Employee Benefits

Benefits

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:

• Minimum wages
• Paid vacations
• Working hours
• Termination, notice periods and severance
• Sick leave
• 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 Organization (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.