The complete guide to offering employee benefits in the Czech Republic
Mar 30, 2023
When you plan to hire employees in the Czech Republic, it’s crucial to offer them the right benefits package to stay compliant with the labor laws of that country. As a member of the European Union (EU), the Czech Republic (also known as Czechia) is obliged to uphold employees’ rights and protections as laid down in EU labor laws.
Here's everything you need to know to offer benefits that meet statutory requirements under Czech labor laws, as well as what you can offer in addition to your employees in the Czech Republic.
What employee benefits are mandatory in the Czech Republic?
The mandatory benefits you need to offer employees in the Czech Republic are regulated by the Czech Labor Code, act No. 262/2006 Coll., as amended, known in Czech as the “Zákoník Práce” and social security contributions as set out in act No. 589/1992, as amended, and administered by the Czech Administration of Social Security (CSSZ). If you employ a Czech worker and fail to offer them these mandatory employee benefits, you could wind up with a hefty fine and in more serious cases, you may personally be held criminally liable.
Keep in mind that the benefits required by the Czech Labor Code are statutory minimums and as an employer, you can always offer more than these mandatory benefits. Also, note that the provisions in the Czech Labor Code apply to employees who either have an employment contract (an agreement to complete a job, which is for temporary and seasonal workers) or an agreement to perform work, which is mainly for long-term part-time workers. Independent contractors in the Czech Republic aren’t entitled to any benefits.
All taxpayers in the Czech Republic must pay contributions to pension insurance. These contributions are determined by the taxpayer’s assessment base. For employees, their assessment base is the sum of their earnings that are subject to income tax according to the Income Tax Act, act No. 589/1992 Coll. For employers, the assessment base is the sum of the assessment bases of their employees.
Employees contribute 6.5% of their assessment base to social security as a whole, including pension insurance. Employers contribute 21.5% of their assessment base to pension insurance.
As an employer, you can apply for a discount of 5% of the total assessment base for certain employees, including employees younger than 21 and specific part-time employees. You must pay your and your employee’s contributions for the calendar month by the 20th of the next calendar month. Late payment or underpayment will result in a penalty of 0.05% of the outstanding amount for every day that the full payment is outstanding.
Currently, people in the Czech Republic can start claiming old-age pension at 65.
Employees who lose their job in the Czech Republic can claim unemployment benefits if they lose their job after having been employed for at least 12 months in the last 24 months. They can claim 65% of their last monthly salary for the first two months, 50% for the next two months, and 45% for the remaining period up to a total period of 11 months.
As an employer, you have to contribute 1.2% of your base assessment to the state employment policy, which is responsible for paying unemployment benefits.
As an employer, you must contribute 2.1% of your base assessment to sickness insurance in the Czech Republic.
When an employee becomes ill or temporarily disabled and unable to work, they are entitled to 60% of their daily salary for the first 14 days, paid from your funds. If the period of their illness or disability exceeds 14 days, the state insurance starts to pay out at the rates of 60% of reduced daily average earnings per day for the first 30 days, 66% until the 60th day, and 72% after that.
Full-time employees in the non-governmental sector are entitled to a minimum of 20 working days (or four weeks) per calendar year holiday leave. In the government sector, they’re entitled to five weeks. Teachers and professors get eight weeks of holiday leave in a calendar year. Employees who work in mines or other particularly hard environments may be entitled to an additional week of holiday leave.
Unused leave days can be transferred to the following calendar year and upon termination of employment, the employee is entitled to monetary compensation for unused leave days.
There are 13 statutory holidays in the Czech Republic that employees are entitled to. If the holiday falls on a weekend, the employee can take this leave day at any time during the calendar year. Employees who work on these days are entitled to either compensatory time off or, if agreed with the employer, they can be paid a premium of at least 100% of their average hourly wage.
What employee benefits are optional in the Czech Republic?
The mandatory benefits in the Czech Republic are the minimum that you as an employer must provide your employees. However, you can also provide additional benefit plans and perks to help you attract and retain employees. Below are some of the most common supplementary benefits.
Supplementary pension plans
While supplementary health insurance is very uncommon in the Czech Republic, some companies offer supplementary pension plans. Contributions to these are voluntary and the amounts are at the discretion of the employer. Your contributions as an employer are capped at CZK 50,000 per year and are fully tax deductible.
Paid time off
Many employers offer a week of paid time off in addition to the four-week minimum.
Life and accident insurance
Some companies offer life and accident insurance coverage, typically in the amount of once or twice the employee’s annual salary. It’s considered taxable income for the employee.
Depending on how the company has performed during the year, some offer an annual bonus, usually in the form of a 13th salary: an additional month’s wages.
It’s common for Czech employers to offer a stipend once the probationary period is over. The employee can use this for cultural and sports activities, for instance, gym membership.
Meal and transport allowances
Meal vouchers are a common benefit and for you as the employer, they’re tax deductible up to 55% and CZK 82.60 per shift. You can also provide a cash catering allowance, tax-deductible up to CZK 82.60 per shift.
Especially in bigger cities, employers often subsidize annual public transportation passes for employees too.
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Disclaimer: Rippling and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.