Approximately 5,28 million people are currently employed in the Czech Republic. The Employment rate in the age group 15–64 reaches 75,5 %.
The minimum wage rates in the Czech Republic are 22,400 CZK gross for monthly minimum wage (for full-time work of 40 hours per week) and the hourly minimum wage is 134,40 CZK gross.
The Czech Labor Code (Act No. 262/2006 Coll.) is a key legal regulation that regulates relations between employees and employers in the Czech Republic.
Labor Law and Human Resources
The Czech legal system heavily protects employees, and all employment contracts must be in writing.
Key Aspects of the Czech Labor Code:
The Czech Labor Code defines standard full-time work as 40 hours per week.
Annual Leave: The statutory minimum paid annual leave is 4 weeks (20 days), though 5 weeks is the standard benefit in the corporate sector. The specificity is that the annual leave is calculated in hours, so for 4 weeks = 160 hours, for 5 weeks – 200 hours.
Probationary Period: The probationary period is a maximum of 4 months for regular employees and 8 months for management positions. If the employment relationship is for a fixed term, the probationary period may not be longer than half of the total duration of the employment relationship.
Termination: The statutory notice period is 2 months. It starts on the day the notice is delivered and ends on the day that numerically coincides with the date of submission in the last month. A reduction to 1 month is only possible in the event of notice given by the employer due to breach of obligations or unsatisfactory results. The employment can be terminated both – by the employer or by the employee. Employment can be terminated by mutual agreement or by notice. If notice is given by the employer, the reasons must strictly align with the legal grounds specified in the Labor Code (e.g., redundancy, organizational changes). Severance pay is mandatory in cases of redundancy.
In principle, the Czech labor law distinguishes between the main employment relationship (based on an employment contract) and agreements on work performed outside of the employment relationship.
- Employment contract (Main employment relationship – HPP)
This is the most common and stable form of employment. It is divided into two types according to its duration:
For an indefinite period: The standard type of contract. It does not specify an end date, which provides the employee with the highest level of security.
For a fixed period: The contract has a clearly defined duration (e.g. for 1 year or for the duration of maternity leave). According to the law, it can be concluded for a maximum of 3 years and repeated no more than twice (the 3x rule).
- Agreements on work performed outside of the employment relationship
These forms are more flexible, intended more for part-time work, seasonal work or additional income (e.g. for students, day laborers or parents on parental leave).
1) Agreement on performance of work (DPP)
The DPP is popular for one-off or smaller scopes of work. Maximum 300 hours per calendar year with one employer. If the monthly remuneration does not exceed a set limit, no social or health insurance is deducted from it – only tax is paid. Now, the limit is 11,999 CZK per month.
2) Work Activity Agreement (WPA)
WPA is used where the scope of work exceeds 300 hours per year, but it is still less than full-time work. WPA may not exceed 20 hours per week (half of the standard weekly work schedule) for the entire period for which it was concluded (no more than 52 weeks).
Social and health insurance are not paid only if the monthly remuneration is lower than the limit (currently 4,499 CZK per month). If the earnings exceed this limit, contributions are paid as standard.
Newly, as with DPP, DPČ also entitles the employee to vacation under statutory conditions.
Social Security and Health Insurance Contributions
Employers are legally obligated to register employees with the Social Security Administration and health insurance companies. The financial burdens are structured as follows:
- Employer Contributions: 33,8 % of the employee’s gross salary (24,8 % for social security, 9% for health insurance).
- Employee Deductions: 11 % (of the employee’s gross salary)
Health insurance: 4,5 %,
Social insurance: 7,1 % (includes 6,5 % for pension and 0,6 % sickness insurance)
Income tax: 15 % for the part of income up to the limit (36 times the average wage per year, approx. 1,6 million CZK per year / approx. 131,000 CZK per month). 23% for the part of income that exceeds this limit.
In addition to these main contributions, the employer must also pay quarterly statutory employer’s liability insurance for damage in the event of an accident at work or occupational disease which is usually a few per mille of the volume of wages depending on the riskiness of the work.
All contributions and deductions are safely withheld by the employer from the gross salary and sent by him to the authorities (before the 20th of the next month).
The payment of sickness benefit (sickness insurance) in the Czech Republic has clear rules that divide financial support during illness into two main phases: wage replacement (paid by the employer) and sickness benefit (paid by the state).
If the employee gets sick, for the first 14 calendar days he does not receive sick leave from the state, but wage compensation from his employer. The wage compensation is paid from the 1st working day of temporary incapacity for work. It is paid only for the working days (more precisely, for the planned shifts) missed due to illness.
The employee gets approximately 60% of his average reduced earnings (calculated from the income for the last quarter).
If the illness lasts longer than two weeks, the District Social Security Administration (OSSZ) starts paying the support from the 15th calendar day. Unlike wage compensation, sick pay is paid for every calendar day (including weekends and holidays). The amount of the benefit depends on the duration of the illness and is calculated from the so-called daily assessment basis (according to the reduction limits).
The system of declaration of the illness is now very digitalized. The doctor notifies it to the Social security which notifies the employer by electronic Data Box. The employee simply notifies his employer (by phone, dms, email). The termination of the sick period is digitalized too.
Maternity leave and maternity allowance
It is an excused leave from work provided by the employer. Financial support during this period is called Maternity Allowance and is paid from the health insurance. It duration is 28 weeks (for one child) or 37 weeks (if twins or more children are born) and starts usually 6 to 8 weeks before the expected date of birth. The amount of support is 70% of the reduced daily assessment base (calculated from previous income).
The Czech labor law incorporated Paternity leave (Paternal postpartum care benefit). Its duration is 2 weeks (14 calendar days). The leave cannot be interrupted and must be used in full and can be taken only during the first 6 weeks after the birth of the child. If the father of the child asks for this leave, the employer is obliged to give it to him.
Parental leave and parental allowance
After the end of maternity leave, the parental care phase begins. The employer is obliged to provide it (both of them) up to a maximum of 3 years of age of the child. The parental allowance is State social benefit (paid by the Labour Office), which serves as financial support. Only one of the parents can receive it at any time.
Benefits
Czech employees’ preferences for benefits have shifted significantly and today people demand benefits that have a real impact on their wallet, health and free time (so-called work-life balance). If a company wants to succeed in recruiting on the Czech market, the benefits that applicants expect today is an extra week of vacation (5th week), flexible working hours (with the option of home office), bonuses (for business positions), sick days, meal allowances or contributions to sport/health activities.
Conclusion
To find and hire a new employee is now a tough task and requires paperwork before the beginning of the employment and during the onboarding. The employer must include into the employment contract some obligatory information and assure that he covers all aspects of the employment from the beginning to the end as required by the labor law.
If you have any questions about Human Resources and payroll in Czechia or need assistance with it, please feel free to contact us.
