by April.
Additional payroll procedures include:
Calculating employees’ monthly salary and sending their pay slips
Submitting employees’ and employers’ wage tax returns
Creating and submitting the company’s annual accounts and year-end statements
Creating payment schedules for salaries and insurance contributions
Ensuring accurate personal income tax returns are filed for the company and the employees when required
There is a smart alternative. Bradford Jacobs’ global Professional Employer Organization (PEO) networks locate and recruit your staff – our Employer of Record (EOR) specialists handle every aspect of registering your new employees and dealing with the tax and social insurance authorities. You know it makes sense.
Legal Checks you can make on Czech Republic Employees
Restrictions on legal checks made as part of pre-employment screening also apply to existing employees and derive from the Labour Code, data protection and personal rights. Generally, employers can require information only related to the role.
Regulations are not clear cut but generally follow these guidelines:
Discrimination: Employers are prohibited from asking questions regarding sexual orientation, racial or ethnic origin, political or religious beliefs or affiliations. These restrictions also apply to third-party agencies asked to carry out pre-hire screening.
Criminal record checks: Permitted, depending on the relevance to the role.
Credit checks: Allowed if relevant to the proposed role, for example, handling cash or a position with financial responsibility.
Health checks: Permitted if relevant to the role. Female applicants can be asked about pregnancy if the role would endanger their health.
Qualifications and References: Potential employers are allowed to ask for verification.
Documentation: This is a required check to confirm that a non-Czech applicant has the legal right to work in the Czech Republic, regarding work permits and visas.
Basic Facts on Hiring in Czech Republic
Companies employing staff in the Czech Republic must comply with various requirements for hiring and onboarding:
The Labour Code requires a written contract to be agreed upon before employment begins and must include the start date and the type and location of work
Employers must give extra written details on working hours, vacations, severance etc. and terms can only be changed in writing by mutual agreement
Applying to the Ministry of the Interior for an Employee Card/EU Blue Card for any foreign national planning long-term residence
Obtaining employees’ Tax Identification Number (TIN)
Remitting employees’ withheld deductions to the General Financial Directorate and the Social Services Administration
Filing returns for the tax year (Jan 1 – Dec 31). Returns and outstanding tax are due by April 1 of the following year, May 1 for electronic filing or July 1 if sent by an accountant or solicitor with power of attorney, provided they registered before April 1
After hiring and onboarding, the employer must comply with various minimum entitlements for employees, as stipulated by the Labor Code and other laws, including the following:
The Minimum Wage is CZK 15,200 (€592, US$690) per month, applying to employees working the standard 40 hours per week. Different minimums apply to eight employment groups as determined by the Czech government decree.
Mandatory participation in the healthcare system applies to all Czech employers and their staff; employees from other European Union countries; employees working in the Republic for companies based in other EU countries and the self-employed. The employer contributes 9% and the employee 4.5% of the employee’s income to the health social insurance fund.
The working hours’ maximum is 40 in a five-day week, usually between 08:00 and 18:00. There must be a 30-minute break after six hours’ continuous work; 11 hours rest between consecutive working days and 35 hours continuous rest each week. Hours exceeding the norm are overtime, which must not exceed eight weekly or 150 annually.
Maternity leave normally totals 28 weeks (or 37 for multiple births) with six to eight pre-natal. The minimum permitted leave is 14 weeks; post-natal leave must not be interrupted or ended before six weeks. Maternity benefit is 70% of the mother’s wage to a limit of CZK 43,470 (€1,700, US$1,961) monthly. Paternity leave is set at 70% of the employee’s daily earnings, capped at CZK 8,575 (€334; US$387) for the seven-day leave which can be taken post-natal at any time during the first six weeks but as one period.
Termination and Severance: Where a company terminates employment due to reorganization, severance pay is one month’s salary for the first year’s employment, two months for the second year and three months for those who have worked more than two years.
Discrimination: Under the Equal Treatment and Prohibition of Discrimination Act, employees can expect protection against discrimination regarding gender or sexual orientation, racial or ethnic origin, religious or political beliefs, physical or mental disability or age.
There is a simple answer to avoiding compliance with these time-consuming procedures. Engage with Bradford Jacobs as your Employer of Record (EOR). We will convert your expansion blueprint into an action plan for the Czech Republic, as follows:
Bradford Jacobs step in as EOR through our legal Czech entity to guarantee your employees comply with employment contracts, payroll, HR, tax and, where required, visas and work permits
You have daily control of your employee, while Bradford Jacobs manage all work-related registration formalities
Your employee completes time sheets and approved expense claims and we invoice you, the client. Once paid, we remit all contributions to the Czech tax and social security authorities and transfer the balance into the employee’s nominated account
Within a few days, your company has an international presence in the Czech Republic, in a prime position for expansion without having risked the initial expense, commitment or hassle of setting up your own subsidiary or branch office. Make contact today.
To succeed in business in Czechia, it is vital for both employers and employees to have a strong understanding of the business culture. As a global PEO (Professional Employment Organization) it is our goal to be familiar and updated with the business culture in the country we work with and in. By sharing our knowledge about the Czech work culture, we want to support your Global Expansion plans. Therefore, we will address all the aspects of the work culture in the Czech Republic to start your expansion well-informed.
The Czech Republic is a strongly developing entrepreneurial economy in the Central and Eastern European (CEE) bloc and an increasingly attractive territory for companies launching international expansion. Planning your international growth alongside a Professional Employer Organization (PEO) such as Bradford Jacobs means you can count on customized solutions for locating staff in the Czech Republic within a week. CEE nations display a pro-business work culture, increasing consumerism and rising living standards with cost-effective, highly skilled, and productive workers. The Czech Republic is a prime mover as a member of the ‘V4 Group’, alongside Hungary, Poland, and Slovakia, which leads integration with fellow members of the European Union (EU). The Czech Republic, however, stayed out of the Eurozone and retains the koruna (CZK) as its currency.
The Czech government is making a sustained effort to attract and encourage investment and even went as far as to make the nation’s name less wordy by introducing ‘Czechia’ as the official short form in 2016. Various initiatives include tax relief schemes, EU subsidies, research and development tax allowances, job creation subsidies and more. Further incentives are available for businesses targeting specific industries. But foreign companies will find the work culture is bound to present new challenges and will need to adjust. So, it is time to get down to business! Here are a few tips on taking the right steps and avoiding the pitfalls:
Language: English is commonly used in business settings but play safe and check first if an interpreter is advisable.
Contact: Initial face-to-face meetings help to build trust in the relationship after you have made an appointment.
Punctuality: Being on time is valued as showing respect and being keen for the business relationship to grow.
Presentations: Meeting presentations are expected to be detailed and accurate with facts, figures, and charts to back up your points.
Greetings: Start with a firm handshake and make eye contact and stand until invited to sit – you may have a designated place around the conference table.
Business Meetings: Introductory small talk will be a way of getting to know you and the first meeting may not move much past this as you may only be dealing with a middle manager at this stage. The corporate world tends to be hierarchical. Moving on in the relationship, subsequent ‘chat’ is likely to be brief with the meeting sticking close to the agenda in a generally formal atmosphere.
Younger companies are more likely to encourage a more relaxed attitude around the table. Avoid arranging meetings for Friday afternoons or during the holiday month of August.
Business Meals: Talking business around the lunch and dinner table is part of building the relationship.
Negotiations: These are generally courteous but building sufficient trust to reach a decision can take time. Beware – hesitancy by your opposite number can be a polite way of saying ‘No’.
Business Cards: Taking the trouble to have a Czech translation on the card will be noticed and appreciated.
Dress Code: Tends to be formal in the corporate world, although smart casual is becoming more common in the tech sector and in younger companies.
Sealing the Deal: Having reached a verbal agreement, make sure the ‘small print’ matches what was agreed around the table.
Czech Republic Minimum Wage
The Czech Republic (or Czechia) has a government-mandated national minimum wage of CZK 15,200 (€592, US$690) per month, applying to employees working the standard 40 hours per week. This was set in January 2021, an increase of CZK 600 (€23, US$27) over the previous rate. The new hourly minimum rate is CZK 90.50 (€3.52, US$4.10). The national minimum wage brings up the wages for the lowest paid workers, as different minimum wages apply to eight different employment groups as defined by government decree, according to the difficulty, responsibility, and complexity of the role. The absolute national minimum of CZK 15,200 applies to Group 1.
Minimum monthly wages range from CZK 16,800 (€654, US$761) for Group 2 (e.g., craftsmen and on-site workers) to CZK 30,400 (€1,183, US$1,378) for Group 8 employees such as financial and sales directors.
Probation Periods in Czech Republic
These are covered by the Labor Code (section 31) and are for three months maximum for most employees; however, for managerial staff, a six-month trial period is allowed. An employment contract approved by both parties can provide for a shorter trial period from day one of starting the job but cannot be increased at a later date once agreed upon.
Working Hours in Czech Republic
The working hours are a maximum of 40 hours over a standard five-day working week and no more than a 12-hour daily shift (including overtime); normal hours are between 08:00 and 18:00. Some businesses may need flexibility regarding hours, and this is covered by the Labor Code. A 30-minute break applies after six hours of continuous work, with a minimum 11-hour rest between consecutive working days and 35 hours of continuous rest each week.
Any hours over what is considered the norm are deemed overtime, which cannot total more than eight per week or 150 annually without the employee’s agreement.
Collective Bargaining Agreements (CBAs) may apply more beneficial minimums.
Overtime in Czech Republic
Any hours over the daily rate contractually agreed between parties are considered overtime. However, no more than eight per week and 150 hours in a calendar year are allowed without the employee’s agreement.
Overtime is paid at 125% of the average earnings or, if agreed, time off in lieu.
Employees working their rest days or Saturday / Sunday should be paid a minimum of 110% of their average wage. Payment for public holidays is double time or a day off in lieu. Collective Bargaining Agreements (CBAs) may apply more beneficial minimums.
Notice Periods in Czech Republic
Notice periods should be the same for both parties, a minimum of two months unless contractually agreed otherwise. When served, notice begins at the start of the following month for the two months or agreed period. There is no statutory right to pay in lieu of notice, but this can be contractually agreed upon. Employees do not need to give any reason for leaving whereas employers must justify termination as covered by the Labor Code. Workers cannot be served notice under certain circumstances e.g., pregnancy, illness, or military exercises.
Redundancy, Termination, Severance in the Czech Republic
The Labour Code stipulates dismissal can be only for three reasons:
During a trial period
Without notice for just cause
Termination with notice is allowed on such grounds as company reorganization, inability to work due to long-term illness or unsatisfactory performance. Immediate dismissal without notice is permitted for criminal or gross misconduct. Generally, employees cannot be dismissed during sick leave, military, or public office duties, during pregnancy, maternity, or paternity leave. The relevant trade union must agree to the dismissal if the employee is a union representative.
If companies make multiple redundancies for operational reasons the relevant labour authority must be notified. In this case, severance pay is one month’s salary for the first year, two months for the second year and three months for those who have worked more than two years.
Severance pay for individuals is based on length of service:
Less than one year – one month’s average earnings
One to two years – two months’ average earnings
More than two years’ service – three months’ average earnings
Termination due to occupational illness or injury entitles the individual to 12 times the average monthly salary.
Pension Plans in the Czech Republic
The state or public pension plan is administered by the Czech Social Services Administration (CSSA). Employers contribute 21.5% of payroll and employees 6.5% of earnings; self-employed persons pay all the required 28%.
There are three tiers to the pension system:
Voluntary schemes are run by companies incorporated under the Commercial Code and strictly licensed by the Ministry of Labor and Social Affairs and the Securities Commission.
Public Holidays in the Czech Republic
Workers receive 13 statutory paid public holidays each year, which are not included in their annual vacation entitlement. These include:
New Year’s Day – January 1
Good Friday – March / April
Easter Monday – March / April
Labor Day – May 1
Liberation Day – May 8
Day of Apostles Cyril and Methodius – July 5
Anniversary Martyrdom of Jan Hus – July 6
Day Czech Statehood – September 28
Independence Day – October 28
Freedom and Democracy Day – November 17
Christmas Eve – December 24
Christmas Day Holiday – December 25-26
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