Knowing your labour laws in the Czech Republic Knowing your labour laws in the Czech Republic

Knowing your labour laws in the Czech Republic
14 Dec 2017

Business is booming in the Czech Republic, which alongside Poland and Romania, is enjoying high economic growth. The country also has the lowest unemployment rate in the European Union (EU), amounting to only 2.9% in June compared with 3.8% in Germany and 7.7% across the EU overall.

The employment of foreigner workers is likewise on the rise, with close to 400,000 recorded at the end of 2016.

But as the country grows in appeal to both international and domestic employers alike, it is important that they familiarise themselves with its labour laws. Here is a summary of the key points you need to know:

Social security

The Czech Republic has a mandatory social security system that provides pension, sickness, unemployment and health benefits. Both employer and employees are required to contribute towards social security and health insurance schemes. In 2017, the annual cap on the salary base that is used to calculate total social security contributions (pension, sickness and unemployment) was set at CZK 1,355,136 (US$62,452). There is no cap for health insurance.

Work permits

EU nationals and citizens of Iceland, Liechtenstein, Norway and Switzerland do not require a work permit or visa to live and work in the Czech Republic, but they must register with the Labour Office.

When wanting to hire new staff members, employers must first announce that they have a vacant post. If the position is not filled by a Czech or EU national within one month, they are then authorised to apply for a work permit to employ a non-EU foreign national.

Type of contribution

Employer contribution (% of salary)

Employee contribution (% of salary)

Pension

21.5%

6.5%

Sickness insurance

2.3%

-

Unemployment insurance

1.2%

-

Health insurance

9.0%

4.5%

Total:

34.0%

11.0%

A work permit application must include a degree equivalency certificate, which confirms that the applicant’s foreign educational qualifications are of a comparable standard to similar Czech qualifications. The applicant must also receive police clearance from their country of origin and/ or the ountry in which they have resided for more than 90 days.

All non-EU nationals intending to work in the Czech Republic are required to obtain an Employee Card/EU Blue Card/Green Card before commencing employment. The Blue Card is a combined work and residence permit that applies to highly qualified, non-EU foreign nationals working in an EU country.

The Employee Card, meanwhile, is a type of permit that allows foreigners to reside in the country long-term for working purposes. It is valid for up to two years but can be extended indefinitely for the duration of the employment term.

Non-EU foreign nationals also need to register their place of residence with the local Foreigners’ Police Office within three days of their arrival in the Czech Republic. The same applies to EU nationals intending to stay in the country for more than 30 days. If they wish to remain for more than 90 days, they can apply for a Confirmation of Temporary Residence at the Office of the Ministry of Interior.

Payroll cycles and overtime rules

The minimum wage in the Czech Republic is currently CZK 11,000 (US$507) per month or CZK 66 (US$3) per hour. From January 2018, it will increase to CZK 12,200 (US$562) per month or CZK 73.20 (US$3.40) per hour.

Overtime is payable at a rate of at least 25% above normal pay rates (or equivalent time-off). Night and weekend working must be reimbursed at a minimum of 10% above the normal pay rate. Employees who work over public holidays are entitled to a compensatory day off or to be paid a premium of 100% over their salary or wage.

The Czech Republic has a five day standard working week (Monday to Friday). Normal business hours are between 8:00am and 6:00pm, and shifts between 10.00pm and 6.00am are classified as night working. Maximum working hours cannot exceed 40 hours per week.

Employees are entitled to a daily rest break of at least 30 minutes after six hours of continuous work, an uninterrupted rest period of 11 hours between two consecutive work days and an uninterrupted rest period of 35 hours each week. Hours worked in excess of normal working hours count as overtime, which cannot exceed eight hours per week or 150 hours per year.

HR legislation

Employment in the Czech Republic is primarily governed by the Labour Code 2006, which applies to all employees regardless of their nationality. It governs terms and conditions of employment such as working hours, holidays, rest periods, wages, overtime, occupational health & safety and termination of employment.

If either or both the employer and employee are foreign nationals, the law of a second jurisdiction may be chosen to govern the employment relationship, but it cannot lead to the employee being deprived of protections offered by Czech employment law.

Frédéric Labiche has more than 20 years of experience in outsourced business services. He has managed TMF Group’s Czech Republic operations since 2013. Frédéric’s experience spans local and international financial reporting, tax compliance, business processes and systems implementation. He is a certified member of the ACCA.

Business is booming in the Czech Republic, which alongside Poland and Romania, is enjoying high economic growth. The country also has the lowest unemployment rate in the European Union (EU), amounting to only 2.9% in June compared with 3.8% in Germany and 7.7% across the EU overall.

The employment of foreigner workers is likewise on the rise, with close to 400,000 recorded at the end of 2016.

But as the country grows in appeal to both international and domestic employers alike, it is important that they familiarise themselves with its labour laws. Here is a summary of the key points you need to know:

Social security

The Czech Republic has a mandatory social security system that provides pension, sickness, unemployment and health benefits. Both employer and employees are required to contribute towards social security and health insurance schemes. In 2017, the annual cap on the salary base that is used to calculate total social security contributions (pension, sickness and unemployment) was set at CZK 1,355,136 (US$62,452). There is no cap for health insurance.

Work permits

EU nationals and citizens of Iceland, Liechtenstein, Norway and Switzerland do not require a work permit or visa to live and work in the Czech Republic, but they must register with the Labour Office.

When wanting to hire new staff members, employers must first announce that they have a vacant post. If the position is not filled by a Czech or EU national within one month, they are then authorised to apply for a work permit to employ a non-EU foreign national.

Type of contribution

Employer contribution (% of salary)

Employee contribution (% of salary)

Pension

21.5%

6.5%

Sickness insurance

2.3%

-

Unemployment insurance

1.2%

-

Health insurance

9.0%

4.5%

Total:

34.0%

11.0%

A work permit application must include a degree equivalency certificate, which confirms that the applicant’s foreign educational qualifications are of a comparable standard to similar Czech qualifications. The applicant must also receive police clearance from their country of origin and/ or the ountry in which they have resided for more than 90 days.

All non-EU nationals intending to work in the Czech Republic are required to obtain an Employee Card/EU Blue Card/Green Card before commencing employment. The Blue Card is a combined work and residence permit that applies to highly qualified, non-EU foreign nationals working in an EU country.

The Employee Card, meanwhile, is a type of permit that allows foreigners to reside in the country long-term for working purposes. It is valid for up to two years but can be extended indefinitely for the duration of the employment term.

Non-EU foreign nationals also need to register their place of residence with the local Foreigners’ Police Office within three days of their arrival in the Czech Republic. The same applies to EU nationals intending to stay in the country for more than 30 days. If they wish to remain for more than 90 days, they can apply for a Confirmation of Temporary Residence at the Office of the Ministry of Interior.

Payroll cycles and overtime rules

The minimum wage in the Czech Republic is currently CZK 11,000 (US$507) per month or CZK 66 (US$3) per hour. From January 2018, it will increase to CZK 12,200 (US$562) per month or CZK 73.20 (US$3.40) per hour.

Overtime is payable at a rate of at least 25% above normal pay rates (or equivalent time-off). Night and weekend working must be reimbursed at a minimum of 10% above the normal pay rate. Employees who work over public holidays are entitled to a compensatory day off or to be paid a premium of 100% over their salary or wage.

The Czech Republic has a five day standard working week (Monday to Friday). Normal business hours are between 8:00am and 6:00pm, and shifts between 10.00pm and 6.00am are classified as night working. Maximum working hours cannot exceed 40 hours per week.

Employees are entitled to a daily rest break of at least 30 minutes after six hours of continuous work, an uninterrupted rest period of 11 hours between two consecutive work days and an uninterrupted rest period of 35 hours each week. Hours worked in excess of normal working hours count as overtime, which cannot exceed eight hours per week or 150 hours per year.

HR legislation

Employment in the Czech Republic is primarily governed by the Labour Code 2006, which applies to all employees regardless of their nationality. It governs terms and conditions of employment such as working hours, holidays, rest periods, wages, overtime, occupational health & safety and termination of employment.

If either or both the employer and employee are foreign nationals, the law of a second jurisdiction may be chosen to govern the employment relationship, but it cannot lead to the employee being deprived of protections offered by Czech employment law.

Frédéric Labiche has more than 20 years of experience in outsourced business services. He has managed TMF Group’s Czech Republic operations since 2013. Frédéric’s experience spans local and international financial reporting, tax compliance, business processes and systems implementation. He is a certified member of the ACCA.

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