- Overview: Czech Republic
- Global HR Compliance
- Global PEO and Payroll
- Work Permit for Hiring Expats via Global EOR
- Expand without a Company Set Up
- Contractor vs. employee: which is better?
Global HR Compliance in the Czech Republic
If you’re looking to expand your business internationally and grow into new markets, you might be overwhelmed by the prospect of keeping up with an ever-changing array of employment laws and tax regulations. It can feel impossible to keep up with everything you need to do to ensure that your employees are happy, loyal, and motivated—and it can also seem incredibly difficult to ensure that you’re in compliance with each country’s laws. The consequences for non-compliance with other regulations range from small monetary penalties to criminal prosecution. It’s important to be aware of these penalties to protect your business and ensure you’re doing everything possible to avoid them.
That’s why many companies turn to Global PEO and EOR solution providers: they know that these experts can help them hire employees across multiple countries while reducing their overall risk and ensuring compliance with local laws. These companies provide various services that can help your company save time and money while ensuring you stay compliant with government regulations in the Czech Republic. They can help you find qualified employees, manage payroll and benefits administration, assist with immigration paperwork, and even handle international recruiting efforts. These companies are experts in helping companies worldwide meet their HR needs when expanding into global markets.
Partnering with Acumen International, a leading PEO and EOR global employment solutions provider is the best way for your company to thrive internationally without slowing down or changing how you do business. With Acumen PEO and EOR by your side, you can get ahead of the game regarding international hiring compliance, identify and mitigate risks related to regulatory compliance, such as employer misclassification risks, and stay on top of any tax implications related to where your employees work.
Risks of Employment Compliance Violations in the Czech Republic
HR compliance affects every organization. The potential costs of non-compliance are far more expensive than the potential expenses that would be incurred by guaranteeing global HR compliance. The cost of a non-compliant action can be quantified in monetary penalties, legal fees, and lost customers. The cost of ensuring compliance can be quantified in the time, money, and resources spent on developing and implementing compliant global employment strategies. Only 40 percent of businesses are thoroughly prepared for an HR compliance audit.
As a business owner, you want to avoid any association with corporate scandals or lawsuits. Employee compliance is essential to keeping your company name clean and avoiding hefty fines. To maintain compliance with local labor and tax regulations, procedures, and other related laws, businesses must be proactive when expanding globally. By taking steps to ensure employee compliance, businesses can protect themselves from legal troubles and negative publicity.
Financial Costs of Non-compliance
To combat the potential financial costs of non-compliance, the first step is understanding the laws and regulations that apply to your business in the Czech Republic. Every European country has its minimum wage and overtime requirements, as well as employment agreement termination reasons, for example. Local labor laws also affect most businesses, from workers’ compensation and minimum wage to discrimination in hiring practices and parental leave.
Employers have a lot to lose when they don’t comply with labor laws and workplace regulations. The bottom line is that simply adhering to laws and standards is much less costly than dealing with the financial consequences of non-compliance with labor laws and employment regulations in the Czech Republic.
Employee Non-Compliance Issues Can Lead to Serious Legal Consequences
Are you concerned your actions and decisions could hurt your company’s reputation? Legal action and criminal charges are other potential results of failure to comply with employee compliance laws. This can result in dramatically increased legal costs for civil litigation and potential criminal charges. The most immediate effect of employee non-compliance is bad publicity, which could lead to lawsuits. All kinds of legal action such as fines, class action lawsuits, or lawsuits from government agencies result from non-compliance. If this applies to you or your company, it’s time for a change.
HR Compliance Risks to Global Employers
- Complex in-country tax and social security regulations
- Ubiquitous and highly demanding trade unions
- Labor laws favoring the rights of employees over employers
- Employee misclassification risk
- Reputational damage risk.
Employee Misclassification Risk Prevention in the Czech Republic
Employee misclassification risk has become a pressing issue in the Czech Republic, and it’s one that is being taken increasingly seriously by the government. As a business owner, you already know how important it is to comply with tax law—but did you know that this extends to how your employees are classified? Employee misclassification is a serious issue for employers in the Czech Republic. Knowing the possible consequences of this mistake can help you avoid misclassifying your employees and ensure compliance with federal and local laws.
How to Avoid Employee Misclassification Risk
Employee misclassification happens when an organization is incorrectly classified as a non-employee or a self-employed business. While this might seem like a small issue, many risks are associated with being incorrectly classified. First, working without the benefits and protections inherent in being an international employer can put your business at risk of being sued by one or more of your employees. Second, incorrect employee classification may lead to your organization being audited by the government and paying fines for not staying compliant with the law. Third, if you’re incorrectly classified as a non-employer or self-employed business, you’re not eligible for certain tax deductions that could leave you paying more than you should for payroll expenses.
To avoid all these risks and continue operating legally, your organization’s workforce needs to be classified correctly.
The first step to preventing misclassification is understanding what it means and how you can recognize it. Employee misclassification occurs when an employee is mistakenly classified as an independent contractor. The governments, labor, and tax authorities have created a series of regulations and guidelines to determine whether someone should be considered an employee or an independent contractor. If you follow the guidelines, you’ll be on the right track to avoiding the risk of misclassification.
One of the biggest factors affecting misclassification is a lack of understanding about employment status and how certain actions can jeopardize your organization’s tax status.
For example, if you hire independent contractors instead of full-time employees to save money on expenses normally covered for full-time employees—such as benefits, paid time off, and sick days—you may have more indirect costs down the line. You’ll have to do more paperwork at tax time and pay back taxes and penalties if you’re audited by government authorities, and they discover a misclassification case.
Global EOR and PEO Solution: Staying on Track with Employee Compliance
When expanding your business internationally, it is important to know the potential risks involved. Different countries have different laws and regulations regarding employment, taxes, and compliance, making operating in multiple countries complicated and risky. You could incur a heavy burden of compliance-related expenses if you are not careful.
If you want to avoid non-compliance risks in the Czech Republic when expanding internationally, take steps to ensure that your operations will not be burdened by outdated legislation or overly restrictive regulations. Keep up to date on changes affecting your business and ensure that your company is well positioned to accommodate them from the start.
In the Czech Republic, as in many European countries, a company should partner with a PEO & EOR global employment solutions provider to handle HR administration duties, including payroll and benefits administration and regulatory compliance.
Achieving 100% HR Compliance in the Czech Republic with Acumen International
Acumen International is a leading provider of global EOR and PEO services, offering fully compliant and cost-effective solutions for businesses that need to manage international payroll, HR & benefits administration across 190 countries. The team of Acumen PEO provides strategic guidance and a wide array of high-quality, cost-effective services tailored to your specific requirements that can help your company grow and scale up safely. Here are some of them.
- Processing Immigration requirements
- Business visa applications & extensions
- Work permit sponsorships
- Streamline onboarding, benefits, payroll, PTO
- Local labor law compliance across 190 countries
- Audit-proof compliance requirements
- Employee benefits management
- Handling employment contracts, terminations, and compensation
- Processing medical insurances and benefits
- Payroll, including year-end tax statements
- Relocation Services & housing
- Benefits administration
- Special needs or requirements
- Multi-country employment without limitations
- Handling contract worker and ex-pat workforce management
- Compliant employment or termination within 72 hours.
Our team of English-speaking professionals frees you from working through language nuances. Acumen International works 24/7 and can assist you whenever you need it, regardless of time zones. We can create tailored global employment solutions for you to deploy in Estonia that is managed legally and in full compliance with the employment laws, tax, social security, and immigration requirements in Estonia. We can help you navigate this new territory compliance landscape so you aren’t exposed to any legal issues.
Global Employment Cost Estimation
As your company grows and expands its operations globally, it becomes increasingly important to have a global employment cost prediction that can give you visibility into your worldwide workforce expenses. Global Payroll Calculator can do that by providing you with predictive analytics on global employment costs and employer and employee tax analysis capabilities. This allows you to budget more effectively for your expansion plans and manage your international workforce. Having global employment costs at your fingertips helps you stay ahead of the competition and maintain a healthy bottom line.
The Global Payroll Calculator leverages unique up-to-date data collected by Acumen’s expert in-house team research of over 1500 official government sources and validated with local lawyers, compliance experts, and accountants.
Global Payroll Calculator helps companies minimize labor costs while providing up-to-date information on hiring, compensation, and tax requirements across 190 countries. The Global Payroll Calculator is also ideal for rapid global employment as it provides accurate estimates of an organization’s international intake, accounting for relevant factors such as salary levels, taxation rules, hiring requirements, and other legal standards across multiple jurisdictions.
HR Compliance Guide: Hiring and Firing Workforce in the Czech Republic
Apart from the fact that the Czech Republic is a staunch EU member, it is also strategically positioned in Central and Eastern Europe. It is a foolproof gateway to around 502 million regional consumers. The Czech Republic has a relatively stable economy with a sophisticated infrastructure and a highly educated workforce, to mention but a few. Nevertheless, the country is still considered one of the most challenging places to conduct business globally. This should not scare you because a problem does not exist without a befitting solution.
All you need to do is employ the services of a locally sourced provider who knows the ins and outs of labor law in the Czech Republic. Global Employer of Record is all you need to do that.
Here are a few facts to be aware of about employment in the Czech Republic.
An indefinite duration employment contract is established if the duration of the employment relationship has not been expressly agreed upon.
A fixed-term employment relationship between the contracting parties may not exceed three years. As of the first fixed-term employment relationship date, it may be recurrently agreed no more than twice.
A collective agreement may be concluded on behalf of employees only by their trade union organization. A collective agreement may regulate wage and salary rights and other employee rights in labor relations as well as rights or obligations of the contracting parties to the agreement. A collective agreement may be concluded by one or more employers or by one or more employer organizations on one side and by one or more trade union organizations on the other.
Employment Termination and Severance Pay (Dismissal)
An employment relationship may be terminated:
- By agreement
- By notice of termination (when given by an employer, it is referred to as dismissal, when it is given by an employee, it is referred to as resignation)
- By immediate termination
- By termination within the trial period
The employee may immediately terminate his employment relationship (instant resignation) only if:
- According to a medical certificate issued by the occupational medical services provider or under a ruling of the competent administrative agency having reviewed the medical certificate, the employee cannot perform his work (job) any longer without a serious threat to his health and the employer has not transferred the employee to perform some suitable alternative work within 15 days of the submission of such medical certificate.
- The employer has not paid this employee’s wage or salary, compensatory wage or compensatory salary, or some part of such wage or salary within 15 days of the maturity date.
The employer may immediately terminate an employment relationship only:
- If an employee has been sentenced, under a final verdict, for a willful criminal offense to a term of unconditional imprisonment of over one year or if an employee has been convicted, under a final judgment, for a willful criminal offense committed during the performance of his working tasks, or in direct connection therewith, to unconditional imprisonment of no less than six months.
- Employees who breach their obligations under the law, especially in a manner that adversely affects their work performance, may be subject to disciplinary action.
Unlawful Employee Dismissal in the Czech Republic
It is prohibited to give notice to an employee during the protection period, namely:
- During a period while an employee is recognized to be temporarily unfit for work (unless the employee concerned brought on this incapacity intentionally or unless it arose as an immediate consequence of his drunkenness or abuse of addictive drugs), or during a period from submission of a proposal for an employee’s treatment in a medical (health care) establishment or a spa or during a period from the start of his treatment in a medical establishment or a spa until such treatment comes to an end; if an employee suffers from tuberculosis, the protection period shall be extended by six months as of his discharge from treatment at a health care establishment.
- If an employee is called up to take part in military exercises or extraordinary military exercises, the protection period shall start as of the date when the relevant called-up order is served on such employee and shall last during his participation in the exercises and for two weeks after the employee is discharged from the exercises.
- During a period while an employee is fully released (from his job) to exercise a public office.
- During a period while a female employee is pregnant or is on maternity leave or while a female or male employee is on parental leave.
- During a period while a night worker is recognized to be temporarily unfit for night work by a medical certificate issued by the occupational medical services provider.
Notice Period in the Czech Republic
Where notice of termination has been given, the employment relationship will end upon the notice period’s expiry. The notice period must be the same for both the employer and the employee and shall be at least two months. The notice period may be extended only by agreement between the employer and the employee; this agreement must be in writing. The notice period shall run on the first day of the calendar month following delivery (service) of the notice and come to an end upon the expiry of the last day of the relevant calendar month.
Severance Payments in the Czech Republic
On termination of an employment relationship, an employee whose employment relationship is terminated by notice given by his employer or by agreement for the same reasons is entitled to receive from the employer severance pay (redundancy payment) at least in the amount equal to:
- Once his average (monthly) earnings were an employment relationship with the employer lasted less than one year.
- Twice his average earnings where an employment relationship with the employer lasted at least one year and less than two years.
- Triple his average earnings where an employment relationship with the employer lasted at least two years.
- The sum of triple his average earnings and the amounts laid down in (a) to (c) where his employment relationship is terminated in a period when he is subject to a working hours account.
Employee Benefits and Contributions in the Czech Republic
The most common benefits for employees in the Czech Republic are:
- bonuses in terms of financial rewards
- professional training
- language courses and personal development
- the option to work from home
- additional days off (extra holidays, study leave, sick days)
- discounts on company products
- flexible working hours
- meal vouchers
- company phone
- company car or transport allowance
- insurance contributions
- refreshment/beverages at the workplace
Certain companies also offer temporary accommodation or housing allowances, recreation in the company’s facilities or holiday allowances, or free tickets by companies operating regular public transportation.
Probationary Period in the Czech Republic
If a probation period is agreed upon, it may not be longer than:
- Three consecutive months from the date when the employment relationship commences.
- Six consecutive months from the commencement date of the employment relationship where it concerns a managerial employee.
A probation period may also be agreed upon with the appointment to a top managerial position (i.e. as head of a government agency, its branch, or section). A probation period may be agreed latest on the day which has been agreed as the date of work commencement or on the date stated as the date of appointment to a top managerial position (as head of a government agency, its branch, or section). An agreed probation period may not be subsequently extended. However, the probation period shall be extended by the period of full-day obstacles to work due to which the employee does not perform work during the probation period and by a full-day leave of absence during the probation period. A probation period may not be longer than one-half of the agreed period of the employment relationship. A probation period must be agreed upon in writing.
The employer may order overtime work only for serious operational reasons, even within an uninterrupted rest period between two shifts or even on non-working days. An employee may not be ordered to do more than 8 hours of overtime work within individual weeks and 150 hours of overtime work within one calendar year.
The standard working week in the Czech Republic is regulated by law at 40 hours a week (42.5 hours, including a half-hour break for lunch each day) and is usually divided into five working days of eight hours (8.5 with lunch) each. The lunch break does not count as working time.
Annual Leave in the Czech Republic
Minimum paid holidays entitlement
Under family circumstances or for other especially personal reasons, the employee may be given leave without pay, the duration usually determined under the agreement between the employee and the employer. It is applicable upon request but in certain cases prescribed by law. For example, the employer is obliged to provide leave for the performance of a public office or military training; in other cases, it depends on the agreement with the employer.
Unpaid vacation entitlement
There is a list of events for which an employee must be granted time off. These include medical examinations, weddings, and the birth of a child, as well as deaths and funerals within the immediate family. In addition, employers must grant their employees leave for work performed at a public office and other public interest duties if employees cannot perform these activities outside working hours.
Sick Leave in the Czech Republic
Employers must pay sick employees for the total sick leave benefit of up to 14 days starting the first day.
Parental Leaves in the Czech Republic
Peněžitá Pomoc v mateřství, a benefit more commonly known as maternity leave, is financial support in place of a parent’s salary and is paid for 28 weeks (or for twins, triplets, etc. 37 weeks). The maternity leave period begins at least six and eight weeks before the baby is due to be born. After the baby reaches 7 weeks of age, the father can take over the maternity leave instead of the mother if he is eligible (based on the same conditions – sickness insurance).
An employee can be absent from work to care for a child younger than ten years of age and to provide care to a sick family member. Further, if an employee caring for a child under 15 years of age, or another dependent person, requests shorter working hours or some other reasonable adjustment to the weekly working hours, the employer must comply with the request unless serious operational reasons prevent it from doing so.