The Czech Republic (officially known as Czechia as of April 2016) has an open economy, with 74% of its GDP based on exports. These come mostly from the engineering and automotive industries.
Compared to its counterparts, the Czech Republic has a somewhat discreet reputation when it comes to innovation however its robust economy provides an excellent framework for businesses of all sizes to thrive.
According to combined research from the World Bank, the OECD, UNESCO and existing studies from Deloitte and PWC, the Czech Republic was declared the 6th best country in the world for startups in 2019 according to a study conducted by a personal finance company, Nimblefins.
As a welfare State, the Czech Republic enjoys universal health care and free university education. It currently ranks 12th in the UN's inequality-adjusted human development and 8th in the Global Peace Index.
Most of the Czech Republic’s exports go to the EU, with 33% going to Germany alone.
Czech Koruna or Crown (CZK)
Payroll and taxes in the Czech Republic
Social security contributions provide funding for pensions, sickness and unemployment benefits, among other allowances.
Mandatory contributions are calculated from the employee’s gross remuneration, including most of their allowances and benefits.
The maximum annual cap for the assessment base for the calculation of contributions into the social security system is 48 times the average monthly wage per year.
In the Czech Republic, employment policy dictates that employers pay 33.8% of an employee’s salary in social security contributions. This includes coverage for health insurance, sickness, unemployment and retirement pension.
The monthly retirement pension consists of two elements: a monthly payment of 1,700 CZK and an earnings-related contribution. The latter is calculated on 1.5% of the personal assessment base per year of coverage.
Social security taxes are compulsory for employees in the Czech Republic.
The contribution rates for the employee are a flat rate of 6.5% for social security and 4.5% for health insurance.
Most secondees are obligated to pay Czech social security and health insurance unless the EU regulation or social security treaty states otherwise.
Minimum wage in the Czech Republic
As of 2022, the minimum wage in the Czech Republic is 16,200 CZK.
Employee Benefits in the Czech Republic
Mandatory benefits for employees in the Czech Republic are those covered under Social Security Insurance and include:
Retirement pension (as detailed above)
Paid time off
Maternity leave and pay
It is worth noting that meal allowances/vouchers are a mandatory benefit in the Czech Republic and is provided only for days worked by the employee. This benefit is also not subject to any tax or social and health contributions for both employers and employees.
Additional employee benefits in the Czech Republic include:
Additional paid leave
Flexible working hours
Public transport allowance
Sports and cultural activities support
Additional insurance, e.g. life and accident insurance, supplementary health insurance etc.
One of the most important supplementary benefits to consider is additional paid leave. In the Czech Republic, it is becoming increasingly common for employers to provide an additional week of paid leave each year. As an employer, you can also opt to provide your employees additional time off in lieu of overtime pay.
Employee protection and anti-discrimination rights
Employees in the Czech Republic are also protected by the country's Anti-Discrimination Act of 2008, which prohibits any form of employment discrimination against categories of employees such as:
Working hours in the Czech Republic
Working hours in the Czech Republic are typically 40 hours per week or eight hours per day within a standard workweek. Any work carried out outside of working hours should be counted as overtime and must not exceed 150 hours per calendar year. The length of a shift must not exceed 12 hours. Both employer and employee can agree to no more than 416 hours of overtime per calendar year if they do not work more than eight hours per week for 26 consecutive weeks.
Overtime pay is typically 125% of the employee’s regular wages. Employers can also provide additional time off instead of pay.
For employees that work on rest days (Saturdays or Sundays), they are entitled to their salary plus a premium of at least 10% of their average earnings.
Source: Pexels/Andrea Piacquadio
Types of leave available in the Czech Republic
All terms and conditions of employment relating to working hours, overtime, rest days, salary, holidays, termination of employment and occupational health and safety are regulated by the Labor Code.
Full-time employees in the Czech Republic are entitled to a minimum of four weeks of paid leave per year. This is refunded by the employer and calculated from average earnings from the previous quarter.
Employees who work in particularly difficult working conditions should be compensated with an additional week of paid leave. This type of work is defined by the Labour Code as:
Certain medical fields or work involving contact with infectious materials
Work involving exposure to radiation
Work involving regular contact with prisoners
Work conducted underground (e.g. building tunnels, extracting minerals)
Work involving scuba diving
Employers are not required to pay employees for the first three days of sick leave. After this period, staff members who are off sick are entitled to pay for up to 14 days.
After this period, employees can receive further sickness benefits from the from Czech Social Security Administration (CSSZ).; this will be paid at 60% of their wage’s taxable income and is valid for up to 380 days from the first day of the employee being sick.
A medical certificate must be submitted in order for an employee to claim sickness benefits and must be submitted online to the CSSZ by the employee's physician. The employee is responsible for notifying their employer.
Maternity and paternity leave
Maternity leave is paid for 28 weeks (or 37 weeks for parents of multiples, e.g. twins, triplets etc.) to female employees. The maternity leave period begins at least six and at most eight weeks prior to the birth of a child and must be taken before the child turns one year old.
Maternity benefits amount to 70% of an employee’s gross earnings, calculated based on the preceding year. To be eligible for this, your employer must have paid sickness insurance for at least 270 days within the last two years.
Once the child has reached 7 weeks of age, the father can take over the leave in place of the mother under the same conditions regarding sickness insurance.
Employees can also get seven days of paternity leave for the first six weeks after the child’s birth. This is paid at 70% of their salary and capped at 8,575 CZK.
Parents who are adopting a child can take 22 weeks of maternity leave, which is extended to 33 weeks in the case of multiple adoptions.
Mothers are still entitled to up to 14 weeks of maternity leave in the event of stillbirth.
Additionally, parental leave is available to parents upon request to care for children up to three years old. The Labor Office pays a parental allowance of 300,000 CZK per child, up to the age of four. This parental leave allowance is not related to the employee's income and is not dependent on the length of parental leave.
This is provided to employees in the event that they need to take care of children younger than 10 years of age or an ill family member.
The first nine days of care leave are paid for by the CSSZ. For employees who are providing care on their own, this number is increased to 16 days. Employees providing care can also request for adjustments to their weekly working hours to accommodate their schedule and unless they are able to provide serious operational reasons for not doing so, employers are obliged to comply with this request.
The Social Security Administration pays carers' benefits for the first nine calendar days of care leave (increased to 16 calendar days for employees who are caring on their own).
Further, if an employee caring for a child under 15 years of age, or another dependent person, requests shorter working hours or some other reasonable adjustment to the weekly working hours, the employer must comply with the request, unless serious operational reasons prevent it from doing so.
Civic duty leave
All employees must be offered unpaid leave to conduct civic duties.
Employers are required to provide leave for military service. This is paid for by the military authority.
Public holidays in the Czech Republic
Czechians observe the following national holidays:
New Year’s Day
St. Cyril and Methodius Day
Jan Hus Day
Freedom and Democracy Day
St. Stephen’s Day
Attracting talent in the Czech Republic
Currently, the job market in the Czech Republic favours job seekers. Unemployment has been below 3% since 2017, reaching 2.01% in 2019 before rising slightly during the COVID-19 pandemic. However, the country has recently experienced labour shortages, making it a competitive landscape for attracting candidates.
Here are some ways in which companies can attract and retain top talent in the Czech Republic:
Businesses looking to compete in the Czech talent market should consider these attitudes and, where possible, try to provide at least partially remote working options for their staff.
Source: Pexels/Antoni Shkraba
Termination of employment in the Czech Republic
Employers and employees who terminate an employment contract must provide one month’s notice of termination, which should begin on the first day of the month following the delivery of the notice.
An exception to this rule is if an employee commits a gross breach of contract or is convicted of a crime. Employees do not have to provide notice in the case of particular health restrictions or if they have outstanding wage payments that are more than 15 days overdue.
Employment contracts one the Czech Republic are typically fixed-term contracts or permanent agreements. Fixed-term contracts cannot extend beyond three years and will automatically be considered permanent employment if extends beyond this period.
Czech employment laws permit probationary periods for three months, extending to up to six months for those in a chief officer position. During the probation period, an employment relationship can be terminated by either party via written or verbal notice.
All terminated employees are entitled to the following in terms of severance pay:
One month’s average earnings if the period of employment is less than one year
Two month’s average earnings if the employment period is between one and two years
Three month’s average earnings if the employment period is more than two years
Employers need to pay severance pay on the next available payday after the termination unless both parties agree otherwise.
Minimum retirement age in the Czech Republic
The minimum retirement age for all employees born after 1971 in the Czech Republic is 65.
What are my options for hiring in the Czech Republic?
Airswift provides a variety of employment solutions and professional advice for international companies looking to hire employees in the Czech Republic. Our services make the hiring process simple, efficient and fully compliant with Czech laws.
Our extensive knowledge and expertise enable us to reduce risk when shouldering the administrative responsibilities of onboarding new employees, giving you more time to focus on business growth.
Our contract hire services can help you fill temporary roles and provide your business with the agility to respond to shifts in needs and market demand.
For long-term hiring needs, Airswift’s professional search service can help you discover talented candidates for permanent employment within your business.
Employer of record
If your business needs to hire remote staff without setting up an entity, working with an Employer of Record in the Czech Republic makes this process simple, with minimal compromise on expenses and time.
Working with an experienced Employer of Record allows you to bypass the complications of setting up a legal entity in-country by appointing a partner to oversee payroll management and manage mandatory benefits. All whilst ensuring that you stay compliant with Czech labor law.
*Although the information provided has been produced from sources believed to be reliable, no warranty, express or implied, is made regarding the accuracy, adequacy, completeness, legality or reliability of any information. For the latest information and specific queries regarding particular cases, please contact our team.
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