Taxes and payrolls: analyzing the Czech labour market

Each labour market has some peculiarities. It may be tricky for foreigners to understand fully the payment methods, the taxes and other benefits related. In TalentUp we are starting a series of different blog articles, one for each country. This article analyses the Czech labour market.

Even if the national currency is the Czech Koruna (CZK), the whole article is in EUR to compare easily across countries and exchange rates.

General data about the Czech labour market

Minimum wage	700,96€
Payment basis	Monthly.
Payment	Must be paid by
Maximum working hours a day	8h
Maximum working hours a week	40h
Maximum overtime hours a day	4h
Maximum overtime hours a week	8h for more than 26 consecutive weeks
Maximum overtime hours a year	150h in managerial positions
Working hours compensation	For night shifts and weekends: 110% of the regular pay. For holidays: 125% of the regular pay. All can be changed by additional time off.

Payroll taxes in the Czech Republic

Social security contributions are made by the employer and the employee and are used for funding unemployment, pension, maternity/paternity leave, and sickness or injury.

Type of Insurance	Employer %	Employee %
Social Security	24.8	6.5
Health Insurance	9	4.5
Total %	33.8	11

Once contributions are paid, employees need to pay an income tax that is established at a 15% up to 78,424.70€ and 25% after that.

Contingencies from self-employees

If the annual income of a self-employed person does not reach the minimum threshold the self-employed person is not obliged to pay social security contributions.

The minimum monthly contributions of self-employed persons consist of

77.5€ of health insurance.

4.7€ of sickness insurance.

83.85€ of social security.

Example of net salary in the Czech Republic

As a reference, we use the average salary of a software engineer. In the Czech Republic, on average, software engineers earn annually 40,000€.

Contingencies	Employer	Employee
	%	€
Gross salary (annually)
Pension	24.8	9920
Health Insurance	9	3600
Total	33.8	13520
Income tax
Net salary (annually)

The employer contributes 13,520€ to social security and the employee 4,400€.

After paying the income tax, the employee has a net salary of 30,260€ coming from a gross salary of 40,000€.

Unemployment regulation in the Czech Republic

Workers in the Czech Republic have a three-month probation period, and chief officers have a six-month probation period. However, it cannot be longer than half of the agreed period of the employment relationship.

Notice of termination cannot be given during the protection period. This includes pregnancy, maternity leave, disability leave…

When notice of termination is given, the notice period has to be at least 2 months. The period begins on the first day of the month following the delivery of the notice.

The severance payment depends on how long the employee has been employed.

Years of employment	Severance payment
1 year	1 month’s gross salary
2 years	2 months’ gross salary
3 years or more	3 months’ gross salary

Different kinds of leaves in the Czech Republic

Czech employees are entitled to 4 weeks of paid leave and there are 13 public holidays.

The Czech paid leave consists of 60% of the regular wage, for the first 14 days of illness.

Paid parental leave

The maternity leave consists of 70% of the regular wage and it lasts for 28 weeks, and 37 weeks for multiple births. The leave has to start between the 8th and the 6th week before the expected due date. The minimum duration of maternity leave is 14 weeks.

Fathers can take 7 weeks off after giving birth in exchange for weeks off for the mother.

Parental leave starts at the time of birth until the kid is 3 for the father, and after the maternity leave for the mother. It is only possible if the kid is being cared for from home. The amount received is 8,950€, 13,425€ for multiple births.

Common benefits offered by Czech companies

Benefit	% of companies with this benefit
Casual dress code	19.6
Free snacks	17.2
Professional development	11.3
Company events	10.1
Gym	9.1

How to employ a Czech worker

There is no central point of registration in the Czech Republic; each government office requires its own registration. For this reason, the employment of Czech workers is a long procedure with lots of paperwork.

In order to be able to hire people on employment contracts (even temporary contracts), the company must be registered:

at the tax office for income-related taxes,

at the social office (as an organisation),

at one or more of the public health care providers (as an organisation),

at the cooperative health insurance (for company liability).

Every time an employee is hired or fired, this action needs to be notified:

at the social office as a new employee,

at the public health care provider (even if the person is already registered),

at the labour office, exchanging information about previous employment.

at the tax office, if the person has not been registered before.

Some platforms (Papaya Global among them) offer the Employer of Record (EoR) service helping companies hire countries where they do not have any office.

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