The Czech Republic has much to offer as a European country, as far as its beauty, business potential, and much more. Like many European countries, Czech streets are full of tourists, particularly during the summer. While tourism is a foundational industry in the Czech Republic that has enabled the service sector to grow, 60% of Czech employees work within IT, software development, research and development, consultancy, and finance. A company seeking to hire tech workers in central Europe will find the right applicant pool in the Czech Republic.
Before you set up a global team, however, let's review the differences between employees and independent contractors, or self-employed workers. For an in-depth look at Czech employment laws, see our detailed guide.
Employment contract versus independent contractor agreement
“Dependent work," known as závislá práce in the Czech Republic, is work that is performed by an employee who is subordinate to their employer. In exchange for services, the employee receives compensation.
Dependent work can only occur within the framework of an employment relationship. Independent contractors and freelancers, i.e., self-employed workers in the Czech Republic, are a different category of worker, and your company should take care to distinguish them from regular employees. If you do misclassify an employee as a self-employed person, your company may incur legal trouble and tax penalties.
Employment contract 📑
In order to establish an employee relationship, an employer must provide a written contract to their employee. The written contract should include where the work will take place, the day the employee will start work, and the duties entailed in the job. The set weekly working hours that the employee is required to work should also be specified, in addition to the employee's benefits, their wages or their salary, and whether there is to be a probationary period. A probationary period is a set amount of time in which an employer can determine a worker's suitability for a position. It may not be renewed after the terms are mutually agreed upon by the employer and the employee.
It should be assumed that an employment contract is indefinite unless the the contract indicates a fixed term. If this is the case, the term may last a maximum of three years and may be renewed twice at most from the date that the employment relationship started.
The other two types of supplementary employment contracts are an agreement to complete a job and an agreement to perform work.
Agreement to complete a job
Known in the Czech Republic as DPP, agreements to complete a job are for workers who work no longer than 300 hours a year for the same employer. The worker must make social security contributions if their average monthly earnings are more than CZK10,000.
Agreement to perform work
Workers using this agreement, known commonly as DPČ, may work a maximum of 20 hours a week for the same employer. The worker's social security contributions are the same as they would be under a full-time employment agreement.
There are certain standards that must be granted to all employees in the the Czech Republic. Here are a few of those standards.
Working hours and rest periods 😴
The standard weekly working time in the Czech Republic is 40 hours a week, or eight hours per day. Scheduling an employee for more than 12 hours a day is against labor law in the Czech Republic, and any overtime work assigned to an employee must not exceed eight hours in one week, or 150 hours a year.
Employees are entitled to daily and weekly rest periods. Weekly, employees must be given 35 hours of continuous rest. Every work day, a 30-minute period of rest is required for every 6 hours of continuous work. Employees who work twice in a 24-hour period must be granted a continuous rest period of 11 hours between the end of one shift and the beginning of another work shift.
Minimum wage 💰
Currently, the national minimum wage in the Czech Republic is CZK 96.40 per hour, which equates to a monthly minimum wage of CZK 16,200.
Holiday entitlement 🏖
All employees are entitled to paid leave. The minimum holiday entitlement for an employee in the Czech Republic is four weeks every year, and some employees, like government employees, may be entitled to more.
Maternity benefits and paternity benefits 🤰
Every employee who is a parent is entitled to parental leave. Pregnant employees receive 28 weeks' paid maternity leave after giving birth, or 37 weeks in the case of multiple births. Fathers are entitled to 14 days of paid paternity leave.
An employee can receive parental paid leave if they have completed 270 days of sickness insurance participation during the last two years before the parental leave starts. The parental leave pay calculation is 70% of their daily assessment base.
Sick leave 🤕
Employers must provide their employees with compensation for the first 14 days of their sick leave under The Sickness Insurance Act. After 14 days, insurance covers the employee's wages. An employee must provide a medical certificate from a doctor stating that they are ill or injured in order to qualify for this leave.
Self-employed person 👩💻
An employer may not always require full-time employees to complete a job or a task, and in some cases, it is more sensible to hire a self-employed worker. This is especially true if there is an indeterminate amount of work an employer can provide.
Employees under these agreements are responsible for handling their own self-employment tax and social security contributions. Unlike employees, the employer is not required to provide benefits to self-employed individuals, like old age pension, paid leave, or severance pay. Nor are they responsible for the independent contractor's schedule or the tools they use.
Standards for classifying a self-employed person
Certain standards are required for distinguishing self-employed workers from regular employees, or dependent workers.
- A self-employed person is independent. In a standard employment relationship, an employer has a certain amount of control of how their employee works. With self-employment, the worker may choose when and how they work, and are not subordinate to any employer.
- A self-employed person works in their own name. Instead of working on behalf of an employer, a self-employed person works for themselves, using their own name instead of the company's name.
- A self-employed person assumes all business risk. This means that the worker takes financial responsibility for any damages or mistakes made while on the job.
Social security contributions
The social security contributions a self-employed person makes is based on their taxable income. These contributions cover health insurance, occupational disability, unemployment insurance, and old-age pension.
- Health Insurance is 6.75% of the contractor's taxable income
- Pension Insurance is 14% of the contractor's taxable income, and is capped at CZK 1,438,992 annually
- Social insurance is paid on a monthly basis
- Unemployment Insurance is 0.60% of the contractor's taxable income, and is capped at CZK 1,438,992 annually
Finding and hiring contractors in the Czech Republic 🔎
How do you find the right professionals in the Czech Republic? The first step is to post the position on a reputable online job posting board. Profesia.cz is one of the leading job portals in the Czech Republic. Other popular sites in the country are Jobs.cz and Prace.cz.
Role description 📝
An ideal description for a position at your company should include the job's pay, skills desired in a candidate, the duties of the position, and any other important information about your business (e.g., mission statement, size, culture, etc). A company is more likely to receive applications from potential contractors if they have detailed information.
When hiring abroad, sometimes a translator is necessary in countries where English isn't the official language. The official language in the Czech Republic is Czech, but a minority of people can speak Slovak and/or Polish. To translate your job posting and other necessary documents, you can hire a translator from Transperfect or American Language Services.
Many interviews for remote roles are virtual these days, and it will be your most convenient option when you're conducting a job search in the Czech Republic. Just don't forget the time zone difference! The Czech Republic is in Central European Time, which is nine hours ahead of Pacific Time, and six hours ahead of Eastern Standard Time.
How to pay self-employed workers 💸
What are the best payment options for paying an overseas contractor in the Czech Republic? Here are some of your options as a business owner or company administrator.
Bank transfers using SWIFT 🏛
SWIFT stands for The Society for Worldwide Interbank Financial Telecommunications, and many companies use it for standard transfers. Using a network of global financial institutions, transfers can be made securely from different bank accounts, with little risk that the funds will not make it to the recipient's account.
One of the cons of SWIFT is that there are additional bank fees in each transfer that can reduce a payees' overall payment. The reason for this is that SWIFT payments are routed through multiple banks before they reach the contractor’s bank, and a fee is usually charged each time there is a transfer.
The total cost for transferring funds from bank to bank may vary, even if the same banks are used each time to pay a contractor. This can make payroll a headache, as companies and their employees cannot predict how much will be detracted from payments in any given payroll cycle.
Money transfer companies 💳
Money transfer companies are another way for companies to make wire transfers to their contractors. Remitly, Xoom (owned by PayPal), and Wise (formerly Transferwise) are a few of these companies that are also accessible online. Another benefit to these companies is that they they provide lower markups on exchange rates.
Unfortunately, these companies can require that payees use company-issued debit cards to access their payments. These cards can come with withdrawal fees, which detracts money from their overall compensation. Money transfer companies charge percent-based fees, too, and sometimes they even add markup fees for exchange rates. The fees may not be as bad as the ones you might be charged with using SWIFT, but if you can avoid any markup fees at all, it would be prudent for your company to do so, in an effort to cut down on payroll costs.
Traditional money transfer services 🏦
The slightly more convenient option for transferring funds is to transfer funds through companies like MoneyGram and Western Union. These companies are traditional money transfer services that have both online services and physical locations. One of the benefits to using these companies is that they have better markups on currency rates than traditional banks do. The downside is that you won't be able to avoid percent-based fees or markup fees with these services, and additional fees still apply for currency exchanges.
Although digital currency has become increasingly popular across the globe, not everyone is set up to receive payment this way. In the Czech Republic, cryptocurrency is largely unregulated and seen as a commodity, not a monetary unit. This means that it isn't used by any central bank for transfers. The most popular forms of crypto in the Czech Republic are Bitcoin, Ethereum, Ripple, Litecoin; all forms of the commodity are subject to income tax. The income tax is imposed on both individuals and any legal entity, as well as on value added tax, or VAT.
Pilot can help 🤝
Employment contract laws can be complex, and without the proper expertise, your company might overlook important details, like those involving worker classification, which could lead to fines or legal trouble. For many companies, the most prudent option for offsetting the risk of noncompliance is to hire HR experts.
Pilot manages payroll, benefits, and compliance for remote teams. Our HR experts can help your business navigate the ins and outs of international compliance, whether you choose to hire employees or contractors. We can help with everything from securing a work permit for an employee, navigating Czech law within the laws of the European Union, health insurance benefits, or the details of hiring and paying contractors.
Contractors love getting paid through Pilot. We support contractor payments in over 240 countries around the world, with no markup fees and no need for an e-wallet. Instead, your contractors get their payments sent directly to their bank accounts.
Interested in learning more about Pilot? Schedule a demo with one of our experts.
⚖️ Legal Disclaimer: The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter.
Cover photo of Pisek by Leonhard Niederwimmer on Pixabay
Photo of Pravčická Archway near Hřensko by ivabalk on Pixabay
Photo of pedestrians in Wenceslas Square, Prague, by FelixMittermeier on Pixabay
Photo of Hluboká Castle, Hluboká nad Vltavou by Leonhard Niederwimmer on Pixabay
Photo of a street in Karlovy Vary by Ralf Gervink on Pixabay