Employment Laws in the Czech Republic: A Guide for US Companies Hiring Abroad

With its strong tech industry and vibrant culture, the Czech Republic is an ideal place for US companies hiring remote workers abroad. We examine the key employment laws you should keep in mind when hiring there.

Historic buildings at night in Karlovy Vary

Caitlin MacDougall

PEO vs EOR office building against a purplish sky

The Czech Republic is a prime location to grow a remote team. The country is full of historic castles, winter spas and resorts, stunning street art, and busy cafes. And like many European countries, their streets are bustling with tourists in the summertime who are eager to experience the natural and architectural beauty.Tourism is a foundational industry in the Czech Republic that has enabled the service sector to grow, 60% of Czech employees work within research and development, information and communication technologies, software development, consultancy, and finance.There is much to learn about the legal regulations and labor code in the Czech Republic. In this article, we will provide an overview of some of the basics. Let's start with employment contracts.

Employment contracts 📑

Unless a person is appointed to position (for example, if an employee is appointed to public office or government position), an employee relationship is established with a written contract. The contract is considered indefinite unless the employer establishes a fixed term in the agreement. If the contract is for a fixed term, the term may last a maximum of three years and may be renewed only twice at most from the date that the employment relationship started.The written employment contract should include details such as the day the employee starts work, the employee's duties, and the location where the employee will work. Other details the employment contract may include are the employee's set weekly working hours that they are required to work, the employee's benefits, and their wages or salary. The details of an employee's compensation may be outlined in a salary statement, a wage clause, collective agreement, or internal regulations.

Probationary period 🗓

There may be a probationary period that the employer and employee mutually agree upon, during which period the employee's suitability for the job will be determined by the employer. For employees in managerial positions, this probationary period may not last longer than six consecutive months. For other employees, the maximum probationary period is three months. In both cases, the period of probation may not be extended once an employer and employee agree upon the end date.A copy of the employee's contract must be provided to the employee in an employee agreement. If the employer fails to provide a written contract with a copy for the employee, then the employee can challenge the terms of the contract and render it invalid. The employee is able to do this as long as the contract is challenged before their first day of work. If the employee doesn't challenge the terms of their employment, the employer can still be fined by the Labour Inspection Authority when they terminate the contract.

Other types of employment agreements

There are other types of employment agreements outside of an employment contract that are sensible in the case of part-time or temporary work.One is an agreement to complete a job, and another is an agreement to perform work. These types of agreements are especially useful when it is unclear how long a project will take or how much work an employer can provide a worker.These agreements may also reduce company costs, as workers under these agreements are responsible for handling their own personal income tax and social security contributions. Furthermore, the employer is not required to provide benefits to workers under these agreements.In agreements to complete a job and agreements to perform work, the employer can end the employment relationship at any time without a notice period or severance pay.

Agreement to complete a job

Known in the Czech Republic as DPP, agreements to complete a job may be offered to workers who will work no longer than 300 hours a year for the same employer. If the worker's average monthly earnings are more than CZK10,000, they must make social security contributions.

Agreement to perform work

Known commonly as DPČ, the maximum working hours a worker may perform work for the same employer under this agreement is 20 hours a week. The worker's social security contributions are the same as they would be under a full-time employment agreement.

Agency workers 👩‍💻

In some cases, an employment agency will hire agency workers to work for another employer. This requires a specific written agreement in the employment contract, and the the employment agency must ensure in the written agreement that the working conditions are equal to that of the user's permanent employees.

Labor code in the Czech Republic

Labor code in the Czech Republic can be complex. Here are a few aspects of the code to consider when hiring employees.

Collective agreements 📃

Research shows that at least 45% of employees in the Czech Republic are known to be covered by collective bargaining agreements. Collective agreements are negotiations between employers and trade unions that represent employees in certain industries. These agreements can mandate certain labor standards, such as working hours, benefits, and pension plans.Collective agreements can occur at an industry level, known as “higher level collective agreements” (KSVS). They can also occur locally, or at a company level.

Minimum wage 💰

Currently, the Czech Republic's monthly national minimum wage is 16,200 CZK, or $730.50. This is a 6.58% increase from 2021.

Weekly working hours and rest periods 😴

The standard weekly working time in the Czech Republic is 40 hours a week, or eight hours per day. There are some exceptions to this regulation. An employee's maximum working hours are reduced in the following circumstances:

an employee who works underground with raw materials, such as coal, may not work more than 37.5 hours per week

an employee who works three-shifts in a row, or any continuous pattern of work may not work more than 37.5 hours per week

an employee who works in a two-shift pattern of work may not work more than 38.75 hours;

an employee who is younger than 18 years of age may not work more than 40 hours per week, and their work day must not exceed 8 hours.

Daily rest periods🍴

Employees must be given 30 minutes of rest every 6 hours of continuous work. If a worker is under 18 years old, they must be granted a rest period every 4.5 hours of continuous work. Breaks are may not be granted at the beginning nor at the end of a shift.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; minors must be given 12 hours of rest between shifts. A rest period between shifts may be shortened to eight hours in some cases, as long as the next rest period in an employee's schedule is extended by the amount of time the previous rest period was reduced.

Weekly rest periods 🛌

A Czech employer must allow at least 35 hours of continuous rest once a week for their employees. For minors, employers must grant them 48 hours of uninterrupted rest per week. The weekly rest period should fall on the same day for all employees as much as possible.

Overtime work ⏰

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.An employee must receive 25% of the their average hourly wages in addition to their normal wages for overtime work performed. In lieu of overtime pay, the employer can provide compensatory time off to the employee for overtime hours, with the employee's consent.

Paid leave 🏖

Employees are entitled to certain paid leave benefits in the Czech Republic. Below are some of those benefits.

Holiday entitlement

All employees are entitled to leave, even if they have worked for an employer for less than a calendar year. The minimum holiday entitlement for an employee in the Czech Republic is four weeks annually, although there are some employees that may be entitled to more time off: public employees, for instance, may receive five weeks' holiday, and academic employees are allowed eight weeks' holiday leave.An employee must use all of their holiday entitlement, preferably by the end of the calendar year in an uninterrupted period of time. Some holidays may be carried forward into the following year with an employee's written request.

Public holidays in the Czech Republic 🎊

Here are 13 public holidays in the Czech Republic within a calendar year, during which employees receive time off:

New Year's Day (Restoration Day of the Independent Czech State), Jan 1

Good Friday (movable)

Easter Monday (moveable)

Labor Day, May 1

Liberation Day, May 8

Day of Slavonic Apostles Cyril and Methodius, July 5

Anniversary of the Martyrdom of Jan Hus, July 6

Day of Czech Statehood, September 28

Day of Founding the Independent Czechoslovak State, October 28

Day of the Struggle for Freedom and Democracy, November 17

Christmas Eve, December 24

Christmas, December 25-26

Parental leave 🤰

Parents in the Czech Republic are entitled to paid maternity leave and paternity 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.The parental leave pay calculation is 70% of their daily assessment base, and an employee can only receive these benefits if they have completed 270 days of sickness insurance participation during the last two years before their parental leave starts.An employer must excuse all employee absences related to caring for child younger than ten years, or caring for sick family members. Employees are entitled to nine days of care leave, or 16 days if they are the sole caregiver for a child or sick family member.Shorter working hours are another option for employees who are caring for young children or sick family members. Unless there are serious operational reasons that prohibit them from complying with the request, the employer must grant their employee shorter working hours.

Sick leave 🤕

The Sickness Insurance Act mandates that employers provide compensation for the first 14 days of an employee's sick leave, after which sickness insurance covers the employee's wages. To qualify for this leave, an employee must provide a medical certificate from a doctor stating that they are ill or injured.A sick allowance is granted to employees who are sick or temporarily disabled for more than 14 days. The sick allowance is a percentage of the employee's daily assessment base, or the average earnings that they received over the last 12 months. The maximum period an employee can receive sick pay is 380 days.Here is a guide to calculate the sick allowance:

the employee receives 60% of their yearly average earnings for the first 30 days of temporary illness, injury, or ordered quarantine

the employee receives 66% of their reduced yearly average earnings from the 31st to the 60th day of temporary illness, injury, or ordered quarantine

the employee receives 72% of the reduced yearly average earnings from the 61st day of temporary illness, injury, or ordered quarantine

Employee dismissal and period of notice

The employment relationship can be terminated by a notice of termination, mutual agreement, or immediate termination. Immediate termination occurs in the case of a breach of work conduct. Other situations where employment relationships may be terminated is after a probationary period, the end of a short-term contract, or in the case of the employee's death.A Termination of Employment Contract is a written agreement that both an employer and an employee are responsible for writing and signing if either of them wishes to terminate a contract. In these contracts, the employer and employee must agree to the employee's last day of work.The statutory notice period for a contract termination is two months, and it must be the same for both the employer and the employee. If the employee is under an agreement to complete a job or an agreement to perform work, the statutory notice period is 15 days.

Compliance and labor laws ⚖️

Staying compliant with national and local employment laws is vital to maintaining an international business. Labor laws will vary according to country, even within the EU. The labor code in the Czech Republic will not necessarily match that of Germany or Hungary, for instance.Without the proper expertise, your company might overlook critical details in contract laws, like those involving worker classification, statutory benefits, or work permits. An oversight like this may result in legal trouble and fines for your business.To ensure that they are following employment law in other countries, many businesses will hire HR experts who specialize in international compliance.

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.

Pilot can help 🤝

Our HR experts at Pilot can help your business navigate all the ins and outs of international compliance. We manage payroll, benefits, and compliance for remote teams, enabling companies to hire and pay employees in over 160 countries. Pilot also supports payments in over 240 countries around the world, and we don't charge markup fees. We also don't require an e-wallet. Instead, your team gets their payments transferred directly into their bank accounts.

Going global isn't daunting when you partner with Pilot. 🤝

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