Hiring a (Foreign) Employee in Czech Republic
Hiring and firing any employee in Czech Republic is a relatively complicated process, because of the extensive paperwork that needs to be filled in and the fact that there is no central point of (de)registration; each government office requires it's own registration.
Because of this, many companies (including Czech ones) are often no able to register their employees by themselves. The situation becomes even more complicated if the employee is not a Czech, but of foreign origin.
Standard Requirements for a company (employer) in Czech RepublicIn order to be able to hire people on employement contracts or even on temporary contracts (prácovni dohoda) the company (this can also be a foreign company) must be registered as such:
- at the tax office for income-related taxes,
- at the social office (as organisation),
- at the one or more of the public health care providers (as organisation),
- at the cooperative health insurance (for company liability).
Every time an employee is hired or fired this needs to be notified:
- at the social office as new employee,
- at the public health care provider (even if the person is already registered),
- at the labor office, exchanging information about the previous employment.
- at the tax office, if the person has not been registered before.
At the end of every month the accountant must be notified of sickness, holidays, day off without payment and in case of temporary workers the days and hours they worked. This is all essential data for the payroll administration.
Before the 8th of the following month the following payments need to be made: salary, social charges, health charges and once per quarter cooperative health insurance.
Missing out on tax / social / health payments will result in a check by the authorities. If a mistake is discovered by the company itself, it is clever to notify the authorities immediately. Usually this leads to a reduction in penalties. If however the authorities check a company and discover something, there is almost no escape from paying a fine.
Hiring a Foreign Employee - EU CitizenEU Citizens and their family members do not need a Visa or Work Permit, but still the employer must register an EU Citizen at the labor office.
Also, an EU-Citizen or family member must have a temporary residence permit if the purpose of stay is employment. This residence permit can be applied for if the person is already in Czech Republic.
Officially the application should be made within 90 days at the Foreign Police and is granted (almost) always.
We recommend however, to do this as soon as possible, as well as registration for income tax, so the tax residency can be proven from the date of written in the temporary residence permit.
Hiring a Foreign Employee - 3rd-Country NationalBefore being allowed to work in Czech Republic a 3rd-Country National will at least need a Work Permit + Visa for employment purposes, unless the employee has a permanent residence permit or is familymeber of an EU Citizen. In those cases the Work Permit is no longer required.
This Visa and Work Permit need to be renewed (extended) at the Foreign Police in Czech Republic. For a renewal a 3rd-Country National does not have to go to an embassy abroad.
Having said this, registering a worker as self-employed instead of employee is easier, cheaper and faster than applying for a work permit - Therefore we recommend this method, also because much less tax / social / health charges will be paid by the company and worker.
Work Permit for 3rd-Country NationalA 3rd-Country National without a Permanent Residence Permit needs to have a Work Permit in order to get a job as a regular employee. This is not an easy process. Many papers need to be provided (such as diplomas and certificates) - all translated with apostille. Note that there is a risk that the labor office refuses the application for a Work Permit, especially now there are so many unemployed already in Czech Republic, and therefore it becomes easier for the Labor Office to find a suitable person in Czech Republic, as they are required by law to do.
In order to apply for a Work Permit, the employer needs to initiate the process, by filing a job description at the local Labor Office. Then the position is posted for 30 days, and if no suitable czech person is found, the Ministry of Labor will do a 'nostrification' process. This process can take several weeks / months. With that, the 3rd-Country National can then apply for a Visa for work purposes. The total process may take 6 or more months.
Since it is such a long process it might be easier for an employer to hire:
- a Czech National,
- an EU-Citizen or one of his family members,
- a 3rd-Country National with an EU spouse,
- a 3rd-Country National with permanent Residence Permit
- a 3rd-Country National with a Trade License (Živnostenský List)
- a 3rd-Country National with a Company (SRO)
External workers on Živnostenský ListA company can hire a person on a živnostenský list and pay a monthly invoice. There is no employee registration, no social- and health charges to be paid and there is no obligation to pay the person several months' salary when fired.
There is however, one important condition: the work should not have the character of permanent employment. (i.e. full-time employment, the only customer is you, the person is sitting at a desk as normal employee). In Czech, this is known as the 'Svarc-system'. However, in practise, hiring a foreigner on a Trade License is practised widely and we, as accounting company, have yet to come a cross a case where this had consequences.
Another option for temporary work / on project basis is signing a "prácovní dohoda" or similar document.
There are three types of agreements for 'brigada' work, but it is wise to discuss this with us before hiring.
It is really not a good idea to have the person start without any written contract.
Employment Contract, Determined and Undetermined PeriodThere are two types of employment contracts:
- determined period, maximum a year
- undetermined period
The trial period is 3 months. During this time a person can be fired without reason. Should the employer want to fire the person after these 3 months, then usually at least 2 months salary should be paid (more if the employee has been in the company longer, the maximum payment could be up to 6 months)
An employer can offer the same employee more than one contract of determined time. But if between those temoprary contracts is a gap of small than 6 months not being employed at that company, the total months worked will start to add up. After having worked several times within 24 months, the employer is forced to give a contract of undetermined time.
We recommend for starting companies with foreign ownership to be very careful with the employment contracts. It is usually not clear how business the coming year will look like, so it is clever to write temporary contracts or hire people on Trade Licenses so that the company is not forced to pay employees huge sums severance payment.