How to Hire Employees in Czech Republic

Discover the benefits of expanding your workforce in the Czech Republic, a country renowned for its strategic location and vibrant business landscape. With a skilled workforce and thriving industries like technology, manufacturing, and tourism, the Czech Republic offers access to diverse talent pools and promising growth prospects within Central Europe's dynamic market.
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Since 1970, the Czech Republic has transformed from a raw materials-based economy reliant on rubber and tin exports to a dynamic powerhouse in Southeast Asia. Today, it maintains prominence in rubber, palm oil, petroleum, natural gas, and hardwood production. Shifting towards export-oriented manufacturing, it attracts significant international investment with its skilled workforce, advanced infrastructure, stability, and competitive currency, notably drawing interest from Japan and Taiwan. Proactive socio-economic reforms like the New Economic Policy and New Development Policy promote economic parity and indigenous business development, driving privatization and private sector engagement in crucial sectors for a favorable investment climate.

What you need to know before hiring employees in Czech Republic

Job market in Czech Republic

  • The Czech job market is increasingly shaped by the integration of advanced technologies, with AI leading significant shifts across various industries.
  • Sectors such as IT, automation, and digital transformation are seeing a rise in specialized roles, including AI developers and data analysts, driven by the need for businesses to adopt these technologies.
  • Enhanced incentives and a strategic focus on manufacturing are attracting more multinational companies, boosting job creation in engineering and production.
  • There is a growing demand for professionals, particularly in life sciences and engineering, reflecting the country's commitment to innovation and development.
  • With global shifts towards sustainability, there is an increasing demand for jobs related to environmental management and green technologies.
  • The transition towards renewable energy sources is creating new roles in project management, environmental engineering, and sustainability consulting.
  • Despite a strong educational base, the Czech Republic faces skill shortages in high-demand areas, emphasizing the need for targeted skills development and educational programs.
  • Investments in training and development programs are crucial to equip the workforce with necessary skills, particularly in high-tech and emerging sectors.
  • Government efforts to provide grants and incentives are instrumental in fostering a conducive business environment and attracting foreign investment.
  • These initiatives not only bolster the local economy but also enhance the Czech Republic’s position as a competitive player in the Central and Eastern European region.

Czech Republic Hiring Trends

Several key developments across various sectors influence Czech Republic hiring trends in 2024:

  • Companies are increasingly adopting flexible work arrangements, allowing employees to split their time between home and office. This trend affects space planning and recruitment strategies, emphasizing the need for adaptable and tech-savvy personnel.
  • There is a growing need for professionals in AI, cybersecurity, and data analytics, driven by the digital transformation across industries. These roles are critical in maintaining competitive edges and securing operational efficiencies.
  • With a national focus on sustainability, roles in renewable energy and environmental technology are expanding. Professionals with skills in green tech and sustainable practices are becoming increasingly sought after.
  • As industries evolve, there is a strong emphasis on continuous learning. Companies are investing in training programs to ensure their workforce can adapt to new technologies and changing business needs.
  • To address local skill shortages, especially in high-tech and specialized sectors, businesses are looking beyond national borders, integrating international expertise into their teams.
  • Employers are focusing on comprehensive development strategies to mitigate skill gaps, especially in sectors susceptible to automation, ensuring a steady supply of qualified candidates.

How to hire employees from Czech Republic

1. Set up an entity in the country

Setting up a legal entity in the Czech Republic is a strategic move for businesses looking to establish a firm foothold within the region. The process involves selecting a suitable corporate structure, such as a Limited Liability Company (s.r.o.) or Joint-Stock Company (a.s.), and registering with the Czech Commercial Register. Essential steps include obtaining a trade license, registering for tax purposes, and ensuring compliance with local employment and commercial laws. This setup permits direct control over operations and streamlines activities like hiring, benefiting from local incentives. Engaging with local legal expertise is advised to navigate the registration process efficiently.

2. Hire independent contractors

Hiring independent contractors in the Czech Republic offers flexibility and can be a cost-effective solution for businesses needing specialized skills or temporary project support. To engage contractors, businesses must establish a clear contract that defines the scope of work, duration, payment terms, and mutual obligations. It's essential to ensure that these arrangements comply with Czech labor laws to avoid misclassification risks. Contractors are responsible for their own tax and social security contributions, simplifying payroll processes for the hiring company. 

3. Partner with an EOR in the country

Partnering with an Employer of Record (EOR) in the Czech Republic can streamline the process of hiring and managing employees, especially for companies without a local entity. An EOR handles all legal compliance, payroll, taxes, and HR responsibilities, allowing businesses to focus on their core operations. This partnership is particularly beneficial for companies looking to test the market without committing to a full setup or for those needing to quickly onboard talent in compliance with local labor laws. By leveraging an EOR's expertise, businesses can efficiently manage workforce needs while ensuring adherence to the regulatory landscape of the Czech Republic.

Employment Laws You Must Know Before Hiring in Czech Republic

Compliance risk while hiring in Czech Republic

When hiring in the Czech Republic, compliance risks include misclassification of employees as independent contractors, non-adherence to local labor laws regarding wages, working hours, and benefits, and failure to register employees with social security and tax authorities, which can lead to penalties and legal issues.

Key Aspects of Czech Republicn Labor Law:

Employment Contract: In Czech Republic, the Employment Act mandates written employment contracts for employees working more than one month. These contracts detail terms such as notice periods, maternity leave entitlements, and rest day allowances. 

While contracts must generally be in writing, oral agreements may suffice under certain conditions. The language of the contract must be in Malay or English. In disputes, the written contract serves as legal evidence. Compliance with statutory requirements ensures clarity and adherence to specified employment terms, protecting the interests of both employers and employees under Czech Republicn labour regulations.

Working Hours: Standard working hours in Czech Republic consist of eight hours per day, not exceeding 45 hours weekly. However, many workplaces observe a 40-hour workweek. This practice aligns with common norms, ensuring a reasonable balance between work and personal time for employees.

Overtime

Any work beyond standard weekly hours warrants overtime pay, as stipulated by the Employment Act, employment contracts, and collective agreements. Typically, the Employment Act serves as a guideline, particularly for manual and non-manual workers earning less than 2,000 MYR. Overtime on weekdays commands 150.00% of the regular rate, while weekend and rest day overtime is compensated at 200.00%. Public holiday overtime is remunerated at 300.00% of the regular rate.

Minimum Wage: The national monthly wage in Czech Republic stands at 1,500 MYR. Wage hikes are mandated solely for private sector firms employing five or more workers.

Payroll laws in Czech Republic 

In Czechia, the usual payroll period is monthly, with payments required on the same date each month, and no later than the subsequent calendar month after the work is completed.

Employment benefits in Czech Republic

Leave Policies in Czech Republic

Paid Time Off:

Full-time staff members in private industries receive a paid vacation of 20 working days annually. Those in the public sector and specific fields are granted 25 paid days off yearly, while educators enjoy 8 weeks of leave. Eligibility for leave starts after completing 60 days of service with one employer. Employers hold the authority to approve or reject leave requests based on business requirements. Unused leave can be carried forward to the next year with written approval from the employer.

Public Holidays:

There are 12 national holidays in Czech Republic.

Sick Days:

Employers are required to compensate employees for the initial 14 days of illness. Beyond this period, the Government provides sick pay, starting at 60% of the employee's average salary for the first 30 days (inclusive of employer-covered days), increasing to 66% from days 31 to 60, and 72% thereafter. Employees can take up to 380 calendar days of sick leave. Employers must gather sickness certificates, maintain records, and submit reports to Social Security authorities.

Maternity Leave:

A woman is eligible for 28 weeks of maternity leave (37 weeks for multiple births), with a mandatory minimum of 14 weeks. Maternity leave can commence eight weeks before the expected due date, but not later than six weeks. Maternity pay, constituting 70% of the regular salary, begins concurrently with maternity leave and is disbursed by Social Security. Job security extends from the start of pregnancy until one year post-maternity leave.

Paternity Leave:

New fathers (or those caring for a child under seven) are entitled to 2 weeks of post-natal paternal care benefit, paid at 70% of their regular salary. This leave must begin within six weeks of the child's birth and be taken continuously. To qualify, individuals must have contributed to Social Security for 270 days in the preceding two years. Mothers can opt to transfer some maternity leave to the father after seven weeks, with the father receiving parental pay. Termination of employment during paternity leave is prohibited.

Public Health Insurance 

In the Czech Republic, public health insurance is a mandatory system where residents are covered by state-provided healthcare. Contributions are split between employers and employees, with the government covering individuals who are unemployed, students, and retirees. This system ensures comprehensive medical care for all insured persons, including general and specialist medical services, hospitalization, prescriptions, and maternity care. The system is funded primarily through payroll deductions and is managed by the Czech Social Security Administration. It aims to provide equitable access to healthcare regardless of one's financial situation, making it a cornerstone of the Czech social welfare system.

Filing tax in Czech Republic

Income Tax:

In the Czech Republic, income tax is structured progressively, ensuring that individuals contribute to public revenues in accordance with their earnings. Those with lower incomes are taxed at a lower rate, while higher earners fall into a higher tax bracket. This system is designed to promote fairness, with the intent that those who can afford to contribute more do so. The progressive nature of the income tax helps in redistributing wealth and funding essential public services, supporting the government's efforts in social welfare, healthcare, and infrastructure development, thereby contributing to overall economic equity and stability. For a comprehensive view of Czech Republic tax structure, please refer to our detailed guide.

Other Tax and Social Security Contributions:

In the Czech Republic, both employers and employees are required to contribute to social security and health insurance schemes. These contributions fund pensions, sickness benefits, and unemployment support. Employers bear a larger portion of these costs, reflecting their responsibility in supporting the social welfare system. Additionally, these contributions ensure that employees are covered for healthcare, securing their well-being. While specific rates vary based on income thresholds, the overall system is designed to provide comprehensive social and health coverage, contributing to the financial stability and health security of the workforce. For a comprehensive view of Czech Republic tax structure, please refer to our detailed guide.

Business culture in Czech Republic 

Business culture in Czech Republic is characterized by a blend of traditional and modern influences, reflecting the country's diverse cultural landscape. 

  • Business interactions in the Czech Republic are typically formal, especially during initial meetings. Titles and surnames are commonly used until a more familiar relationship is established, reflecting a respect for hierarchy and formalities.
  • Czech business culture values straightforwardness and direct communication. Professionals are expected to be clear and concise in their dealings, which can sometimes be perceived as blunt by those from cultures with a more indirect communication style.
  • Time is treated with respect, and punctuality is taken very seriously in professional settings. Being on time for meetings is seen as a sign of reliability and professionalism.
  • The Czech business environment typically features a hierarchical decision-making process. Decisions are often made at the top levels of management, with input from various departments. However, the process can be thorough and may require patience.
  • While not as informal as in some Western cultures, business lunches and dinners are common for discussing matters in a less formal environment. These are seen as opportunities to develop relationships and are usually not the venues for decision-making or closing deals.

Top sectors to hire from in Czech Republic

1. Service Sector

Dominating the economic landscape, the service sector contributes significantly to the GDP and employment. Opportunities abound in areas like finance, telecommunications, and hospitality. IT and customer service roles are particularly robust due to the sector's broad impact on the economy, making it a prime area for recruitment.

2. Industrial Sector

This sector is a major economic driver, particularly in manufacturing which includes automotive and electronics industries. The demand for skilled labor is high, with roles ranging from engineers and production managers to quality control specialists. The industry's need for technical skills makes it a key hiring ground.

3. Agricultural Sector

Although smaller in comparison, agriculture remains vital. Employment opportunities focus on agribusiness, environmental management, and food production, with a growing emphasis on sustainable practices and technological integration to improve efficiency and output.

Top cities to hire from Czech Republic 

1. Prague

As the capital and largest city, Prague is the central hub of business and finance in the Czech Republic. It offers a rich pool of talent, particularly in IT, finance, and services, drawing professionals from across the country and internationally.

2. Brno

Known as a technology and university city, Brno boasts strong sectors in technology, engineering, and research. It's home to several major universities and research institutions, making it ideal for recruiting young, educated talent in tech-driven industries.

3. Ostrava

Positioned in a historically industrial region, Ostrava is transitioning towards modern industries but retains its strength in manufacturing and engineering. It's a key location for industries such as machinery and mining equipment.

4. Plzeň

Known for its role in manufacturing, particularly the automotive industry, Plzeň is also famous for Pilsner beer. The city's industrial base makes it a prime spot for skilled workers in production and brewing technologies.

5. Liberec

This city offers a mix of industries, including textile manufacturing, mechanical engineering, and innovation-driven enterprises. Its proximity to Germany and Poland also enhances its strategic importance for businesses looking to tap into Central European markets.

Hire in Czech Republic compliantly with Gloroots

Gloroots, as an Employer of Record (EOR) in Czech Republic, offers a streamlined solution for businesses aiming to establish and expand within the Czech Republicn market. Our EOR platform enables rapid onboarding of candidates, facilitating swift operational setup while maintaining adherence to both local and international regulatory standards. Tailored to support businesses of varying sizes, Gloroots alleviates the complexities involved in payroll management, benefits administration, and tax obligations, removing the need to set up a local entity. This service empowers companies to efficiently assemble and oversee a remote workforce in Czech Republic. For further details on how Gloroots can assist with your recruitment needs in Czech Republic, please reach out to us.

Frequently Asked Questions 

What is required to legally hire employees in the Czech Republic?

To legally hire employees, businesses must register with the Czech Social Security Administration and the tax office. Employers need to ensure compliance with the Czech Labor Code, which includes contracts, working hours, and minimum wage regulations.

How can a foreign company employ staff in the Czech Republic?

Foreign companies can employ staff directly by establishing a local entity such as a subsidiary or branch office, or they can use an Employer of Record (EOR) service to handle employment responsibilities without setting up a permanent establishment.

What are the main types of employment contracts in the Czech Republic?

The two main types of employment contracts are for definite and indefinite periods. Definite contracts are temporary and cannot exceed two consecutive years, while indefinite contracts are permanent and offer more job security.

Are there specific regulations for terminating employment in the Czech Republic?

Yes, employment termination must adhere to the conditions set out in the Czech Labor Code. Employers must provide justified reasons for dismissal and observe notice periods, which vary depending on the length of service and contract terms. Severance pay may also be required in certain circumstances.

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