1. Introduction
As Czech employment law can, in general, be described as quite protective of the employee, and the employee is considered the weaker party in the relationship, employers should always act in compliance with the Czech Labour Code and other labour laws to avoid any breach of the law.
Thus, when opening up an establishment in the Czech Republic, the company as an employer should be informed about the fundamental requirements of Czech employment law.
Havel & Partners is the largest law firm in the Czech Republic and Slovakia. Our clients include large international companies, leading Czech and Slovak firms, including strategic state-owned companies and public sector authorities, as well as medium-sized businesses, individual entrepreneurs, and investors. We advise approximately 150 of the largest Fortune Global 500 companies, almost 50 of the Czech Top 100 companies, and 20 of the TOP 100 Slovak companies. Havel & Partners currently provides its services to a total of 2,500 clients.
We are a business-oriented law firm with a pro-active approach and our labour law team has vast experience advising in a whole range of day-to-day matters in the workplace. We understand how HR teams and the management of our clients work and we know how important it is for companies to stay on top in the ever-changing and constantly evolving HR area. We also have extensive experience in the statutory regulation of employment relations between expatriate employees and domestic employers as well as between Czech employees and foreign employers, including the selection of the appropriate law and jurisdiction to govern the relevant employment relationships and subsequent tax optimisations. Our law firm also provides comprehensive legal support to employers and employees (as well as to their family members) with regard to immigration law. Thanks to our extensive experience with cross-border projects, our highly specialised team is able to efficiently create the most suitable structure of the relocation plan, and assess the social security and tax aspects, as well as the choice of law that is to temporarily govern the contractual relationship.
2. Labour and Employment Law Requirements
a) Employer Policy Requirements
The Czech Labour Code sets the employee’s minimum entitlement which must be provided by the employer:
- Minimum salary;
- Maximum shift length;
- Maximum length of overtime work;
- The written form is generally required for the most important documents;
- Financial premiums for overtime, work performed on weekends/public holidays;
- Annual paid leave (minimum of 4 weeks);
- Sick pay (paid partly by the employer and partly by the state);
- Maternity, paternity, and parental leave;
- Leave in certain specific situations (taking care of a sick child, to get married, etc.);
- Severance pay when terminating employment on the grounds of restructuring or due to occupational injury/disease;
- Employees are entitled to participate in trade unions and other representative bodies.
b) Employee Training Requirements
The employer is obliged to ensure a safe workplace for its employees. According to the Czech Labour Code, besides other duties, the employer is obliged to provide employees mainly with trainings as follows:
- Occupational Health and Safety training – at the commencement or if there is any significant change of the employment or workplace conditions, and regularly during the employment.
- Fire Protection training – would usually be carried out together with the above-mentioned Occupational Health and Safety training.
- Driver’s training – should the employees drive a car for the purposes of their employment, driver’s training should be provided. The training must be repeated periodically.
Every employer is also obliged to provide a sufficient number of employees to possibly provide first aid, depending on the risks at the workplace. The first aid training should include a theoretical part as well as practical training of the skills that are necessary for laymen to provide first aid. The focus should also be on the prevention of accidents at the given workplace.
Other trainings can be required due to specific activities of the employer.
c) Employment Contracts
Minimum Requirements
A valid employment contract must be concluded in writing and must include:
- the type of work (job title) that the employee will perform for the employer;
- the place or places of work where the employee will perform the work;
- the date of commencement of employment.
Besides the above statutory essentials, the employer is also required to inform employees in writing about:
- the specification of the type of work (job description);
- holiday entitlement;
- probationary period (if any);
- the procedure for the eventual termination of the employment and notice period;
- professional development, if the employer provides it;
- weekly working hours and working schedule;
- minimum daily and weekly rest periods;
- salary and payday;
- collective bargaining agreements (if any); and
- the social security body to which the employer pays social security contributions.
This information is either included directly in the employment contract or provided in a separate document. Some of the above information may be supplied by reference to the relevant legislation, collective agreement, or internal regulation.
Besides the above, it is generally up to the parties to negotiate the rest of the contract. It is typical to include provisions relating to the duration of the employment, general obligations of the employee, confidentiality, non-compete clause, and/or regulation of IP rights. Termination provisions are not so typical, since the termination process is specifically stipulated by law.
The contract must be drafted in a language which the employee understands, but it is recommended to draft it in a bilingual version.
The employment contract may be concluded for a definite or indefinite period of time. The duration of a fixed-term contract may not exceed three years and may be repeated or extended only twice.
An extension of an employment relationship shall also be considered an agreed recurring employment relationship. After the expiry of a period of three years from the termination of the preceding fixed-term employment relationship between the same contracting parties, the preceding employment relationship shall not be taken into account.
Where notice of termination has been served, the employment relationship will come to an end upon the expiry of the notice period.
The statutory notice period is two months, the notice period may be agreed longer, but only if it is the same for both parties. This agreement must be in writing.
Under the Czech Labour Code, the notice period commences on the first day of the calendar month following delivery of the notice and comes to an end upon the expiry of the last day of the relevant calendar month.
3. Corporate Law Requirements
a)Compliance for Incorporation
Czech law offers several different corporate vehicles for doing business. Those can be divided into three basic groups:
- branches;
- partnership companies (namely unlimited partnership and a limited partnership);
- limited liability companies (namely limited liability companies “LLC” and joint stock companies “JSC”).
A competent court or notary office can register a company directly into the Czech Commercial Register. Additionally, ready-made companies (LLCs and JSCs) are available and permitted.
The following documents are primarily required for registration in the Czech Commercial Register:
- proof of business licence (issued by the Trade Office);
- Articles of Association or Memorandum of Association;
- a document proving the company’s right to use the property where it will have its registered office (virtual seats are an option);
- consent of the spouse if part of the community property is to be used for business purposes and if the value of such property exceeds a reasonable amount;
- copy of the Criminal Register records or other certificates confirming the clean criminal records of executives and branch founders;
- contribution administrator’s declaration;
- affidavits of executives.
b) Post Incorporation Registrations
After the company is registered in the Czech Commercial Register, it must also complete the following registrations:
- Corporate Income Tax registration (Tax Office)
Every company must be registered for corporate income tax with the Tax Office.
- VAT registration and control reporting (Tax Office)
If the company’s revenue exceeds CZK 2 million, the company must be registered for VAT (subject to other conditions). In most cases, the VAT payer is also obliged to submit control reporting.
- Registration for social and health insurance
Within 8 calendar days of hiring the first employee, the employer must be registered with the Social Security Office. Within 8 calendar days of the employee’s commencement, the employee must be registered with the Social Security Office, too. With the employment of the first employee, the employer must also be registered with the relevant health insurance company.
4. Payroll and Benefits Providers
Instead of employing accountants, the employer may utilize the services of outsourced payroll companies. The main advantage of using payroll providers is their liability; under Czech law, they must be insured. In the event of any damages, the insurance company will cover the costs, subject to the terms and conditions of the insurance policy. The employer can also use benefit providers, who typically offer sports/cultural vouchers or meal vouchers in the Czech Republic.
