SUCCESS, TOGETHER
Our staff are experts in fields ranging from operations, payroll, accounting, and more. Learn what you need to expand your business and hire staff in Czech Republic.
Photo by Kevin Andre
The Czech Republic is a landlocked country in Central Europe. The Czech Republic has a hilly landscape that covers an area of 78,871 square kilometers (30,452 sq mi) with a mostly temperate continental and oceanic climate.
Employees can be majorly divided into two categories – Contractors and Employees and defining relation with the employee is very important to avoid risks associated with misclassification.
The courts in India have applied the control and integration test to determine whether a person can be classified as an employee or independent contractor. The prima facie test is the control test to determine whether an employer-employee relationship exists and it is not merely to direct the nature of work that has to be carried out but also to control the manner in which it is done.
Another difference between an employer and contractors is an employer is required to withhold tax at the time of payment of salary to employees. The salary paid to an employee may include benefits and allowances that the employee is entitled to, which is beneficial to the employee from a tax perspective. However, with respect to independent contractors, the employer must withhold the applicable taxes; however, the amount paid may not be in the form of salary, but as professional fees for services performed. In both these cases, the employee and independent contractor/s will be required to file their income tax returns as prescribed under law.
The payroll cycle in the Czech Republic is generally monthly, and payments must be made on the same day of each month and no later than the following calendar month of the work performed.
Mandatory employee benefits in the Czech Republic include retirement, paid time off, and unemployment insurance. Supplementary employee benefits in the Czech Republic include retirement, flexible benefits, and meal vouchers. Perks in the country include gym memberships, language courses, salary continuations plans, transportation, and an additional week of vacation.
As of 2021, the Czech Republic returns to progressive taxation, with the introduction of a marginal rate of 23%, as follows:
Gross income up to the social security payment cap (the threshold for 2021 is CZK 1,701,168 and for 2022 is CZK 1,867,728) is subject to a 15% rate. Gross income exceeding this threshold is subject to a rate of 23%.
Social security taxes are obligatory for an individual employed by a Czech company. The rules on participation in the Czech social security and health insurance system are complex, and each secondee’s situation should be reviewed individually.
Social security contributions provide funding for three separate funds: pensions, unemployment benefits, and sickness (together with other benefits).
When employers want to dismiss their employees in the Czech Republic, they have several possibilities to do so. In general, the regulation is rather strict and influenced by the European legislation.
The notice of termination must always be given by the employer on the basis of the Czech Labour Code (specifically mentioning the stated reasons), otherwise the notice of termination is invalid. Also, the notice of termination must be always in writing (otherwise it is also invalid).
Please drop us an email below to let us know how we could help you fulfill your global workforce needs. We would love to share more about our capabilities and start a conversation.