Choosing between Employee or Živnostenský List (Freelance)?
Having employees is expensive business. The total costs for the employer are almost twice of what an employee gets on your bank account. Besides that, many times companies do not want extra employees, or are just looking for temporary workforce and prefer to 'out-source'.If the employing company is located outside of Czech Republic and the employee is located in Czech Republic (or the other way around), an employment contract becomes even more complicated (more expensive).
Getting a Work permit is a long and complicated process, especially if the person has no visa yet or is not living in Czech Republic. Most employers are not looking forward to dealing with the Labor Office.
Therefore, for an employer there are benefits in paying someone on freelance-basis, as external worker on a trade license.
Benefits using a trade licence (živno):
- deduct more costs (in most cases 60% of the revenue),
- pay less social / health charges * and income taxes (on only 40% of the revenue),
- you can have a živnostenský list and be a normal employee at the same time,
- a "živno" can be put on hold - no social / health charges then (not for business Visa),
- when you lose your job, your Visa does not expire right away as with Visas for employment,
- there is no need for a work permit, as you are not an employee,
- it is very easy to invoice clients in CZ and in foreign countries without difficult employment contracts.
- less jobsecurity (write a watertight contract),
- the need for an accountant (you are obligated to keep acoounting books),
- social- and health insurance * + income tax are now your responsibility,
- you are required to apply for a Business Visa or change the purpose of stay into 'business' **
- you are required to register at the commercial court (from 2011 this is automatic) **
- for a business Visa extension you must have a certain minimum income (about 10.000 CZK / month for one person) and be able to prove this.
* 3rd-Country Nationals without Permanent Residence Permit do not pay monthly health charges.
** according to the 2011 rules, the first 2 years it is not possible to change the purpose of stay.
Instead of a živnostenský list also an s.r.o. could be used, but for 'employment purposes' a živno is sufficient if the job doesn't have the character of permanent employment and you are able to get more than one client. Besides, from 1.1.2011 the Ministry of Interior requires that directors receive a fee for their activities (on which social- and health charges need to be paid), making directorship far less attractive than before.