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CZECH REPUBLIC
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Czech Republic Payroll & EOR : Employment Contracts
The Czech Republic allows people with temporary or permanent visas to work there. Those who successfully apply for a visa can get work permits in the Czech Republic.
When the necessary paperwork for processing a work visa is presented to the consulate, foreigners can receive work permits for the Czech Republic. The worker must, however, apply for a long-term resident visa if they intend to stay for an extended period of time.
The worker might need paperwork particular to the position or activity they will be performing while abroad.
- Short-term/Schengen Visa : valid for up to 90 days. Issued for tourism, business, study, internships, seasonal employment.
- Long-term Visa : Valid for more than 90 days. Issued for studies, internship, or volunteering, working holiday, seasonal employment, training or entrepreneurship
- Long-term Residency Permit: Issued for employment ( form of an Employee Card, a Blue Card, or an Intra-Corporate Transfer Card ).
Probation Periods
The employer may include a probationary period of up to three months in the employment contract. The nature of the employment determines how long the probationary period will last. Although it can be cut short, it can never be made to last longer than three months.
Notice Periods
Two months’ notice is the customary amount. When notice has been given, this notice period starts on the first day of the next month.
Minimum Wage
The hourly minimum salary is CZK 90.50, or CZK 15,200 per month.
Working Hours
The typical workweek in the Czech Republic is 40 hours.
Overtime
Overtime payments for workers must equal at least 125% of their regular wage. Workers are not permitted to work more than eight hours past the regular workday each week, nor for more than 26 consecutive weeks. There is a 150-hour annual cap on the number of overtime hours that can be worked.
The employee’s regular hourly compensation is 125% of the overtime pay. In lieu of paying overtime wages, employers may provide the employee more time off.
The employee is entitled to time off in addition to pay if the overtime is performed on a holiday. When weekend overtime is necessary, the worker should be compensated at a rate equal to 110% of their regular pay.
Non Compete
The Labor Law states that non-compete clauses in employment contracts are only permitted for a maximum of two years following the end of the work relationship. The non-compete agreement’s breadth must be reasonable, proportionate to the employer’s legitimate interests, and it must not unreasonably limit the employee’s capacity to look for other work.
Severance
An employee is entitled to the following severance compensation if they are fired for “organizational reasons.”
- If the employer-employee connection was short-lived—less than a year—one month’s salary.
- When an employment connection between an employer and employee lasts for at least a year but less than two years, two months’ compensation is due.
- If the employment connection between the employer and the employee lasted for at least two years, three months’ remuneration.
Termination
Agreement, notification, immediate termination or termination during probationary period may be used to terminate an employment contract.
The employee must give two months’ notice if they decide to end the contract.
The contract may also be terminated by the employer. The prerequisites for doing so must be stated, though.
Collective Bargaining
The Collective Bargaining Act governs collective bargaining in the Czech Republic.
Enforcement
The Czech Labor Inspectorate and the courts in the Czech Republic are largely in charge of enforcing labor laws and resolving disputes.
PAID TIME OFF
Annual Vacation
Employers are required to provide their staff with a minimum of four weeks of vacation time annually in the Czech Republic.
Sick
Employees are entitled to 14 days of sick leave. Employers are not required to pay workers during the first three days of a sick absence in the Czech Republic. After the third day, employers are required to pay 60% of the usual rate (up to 21 days). Following this, employee compensation is provided by the state (and up to 380 days of absence).
Maternity
Employees who are pregnant are entitled to 28 weeks of maternity leave, or 37 weeks in the event of multiple deliveries.
Six to eight weeks before the anticipated due date, leave can start. The Social Security Administration pays the employee maternity benefits during this time in an amount equivalent to 70% of the employee’s determined earnings.
Other benefits include:
- Parental Leave: One of the parents is also eligible to parental leave up until the kid turns three.
- Care Leave: If a sick family member is caring for a kid under the age of 10, an employee is allowed to take up to nine days of care leave.
Paternity
Males have a right to seven days of paid paternity leave that is equal to 70% of their regular pay
Family
- Parental Leave: One of the parents is also eligible to parental leave up until the kid turns three.
- Care Leave: If a sick family member is caring for a kid under the age of 10, an employee is allowed to take up to nine days of care leave.
National Holidays
The Czech Republic has 12 official paid holidays.
Other Paid Time Off
N/A
STATUTORY EMPLOYEE BENEFITS
Unemployment
Pensions, unemployment benefits, and sickness benefits are three independent accounts that are supported by social security contributions (together with other benefits).
Employers: 1.2% of the covered payroll each month. There is no minimum income requirement when determining donations. The maximum yearly income that may be utilized to determine contributions is 48 times the average monthly pay in the country.
Depending on the insured’s age, the first two months will be paid at a rate of 65% of their average net monthly earnings from the previous quarter, the next two at 50%, and the remaining months up to 11 months at a rate of 45%. If receiving retraining, 60% of the insured’s typical net monthly wages will be compensated. If the covered individual leaves their job on their own initiative and without a good reason, 45% of their average net monthly earnings from the previous three months is provided for the duration of the support term.
Workers Compensation
A work-related illness or accident that causes a loss in income must be evaluated. Getting to and from work-related accidents are not covered. Includes a disability of the first degree (loss of working capacity of 35% to 49%), second degree (loss of working capacity at 50% to 69%), or third degree (loss of working capacity of at least 70%). Funds sourced via Social Security contributions.
Social Security
Pensions, unemployment benefits, and sickness benefits are three independent accounts that are supported by social security contributions (together with other benefits).
Each month, both the employer and the employee are required to submit social security contributions. The mandatory payments are based on the person’s gross compensation, which includes the majority of their perks and allowances. Social Security and health insurance system contributions are often required of income that is subject to income tax. The employer pays a social security payment rate of 24.8% and a health insurance contribution rate of 9%. The employee’s social security and health insurance contribution rates are 6.5 and 4.5 percent, respectively. The employer provides the money (for both employee and employer parts of contributions). There is an option for a cap on the social security premium solely. The maximum yearly income that may be utilized to determine contributions is 48 times the average monthly pay in the country.
Retirement
Social Security contributions fund three separate accounts: pensions, unemployment benefits, and illness benefits (together with other benefits).
Each month, employees contribute 6.5% of their gross income to the public pension system. For pension contributions, the employer is obligated to contribute 21.5% of the employee’s gross compensation.
An employee must have been covered for at least 35 years in order to be eligible for the state pension (if employed after 2018).
Health
Pensions, unemployment benefits, and sickness benefits are three independent accounts that are supported by social security contributions (together with other benefits).
The state’s health insurance funds compel employers to contribute 9% of each employee’s salary and employees to contribute 4.5% of their income. The pay foundation for health insurance purposes has no upper limit. The Czech Republic has a universal healthcare system even though it has mostly been privatized. Everyone must pay a mandatory health insurance tax on their earnings.
Expatriates must purchase health insurance in order to access free medical care, but they may also be compelled to pay a modest copay for any treatments they may need.
PRIVATE EMPLOYEE BENEFITS
Workers Compensation
Private workers compensation is available.
Retirement
Private pension schemes are available.
Health
Private healthcare is available.
Insurance
Private life insurance is available.
PERSONAL INCOME TAX
Tax Year
A tax year runs from 1 January to 31 December.
Tax Tables
Residents of the Czech Republic must typically pay Czech income tax on their international income. Tax non-residents typically only pay taxes on income that is deemed to have a Czech source.
- Gross income up to CZK 1,935,552 – 15%.
- Gross income exceeding threshold – 23%.
Taxation Method
The Czech Republic will resume progressive taxes as of 2021.
Double Taxation
Czech Republic has multiple DTA’s in place.
Residence Requirements
An individual is regarded as a tax resident in the Czech Republic if they satisfy one of the following criteria:
- They have their center of vital interests in the Czech Republic, which indicates that their social and economic relationships are mostly based there;
- They have a permanent home there;
- They spend at least 183 days there in a calendar year.
Payroll Calendars
Payroll is usually done monthly.
Rebates & Tax Credits
Credit for general personal taxes: CZK 30,840 (CZK 27,840 for 2021).
If the spouse resides with the taxpayer and does not earn more than CZK 68,000, the dependent spouse tax benefit is CZK 24,840.
Child tax credit amounts: CZK 15,204 for the first dependent kid, CZK 22,320 for the second, and CZK 27,840 for any further dependent children (under certain conditions). The taxpayer will get a special tax bonus equivalent to the difference between the kid allowances and one’s tax burden if the overall tax is less than the applicable child credit. The maximum tax incentive up to 2020 was CZK 60,300 annually. This restriction was eliminated as of 2021.
Individual taxpayers may be eligible for the following yearly tax credits in 2022:
Reduction for enrolling a child in a preschool: Real, substantiated costs up to a CZK 16,200 yearly cap (CZK 15,200 for 2021).
Tax credits for people with disabilities: 2,520, 5,040, or 16,140 CZK (depending on the severity of disability).
Tax credit for students: CZK 4,020 (for regular students up to 26 years old and university-level doctoral students up to 28 years old).
Health Insurance
Pensions, unemployment benefits, and sickness benefits are three independent accounts that are supported by social security contributions (together with other benefits).
The state’s health insurance funds compel employers to contribute 9% of each employee’s salary and employees to contribute 4.5% of their income. The pay foundation for health insurance purposes has no upper limit. The Czech Republic has a universal healthcare system even though it has mostly been privatized. Everyone must pay a mandatory health insurance tax on their earnings.
Expatriates must purchase health insurance in order to access free medical care, but they may also be compelled to pay a modest copay for any treatments they may need.
Unemployment
Pensions, unemployment benefits, and sickness benefits are three independent accounts that are supported by social security contributions (together with other benefits).
Employers: 1.2% of the covered payroll each month. There is no minimum income requirement when determining donations. The maximum yearly income that may be utilized to determine contributions is 48 times the average monthly pay in the country.
Depending on the insured’s age, the first two months will be paid at a rate of 65% of their average net monthly earnings from the previous quarter, the next two at 50%, and the remaining months up to 11 months at a rate of 45%. If receiving retraining, 60% of the insured’s typical net monthly wages will be compensated. If the covered individual leaves their job on their own initiative and without a good reason, 45% of their average net monthly earnings from the previous three months is provided for the duration of the support term.
Social Security
Pensions, unemployment benefits, and sickness benefits are three independent accounts that are supported by social security contributions (together with other benefits).
Each month, both the employer and the employee are required to submit social security contributions. The mandatory payments are based on the person’s gross compensation, which includes the majority of their perks and allowances. Social Security and health insurance system contributions are often required of income that is subject to income tax. The employer pays a social security payment rate of 24.8% and a health insurance contribution rate of 9%. The employee’s social security and health insurance contribution rates are 6.5 and 4.5 percent, respectively. The employer provides the money (for both employee and employer parts of contributions). There is an option for a cap on the social security premium solely. The maximum yearly income that may be utilized to determine contributions is 48 times the average monthly pay in the country.
PAYROLL ELEMENTS
Income
Residents of the Czech Republic must typically pay Czech income tax on their international income. Tax non-residents typically only pay taxes on income that is deemed to have a Czech source.
Bonuses
Bonuses/13th salary is not mandatory.
Allowances
Parental Allowance: Regardless of income, the Labor Office gives a parental stipend of CZK 300,000 per child up to the age of four.
Benefits in Kind
Allowance or meal vouchers: If an employee works more than five hours a day, their employer is required to give them an allowance or lunch ticket. The amount of the lunch allowance or voucher is established by law and is updated yearly.
Public transportation: If an employee uses public transportation to get to work, their employer is required to contribute to their costs. The contribution amount is fixed by law and is changed every year.
Investment Income
For a few specific categories of non-Czech investment income (such dividends and interest on foreign bonds), a special tax base with a rate of 15% has been implemented.
Persons have the option to incorporate foreign capital gains in this distinct tax base, which is subject to a flat 15% tax rate. Tax exemptions or things that are tax deductible, however, cannot be used to lower this tax base. The person can choose to include this income in the separate tax base, which is subject to a flat 15% tax rate but cannot be reduced by tax allowances or deductible items, or leave it in the general tax base, which is subject to progressive rates of 15% and 23% but can be reduced by tax allowances and deductible items.
Retirement Funding
Social Security contributions fund three separate accounts: pensions, unemployment benefits, and illness benefits (together with other benefits).
Each month, employees contribute 6.5% of their gross income to the public pension system. For pension contributions, the employer is obligated to contribute 21.5% of the employee’s gross compensation.
An employee must have been covered for at least 35 years in order to be eligible for the state pension (if employed after 2018).
Health Insurance
Pensions, unemployment benefits, and sickness benefits are three independent accounts that are supported by social security contributions (together with other benefits).
The state’s health insurance funds compel employers to contribute 9% of each employee’s salary and employees to contribute 4.5% of their income. The pay foundation for health insurance purposes has no upper limit. The Czech Republic has a universal healthcare system even though it has mostly been privatized. Everyone must pay a mandatory health insurance tax on their earnings.
Expatriates must purchase health insurance in order to access free medical care, but they may also be compelled to pay a modest copay for any treatments they may need.
Risk Insurance
In the Czech Republic, employers are obligated to offer their staff workers’ compensation insurance.
Taxable Income
Residents of the Czech Republic must typically pay Czech income tax on their international income. Tax non-residents typically only pay taxes on income that is deemed to have a Czech source.
- Gross income up to CZK 1,935,552 – 15%.
- Gross income exceeding threshold – 23%.
For a few specific categories of non-Czech investment income (such dividends and interest on foreign bonds), a special tax base with a rate of 15% has been implemented.
Allowable Deductions
Taxes and social security contributions. Voluntary insurances/schemes contributions are also deductible.
PAYROLL TAXES AND EMPLOYER CONTRIBUTIONS
Payroll Taxes
There are no other payroll taxes on which the employer bears the cost. Employers are responsible for deducting employees’ income tax liability and social security contributions.
Unemployment
Pensions, unemployment benefits, and sickness benefits are three independent accounts that are supported by social security contributions (together with other benefits).
Employers: 1.2% of the covered payroll each month. There is no minimum income requirement when determining donations. The maximum yearly income that may be utilized to determine contributions is 48 times the average monthly pay in the country.
Depending on the insured’s age, the first two months will be paid at a rate of 65% of their average net monthly earnings from the previous quarter, the next two at 50%, and the remaining months up to 11 months at a rate of 45%. If receiving retraining, 60% of the insured’s typical net monthly wages will be compensated. If the covered individual leaves their job on their own initiative and without a good reason, 45% of their average net monthly earnings from the previous three months is provided for the duration of the support term.
Social Security
Pensions, unemployment benefits, and sickness benefits are three independent accounts that are supported by social security contributions (together with other benefits).
Each month, both the employer and the employee are required to submit social security contributions. The mandatory payments are based on the person’s gross compensation, which includes the majority of their perks and allowances. Social Security and health insurance system contributions are often required of income that is subject to income tax. The employer pays a social security payment rate of 24.8% and a health insurance contribution rate of 9%. The employee’s social security and health insurance contribution rates are 6.5 and 4.5 percent, respectively. The employer provides the money (for both employee and employer parts of contributions). There is an option for a cap on the social security premium solely. The maximum yearly income that may be utilized to determine contributions is 48 times the average monthly pay in the country.
Workers Compensation
A work-related illness or accident that causes a loss in income must be evaluated. Getting to and from work-related accidents are not covered. Includes a disability of the first degree (loss of working capacity of 35% to 49%), second degree (loss of working capacity at 50% to 69%), or third degree (loss of working capacity of at least 70%). Funds sourced via Social Security contributions.
ADMINISTRATION
Income
Residents of the Czech Republic must typically pay Czech income tax on their international income. Tax non-residents typically only pay taxes on income that is deemed to have a Czech source.
- Gross income up to CZK 1,935,552 – 15%.
- Gross income exceeding threshold – 23%.
Payroll Taxes
There are no other payroll taxes on which the employer bears the cost. Employers are responsible for deducting employees’ income tax liability and social security contributions.
Unemployment
Pensions, unemployment benefits, and sickness benefits are three independent accounts that are supported by social security contributions (together with other benefits).
Employers: 1.2% of the covered payroll each month. There is no minimum income requirement when determining donations. The maximum yearly income that may be utilized to determine contributions is 48 times the average monthly pay in the country.
Depending on the insured’s age, the first two months will be paid at a rate of 65% of their average net monthly earnings from the previous quarter, the next two at 50%, and the remaining months up to 11 months at a rate of 45%. If receiving retraining, 60% of the insured’s typical net monthly wages will be compensated. If the covered individual leaves their job on their own initiative and without a good reason, 45% of their average net monthly earnings from the previous three months is provided for the duration of the support term.
Social Security
Pensions, unemployment benefits, and sickness benefits are three independent accounts that are supported by social security contributions (together with other benefits).
Each month, both the employer and the employee are required to submit social security contributions. The mandatory payments are based on the person’s gross compensation, which includes the majority of their perks and allowances. Social Security and health insurance system contributions are often required of income that is subject to income tax. The employer pays a social security payment rate of 24.8% and a health insurance contribution rate of 9%. The employee’s social security and health insurance contribution rates are 6.5 and 4.5 percent, respectively. The employer provides the money (for both employee and employer parts of contributions). There is an option for a cap on the social security premium solely. The maximum yearly income that may be utilized to determine contributions is 48 times the average monthly pay in the country.
Workers Compensation
A work-related illness or accident that causes a loss in income must be evaluated. Getting to and from work-related accidents are not covered. Includes a disability of the first degree (loss of working capacity of 35% to 49%), second degree (loss of working capacity at 50% to 69%), or third degree (loss of working capacity of at least 70%). Funds sourced via Social Security contributions.
Statutory Benefits
Statutory benefits in the Czech Republic include paid time off for the 12 national public holidays and 4 weeks of holiday.
Employee Benefits
All employees are entitled to time off, including 12 paid public holidays.
LEGISLATION
Czech Republic Labor Code
Czech Republic Employment Act
STATUTORY BODIES
- The Ministry of Labor and Social Affairs
- The Czech Labor Inspectorate
- The labor and social security courts
- The National Employment Service
