Government Type: Unitary parliamentary constitutional republic
Currency: Czech koruna (CZK)
GDP Per Capita: 40,585 USD (2020)
Main Business sectors: 59.7%
Employment Rate: 79.9%
Global People has a significant advantage in the Czech market thanks to our experience in providing global employment solutions and in-depth understanding of the unique employment culture at each location.
When looking to employ in the Czech Republic, its incredibly important to understand the employment structure and be familiar with all employment rules and guidelines.
Global People, has a significant advantage in the Czech market thanks to:
Global people’s services include:
The Czech Republic, located in the heart of Europe, is one of the most diverse countries in the EU. Czechia is known by its strong technical industries and has an excellent work-life balance. The employment regulation consists mostly of local legislation, EU legislation, collective bargaining agreements and employment contracts. Almost a half of the Czech workforce are known to be covered by collective bargaining agreements.
The employment agreement or contract must comply with Czech law, collective agreements and EU rules. The agreements must refer to:
When one of the parties decides to terminate the employment relationship, they must provide notice in writing. If the employee is the one submitting the notice, they do not have to provide a reason for the termination of employment. If the employer is the side terminating the employment, the employer must specify the reason of dismissal.
The notice period must be the same for both the employer and the employee and shall be at least two months. The notice period starts on the first day of the calendar month following delivery of the notice and ends on the last day of the relevant calendar month.
An employee whose employment was terminated by notice or by agreement for organizational reasons is entitled to severance pay; the amount depends on the duration of the employment. Severance pay is one month of salary for those with one full year of service, two months for those with two years, and three months for those with three years of service or more.
The system in its current form was introduced by the Pension Insurance Act, which came into force in 1996. The contribution rate for the public pension system is 28%. Employers pay 21.5% of payroll, employees 6.5% of earnings. The self-employed pay the whole 28% of their earnings.
Social security contributions cover pensions, unemployment benefits and the sickness fund. In total, employers contribute 33.8% of an employee’s salary to these, while the employee contributes 11%.
The Czech Republic has one flat income tax rate of 15% on all earnings. The corporate tax rate is 19%.
All tax and social security contributions are withheld at source by employers.
Income tax rate is 15% calculated for “super gross” salary. This means the tax is calculated form the salary and social and health insurances paid by the employer. Therefore, the income tax rate is an effective tax rate of 20.1% from the gross salary.
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