Guide to Hiring in the Czech Republic

Key takeaways

• Access Czechia's skilled talent pool: The Czech Republic has a strong workforce of engineering and manufacturing talent.
• Understand Czechia's labor laws: Czechia has labor laws that govern overtime, workweek lengths, and more.
• Paths to hiring in Czechia: Companies have various options for setup, including partnering with an employer of record (EOR), hiring contractors, establishing a subsidiary, or direct employer registration.

The Czech Republic, informally known as Czechia, is a key hub for engineering and manufacturing talent, with a GDP exceeding USD 391B. The nation built its economic foundation on an export-based manufacturing sector.

If you're looking to hire in Czechia, you’ll need to understand contracts, taxes, wages, benefits, and other employment laws.

Our guide will tell you everything you need to know about hiring in Czechia.

What to know before hiring in Czechia

Hiring in the Czech Republic comes with legal requirements that differ from those of other countries. The varied regulations will influence your hiring practices, along with many aspects of the employer-employee relationship, including compensation and benefits.

G-P Gia™, our AI-powered global HR agent, can answer your toughest compliance questions across more than 50 countries — including Czechia — and all 50 U.S. states. Reduce your reliance on outside counsel and cut the time and cost of compliance by up to 95% with Gia.

Here are five important facts to know before you hire in Czechia.

1. Contracts and termination

A written employment contract is required and must include the type of work, place of work, and start date. Other details, such as compensation, annual leave, and working hours, must be included in the contract or a separate document within one month of the employee’s start date.

Contracts can be indefinite or fixed-term. Fixed-term contracts are limited to three years per contract. They can only be renewed twice for a total of nine years with the same employer.

Probation is four months for most employees and eight months for managers. During probation, either party can terminate the contract in writing without cause or notice.

After probation, termination is possible only for reasons specified in the Labour Code, with a notice period of two months. Immediate termination is allowed only for gross misconduct or if the employee is sentenced to prison for more than one year for an intentional crime. (See Section 55 of the code for details.)

2. Payroll and taxes

Employers contribute 24.8% of gross salary to social security plus 9% toward public health insurance. Employees contribute 7.1% to social security and 4.5% to health insurance.

Personal income tax is progressive: 15% on income up to a set threshold and 23% on income above that. The corporate income tax rate is 21%, with a 5% rate for basic investment funds. Withholding tax on dividends, royalties, and similar payments is 15% or 35%, depending on the recipient’s tax residency. Employers must withhold and remit employee income tax, social security, and health insurance contributions every month.

3. Working hours and overtime

The workweek is 40 hours. The maximum daily shift is 12 hours.

Overtime is allowed, but it can’t exceed an average of eight hours per week over a 26-week period. This can be extended to 52 weeks by collective agreement. Employees may receive either 125% of their average earnings for overtime hours or compensatory time off.

Night and weekend work require a minimum 10% premium. Employees get:

• 11 hours of rest between shifts
• A 30-minute break after six hours
• 35 hours of uninterrupted weekly rest

4. Leave and benefits

Employees get four weeks of paid annual leave. Some workers, such as public sector employees, get five weeks.

Sick pay is 60% of average earnings for the first 14 days of illness or injury. This is paid by the employer. After this, Social Security pays.

Maternity leave is 28 weeks (or 37 weeks for multiple births). Either parent can take up to three years of parental leave to care for a child.

Bonuses and premiums are common but not guaranteed by law.

Czechia has a universal healthcare system funded by contributions totaling 13.5% of gross salary (9% paid by the employer, 4.5% by the employee). Healthcare is generally free at the point of use, though specialized services can have fees.

5. Job market and workforce education

Czechia has one of the lowest unemployment rates in the EU. The workforce is highly educated, with a literacy rate above 99%. A high proportion of residents have secondary or postsecondary degrees, ranking among the top in OECD and partner countries.

Hiring models for global companies in Czechia

Your global company has several paths to hiring workers in the Czech Republic. Each has pros and cons. The ideal hiring model for your company will depend on the size of your workforce, hiring goals, whether you have an established presence within Czechia, and more. Here are some of the most common hiring models for global companies in Czechia.

• Direct employer registration: Registering your company with Czechia employment authorities gives you greater control over your local operations. The downside is that you need to handle entity setup and ongoing employment requirements like payroll, benefits, and compliance.
• Employer of record: An employer of record (EOR) is a third party that acts as a Czechia-based employer. This path offers a simpler market entry, and you can build a team without the costs and time required to establish an entity. G-P EOR supports hiring in Czechia through a global entity infrastructure.
• Subsidiary or branch: Establishing a new subsidiary or branch in Czechia lets you establish a presence in the country to support more long-term operations. It operates as a Czech company, and it is like an extension of your company back home. Entity requirements, registration, and permitted activities vary based on your business structure and operations.
• Independent contractors: When you need more hiring flexibility, independent contractors are an option worth considering. That said, misclassifying someone as a contractor when they’re actually an employee can create significant financial and compliance problems. Before choosing this model, review the new hire's role, level of control, and working arrangement.

Top hiring hubs in Czechia

Some cities in the Czech Republic are known for particular industries. Knowing what each region has to offer allows you to focus your hiring efforts in the right place and fill roles faster.

These are the top talent hubs in the Czech Republic:

• Prague is the capital and largest city. Prague is the top hub for finance, technology, business services, and global companies. The city's tech talent is concentrated in software development, cybersecurity, and fintech.
• Brno is recognized as Czechia's second tech hub and a leading R&D center. Brno’s main sectors are advanced IT and software development, life sciences, and engineering.
• Ostrava is an industrial city. It was a coal-mining and metal powerhouse. The city is changing to a knowledge-based economy with fields such as business services and IT.
• Plzeň (Pilsen) is known for engineering and manufacturing. The city’s industry grew from the Škoda Works and now focuses on heavy machinery, train equipment, and car components. Its location near Germany makes it a key part of the automotive supply chain.
• Liberec is a regional center for the automotive supply chain and engineering. Its old textile industry has been replaced by modern manufacturing that focuses on car components and mechanical engineering.

Key industries in Czechia

Understanding Czechia’s top industries allows you to benchmark salaries and benefits. You can use this insight to make smart choices about where to invest and grow your talent pool.

The top industries in the Czech Republic include:

• IT and software development: Czechia is a regional leader in IT, with a strong pool of software engineers, developers, and cybersecurity experts. The sector benefits from strong academic institutions and relatively low labor costs compared to Western Europe.
• Automotive: The country is a hub for automotive manufacturing, engineering, and related supply chains. The industry is anchored by original equipment manufacturers (OEMs) like Škoda Auto, Hyundai Motor Manufacturing Czech, and Toyota Motor Manufacturing. Czechia has a strong export link to Germany.
• Business process outsourcing (BPO) and shared services: Many multinational companies have set up shared service centers in Prague and Brno. Services focus on high-value tasks, including finance and accounting outsourcing (FAO), IT support, data analytics, and multilingual customer service in French, German, and English.
• Manufacturing and industrial production: Czechia ranks as one of the most industrialized countries in the EU. It is in the top 15 countries for machine tools production.
• Pharmaceuticals and life sciences: The Czech Republic has a growing sector for pharmaceuticals, biotechnology, and medical research. Its 400 biotech-related entities employ over 22,000 professionals.

Cost of hiring an employee in Czechia

Whether you’re hiring one employee or an entire team in the Czech Republic, expenses are inevitable. Budget for the following:

• Setting up an entity (unless you partner with an employer of record)
• Advertising job positions
• Paying referral bonuses to employees with connections in Czechia
• Paying an in-house hiring committee
• Traveling to and from Czechia, including hotel stays, meals, and transportation
• Partnering with a translator to draft documents or facilitate conversations (if applicable)
• Using a background check service for screening candidates
• Drafting compliant employment contracts, legal review, and consultation with HR and legal experts
• Costs for providing computers, phones, and software licenses
• Onboarding materials and initial training
• Costs for maintaining required tax and payroll records and documentation

According to G-P Verified Sources from Gia, the employer burden rate in Czechia, which includes costs triggered on top of salaries, is about 33.8%, excluding accident insurance, which can vary.

What does a company need to hire employees in Czechia?

The hiring process in Czechia is similar to the one you’re likely familiar with in your own country. Here are the essentials:

• Establish a legal entity.
• Register your company with the Czech Commercial Register.
• Work with Czech tax authorities to get a tax identification number (DIČ), and verify whether you'll need VAT registration.
• Register as an employer with the Czech Social Security Administration (ČSSZ), as well as arrange employee registration.
• Register your business to provide contributions for the country's universal healthcare system.
• Draft written employment contracts in Czech that are in compliance with the Czech Labour Code.
• Set up payroll and statutory reporting processes.

Steps to hiring in Czechia

The hiring process follows five basic steps: advertising the job, evaluating applications, interviewing candidates, sending job offers, and onboarding new employees.

1. Advertise job vacancies

Prepare a clear job description that outlines the successful candidates’ responsibilities, qualifications, and compensation. Post the job. Prace, JenPráce, Profesia, Jooble, and LinkedIn are popular job boards in the Czech Republic.

2. Evaluate job applications

Screen CVs and cover letters to shortlist candidates who meet your requirements.

3. Interview candidates

Conduct your initial interviews over the phone, video, or in person. Gia can help you create questions that follow anti-discrimination laws in Czechia, so you can find the best fit for the role while complying with local regulations.

The next step is to verify employment history, education, and conduct background checks if required.

4. Make job offers

Prepare a compliant written employment contract in Czech. Clearly state the salary, benefits, job duties, and termination terms.

5. Onboard new employees

Now you can onboard new employees. Register your new hire with social security and a health insurance provider. Set up payroll, provide orientation, and make sure the employee understands your company policies. Keep accurate employment records and ensure ongoing compliance with Czech employment laws.

If you’re working with an EOR like G-P, you won’t have to worry about the administrative burden of onboarding. We’ll streamline the process, so you can focus on training your team and integrating them into your company culture.

Hiring contractors in Czechia

Working with independent contractors in Czechia can be a cost-effective way to test the market and build a presence without the commitment of full-time employees.

Contractors based in Czechia understand local consumer behavior, rules, and business practices. They’ll be ready to start working quickly with their own equipment and established work processes.

Hiring contractors allows you to easily adjust your talent pool based on your business needs, without the complexities and costs of employment.

Before you enter an agreement with an independent contractor in Czechia, consider the following:

1. Employees vs. independent contractors

It’s important to understand the difference between employees and independent contractors in the Czech Republic. Employers hire employees to do work and, in return, pay them a regular salary and benefits. Independent contractors provide services, but unlike employees, they don’t work under close supervision, don’t use company equipment, and may not be economically dependent on one client.

2. Penalties for misclassification

Czech law focuses on the working relationship, not just the contract’s wording. If an employee is treated like a contractor, this can be considered “disguised employment” (the Švarc system). Classifying someone as a contractor when they’re not can lead to severe penalties.

If misclassification occurs, you may have to:

• Face fines of up to CZK 10M (EUR 400,000).
• Pay retroactive social security and health insurance contributions, as well as any unpaid wages, overtime, and benefits.
• Face liabilities for unpaid payroll taxes and related penalties.

3. How to pay contractors

G-P Contractor™ takes away the messy, time-consuming process of hiring and paying international contractors. You can create and issue contracts and pay contractors with just a few clicks, using a compliant process.

Hire employees and contractors in Czechia with G-P

Our Global Employment Platform and its AI-powered products, EOR, Contractor, and Gia, support companies as they build and manage global teams.

G-P is the recognized leader in global employment with more than a decade of experience; the largest team of HR, legal, and compliance experts; and a global proprietary knowledge base.

Make your expansion to Czechia easier with G-P. Contact us or book a demo today.

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