The Czech Republic is a popular outsourcing destination, especially when it comes to web development. Along with other Eastern European countries like Bulgaria or Ukraine, the Czech Republic ranks among the countries with the world’s best developers. With over 8,000 IT graduates every year, the country’s talent pool is steadily growing.
What’s more, Czech developers are available at very competitive rates while offering first-class services. Salaries in the Czech Republic are a lot lower and hiring generally a lot cheaper than in other European countries.
When hiring an employee in the Czech Republic, it is mandatory that both parties sign a written employment contract which should at least contain the following basic information:
- Identification of both parties
- Date of commencement (and employment duration for temporary contracts)
- Job type, duties and responsibilities
- Basic salary as well as other compensation or benefits and detailed payment information
- Working hours
- Total number of holidays
- Notice periods for employment termination
- Reference to collective agreements
- Health and safety measures at the workplace and company rules
Unless stated otherwise, employment contracts in the Czech Republic are considered to be permanent. However, fixed-term contracts are equally possible as long as they do not exceed three years in length.
In addition, Czech labour law also allows work without concluding an employment contract. In these cases, work is performed under a so-called “agreement on work activity” or an “agreement on work performance”.
It is common to define a probationary period at the beginning of the employment which should not exceed three months – six months for managers.
Working Hours and Breaks
An employee’s normal working week should not exceed 40 hours – 37.5 hours in certain professions such as miners and shift workers. Daily working time is limited to eight hours – exceptions are possible.
Rest breaks are not included in daily working time. After six consecutive hours of work, an employee must be given a break of at least half an hour.
Furthermore, employees need to have no less than eleven hours of uninterrupted rest between two working days and a weekly rest period of no less than 35 hours – preferably including Sunday.
Overtime work is permitted but limited to eight hours per week and 150 hours per year. Employees who perform work beyond their standard working hours must be compensated with an additional 25% of their usual hourly pay for each hour worked overtime.
Czech employees are usually paid once a month.
As of March 2021, the national minimum wage in the Czech Republic is CZK 90.50 per hour which equals a monthly minimum wage of CZK 15,200.
According to the Labour Code, employers have to provide sick pay for employees who are unable to work because of injury or illness during the first two weeks of sick leave. Sick pay must be at least 60% of the employee’s normal wages.
From the 15th day of sick leave onwards up to a total of 380 days, the employee receives sick leave benefits from social security. Sickness benefits increase with the length of the employee’s sick leave:
- 15th to 30th day of sick leave: 60% of normal wages
- 31st to 60th day of sick leave: 66%
- from the 61st calendar day onwards: 72%
There are no regulations regarding the payment of an annual bonus.
Taxes and Social Security Contribution
Employees and employers in the Czech Republic are subject to the following tax and social security contribution rates (as of 2021):
19% corporate tax rate
21% VAT (standard rate)
Individual income tax rates:
up to CZK 1,701,168: 15%; over CZK 1,701,168: 23%
33.8% of employee’s gross salary including:
9% health insurance
21.5% pension insurance
2.1% sickness insurance
1.2% unemployment insurance
11% of employee’s gross salary including:
4.5% health insurance
6.5% pension insurance
Employees should be granted at least four weeks of paid annual leave each year. During their first year, employees are entitled to prorated annual leave once they have completed 60 days of work with their new employer.
There are 13 public holidays which are typically observed in the Czech Republic. Employees who are required to work on these days should be paid at double rates.
Maternity Leave and Paternity Leave
Female employees can take up to 28 weeks of maternity leave – 37 weeks in case of multiple births – which can start six or eight weeks before the birth. Under the condition that employment has lasted for at least 270 days over the course of the two previous years, the employee receives maternity benefits from the Czech Social Security Agency amounting to 70% of her usual wages.
The child’s father is entitled to seven days of paternity leave for which he receives a paternity allowance equal to the statutory maternity benefit if the leave is taken within the first six weeks after the birth.
Once maternity leave is over, both mother and father have the right to take parental leave until the child reaches the age of three – until the child’s fourth birthday if the employer agrees. During this period, they receive a parental allowance which is currently capped at a total of CZK 220,000.
Additional Leave and Benefits
Furthermore, employees must be allowed time off in case they have to look after a sick child under the age of ten or another member of the family who needs caring due to a medical condition. Alternatively, employees can request shorter working hours for the same reasons.
Other reasons for personal leave include:
- duties of public interest
In addition to employment termination by default – i.e. in case of a fixed-term contract – resignation and mutual agreement, the Czech Labour Code defines the following reasons for employee dismissal (non-exhaustive list):
- redundancy or any other business-related reason
- summary dismissal due to gross misconduct
- serious breach of employment contract
- employee’s underperformance
- employee’s incapability to continue performing the agreed work because of long-term illness or injury
Notice periods must be the same for both employee and employer. According to the Labour Code, employees and employers must give at least two months’ notice – except during the employee’s probationary period when no notice is required.
Employees who are dismissed for reasons other than their personal behaviour are entitled to severance pay which is calculated based on their length of service:
- one month’s wages for a length of service of up to one year
- two months’ wages for a length of service of between one and two years
- three months’ wages for a length of service exceeding two years
Hiring in the Czech Republic?
Not sure if you should start with a contractor or go ahead and hire a full-time teammate in the Czech Republic? The Lano platform makes it easy to go from freelance to full-time employee. Get expert guidance from the Lano team to compare your options and keep growing.