The Czech Republic is an Eastern European country that’s a part of the European Union (EU). It borders Germany, Slovakia, and Poland, giving companies that expand the opportunity to form business relationships with other European countries. However, planning an expansion also includes considering how to set up your Czech Republic payroll and stay compliant.
That’s why Globalization Partners offers Czech Republic payroll outsourcing for companies that don’t want to go through the hassle of establishing a subsidiary before hiring in the Czech Republic. As a global PEO, we have an entire team of experts ready to hire employees on your behalf and add them to our established payroll. You won’t have to worry about compliance, establishing a subsidiary, or analyzing your payroll options.
Taxation Rules in the Czech Republic
Employees and employers both contribute to different tax funds at varying rates. For example, employers contribute 24.8% of employees’ salaries to the state social security funds. The Czech Republic sets a social security fund cap at 48 times the monthly average wage, currently 1,701,168 CZK in 2021.
The Czech Republic used a flat income tax of 15% for all employees until 2021, when a progressive tax rate was introduced. Currently income up to 1,701,168 CZK is taxed at 15% while gross income exceeding that limit is subject to a tax rate of 23%.
All taxes get withheld at the source using a Pay As You Earn (PAYE) system, so employers have to deduct taxes and give employees a net wage.
You’ll need to pay a flat corporate tax of 19%.
Czech Republic Payroll Options for Companies
You can choose the Czech Republic payroll option that works best for you out of the following options:
- Remote: You can add employees to an existing payroll if you already run one out of your parent company. Doing so will require you to pay employees remotely and make sure you’re following the right regulations for each country.
- Internal: Larger subsidiaries that want to work in the Czech Republic long-term may want to use an internal payroll. However, you’ll need HR staff with knowledge of local labor laws.
- Local outsourcing company: A local payroll processing company works for companies that need to outsource their payroll, but this option means you’ll still need to worry about compliance.
- Globalization Partners: A global PEO such as Globalization Partners will outsource your payroll and take on all compliance. You won’t have to worry about setting up your Czech Republic payroll, following tax obligations or completing similar steps — we’ll have compliance covered for you.
How to Set Up a Payroll in the Czech Republic
Your company will need to spend weeks or months establishing a subsidiary before you can set up your Czech Republic payroll. Fortunately, you won’t have this same time-consuming requirement when you work with Globalization Partners. You won’t have to set up a subsidiary with us, as we’ll use our existing subsidiary to help your company start working in as little as one day. With Czech Republic payroll outsourcing, you won’t worry about your payroll being compliant either. We will handle all payroll laws and regulations so you can focus on building your business in the Czech Republic.
One of the more challenging aspects of an expansion is learning how to terminate employees. Adding entitlement and termination terms to an employment contract before you choose a Czech Republic payroll option can help you stay compliant. Employees can get terminated by notice, agreement, immediate termination, or termination within a probationary period. Your employees should receive severance pay if they’re terminated for organizational reasons.
Payroll Processing Company in the Czech Republic
Globalization Partners will help make your expansion fast and easy. Contact us today to learn more about Czech Republic payroll outsourcing.
THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). G-P does not provide legal or tax advice. The information is general and not tailored to a specific company or workforce and does not reflect G-P’s product delivery in any given jurisdiction. G-P makes no representations or warranties concerning the accuracy, completeness, or timeliness of this information and shall have no liability arising out of or in connection with it, including any loss caused by use of, or reliance on, the information.