Agreement to Perform Work and Annual Leave Entitlement

When Does an Entitlement to Leave Arise for DPČ and DPP Agreements?

The first condition is the continuous duration of the agreement for a minimum of four weeks, i.e., 28 calendar days within a calendar year. It is not enough for an employee to work, for example, 100 hours over three weeks – if the agreement did not last for a full four weeks, the entitlement to leave does not arise. This rule prevents short-term agreements where the administration associated with leave would be disproportionate.

The second condition is working a minimum of 80 hours per calendar year. This threshold is based on a notional weekly working time of 20 hours, established for the purpose of calculating leave for these agreements. Four times this duration is precisely 80 hours – the minimum threshold for leave entitlement to arise.

For legal assessment, it is crucial that both conditions are met in the same calendar year. For example, if an employee worked 50 hours in December 2024 and 40 hours in January 2025, they have a total of 90 hours, but in neither calendar year did they meet the condition of at least 80 hours, so they will not be entitled to leave.

Why is the Notional 20-Hour Working Week Key?

For the purpose of calculating leave for agreements outside of an employment relationship, the Labour Code introduces a notional weekly working time of 20 hours. This number is absolutely fundamental for all leave calculations and applies universally, regardless of how many hours the employee actually works per week.

The employee's actual scope of work is entirely irrelevant – whether they work five hours a week or fifteen, the notional value of 20 hours is always used for the leave calculation. The reason is to ensure fair and uniform treatment of all employees on agreements, as their working hours can be highly variable.

In practice, this means that when an employee works 100 hours in a year, you divide this figure by 20 to get the number of full "weeks worked" for leave purposes. In this case, 100 ÷ 20 = 5 full weeks. The remainder after division is not considered – if the result were 5.7, only the whole number 5 would be used.

This methodology may seem simple at first glance, but in practice, it hides a number of pitfalls. A misunderstanding of the notional weekly working time is one of the most common causes of incorrect leave calculations. For example, employers sometimes mistakenly use the actual weekly working hours stipulated in the agreement instead of the notional 20 hours, which leads to significantly different (and incorrect) results.

How to Correctly Calculate Leave Entitlement: A Step-by-Step Guide

Calculating leave for agreement workers requires a precise procedure. A single mistake in any step can deprive an employee of part of their statutory entitlement, which will lead to penalties during a labour inspection.

Step 1: Determine the Total Number of Hours Worked in a Calendar Year

The first step is to sum up all the hours an employee has actually worked during the calendar year under the agreement. Certain other periods are also counted as hours worked for leave purposes – typically, time spent on other leave, some obstacles to work on the part of the employee (such as a doctor's visit) or the employer.

Conversely, time on sick leave, unexcused absences, or unpaid leave is not counted as hours worked, unless the law provides otherwise. In practice, this means you must keep precise records of working time for every employee on an agreement.

Step 2: Divide the Hours Worked by 20

Once you have the total number of hours worked, divide it by the notional weekly working time, i.e., by 20. Round the result down to the nearest whole number – only full multiples are considered.

Example: An employee on a DPČ worked 416 hours in a year. Calculation: 416 ÷ 20 = 20.8. For the next calculation, you will use only 20 full weeks worked. The decimal part (0.8) is ignored.

Another example: An employee on a DPP worked 300 hours. Calculation: 300 ÷ 20 = 15. You will therefore use 15 full weeks worked.

Step 3: Use the Formula to Calculate Leave Entitlement

Now, use the following formula set by the Labour Code:

The number 52 represents the number of weeks in a year. The number 20 is again the notional weekly working time. The leave allowance is the statutory minimum (4 weeks) or a higher allowance you provide to your employees (e.g., 5 weeks).

Practical example: An employee worked 300 hours, and you have a basic 4-week leave allowance.

Calculation: 15 (full weeks) ÷ 52 × 20 × 4 = 23.0769 hours

Step 4: Always Round the Result Up to the Nearest Whole Hour

This is the most common mistake that costs employers hundreds of thousands of crowns. The result of the calculation is always rounded up to the nearest whole hour, regardless of how small the decimal part is.

In our example, the result is 23.0769 hours, which is rounded up to 24 hours of leave. Using standard mathematical rounding rules (i.e., rounding 23.0769 to 23 hours) is a gross error and a clear violation of the law, which the labour inspectorate does not forgive during an inspection.

Other rounding examples:

• Result of 21.01 hours → rounds up to 22 hours

• Result of 30.77 hours → rounds up to 31 hours

• Result of 6.15 hours → rounds up to 7 hours

For the Agreement on Work Performance (DPP)

The time during which an employee takes leave (or for which they are provided with wage compensation) does not count towards the annual limit of 300 hours. This means that an employee can effectively work the full 300 hours, and on top of that, they will be entitled to and paid for, for example, 24 hours of leave.

Therefore, leave taken does not affect the maximum number of hours that can be worked on a DPP. The employer must account for the fact that the total cost of the employee will include both the hours worked (max. 300) and the additional hours of leave.

For the Agreement on Work Activity (DPČ)

The situation here is completely the opposite and much more complicated. The time spent on leave is counted towards the hours worked for the purpose of monitoring the limit of an average of 20 working hours per week. In practice, this means that when an employee takes leave, they are "using up" their available hourly fund.

This detail represents a hidden trap, especially for employers using DPČ agreements at the edge of the legal limit. When planning shifts, you must account for the fact that leave taken reduces the employee's available work potential and can easily lead to an unintentional exceeding of the limit.

Example: An employee on a DPČ works an average of 18 hours per week and takes 16 hours of leave in August. These hours will be included in the average weekly working time. If they were to work additional shifts in August, the total average could exceed the 20-hour weekly limit, which is a violation of the law.

This legal regulation requires careful planning and record-keeping. Many employers overlook this fact, leading to unintentional exceeding of limits and subsequent penalties from the labour inspectorate. The lawyers at ARROWS specialise in setting up work time planning systems that respect all legal limits and protect you from sanctions. For a consultation, contact us at konzultace@arws.cz.

Leave Allowance: How to Calculate It Correctly?

When an employee on a DPČ or DPP takes leave, they are entitled to wage compensation equal to their average earnings. This compensation is crucial not only for fair remuneration but also because its incorrect calculation can lead to labour law disputes. 

Average earnings are always determined at the beginning of a calendar quarter – i.e., on 1 January, 1 April, 1 July, and 1 October. To calculate average earnings, the gross wage for the relevant calendar quarter is divided by the number of hours worked in that quarter.

Extraordinary premiums and bonuses are also included in the gross wage. If an employee received a premium that relates to a period longer than a quarter (such as an annual bonus or a thirteenth salary), only a quarter of it, or a proportional part according to the time worked, is included in the calculation of average earnings for the given calendar quarter.

Practical example: An employee on a DPČ takes leave in May 2025. To calculate the wage compensation, the average earnings for the period from January to March 2025 will be used. During this period, the employee worked 240 hours and their gross wage was CZK 48,000. The average hourly earnings are: 48,000 ÷ 240 = CZK 200/hour. If they take 8 hours of leave, the wage compensation is: 8 × 200 = CZK 1,600 (gross).

If an employee has multiple employment relationships with the same employer (for example, an employment contract and a DPČ simultaneously), the average earnings from the individual relationships are not added together. If the employee takes leave in both relationships at the same time, the employer is obliged to provide wage compensation at the average earnings rate separately for each relationship.

The lawyers at the ARROWS law firm will help you set up an average earnings calculation system that meets all legal requirements and eliminates the risk of disputes. Contact us at konzultace@arws.cz.

Unused Leave: What Happens at the End of the Year?

An employee's entitlement to leave never expires – this is one of the fundamental principles of labour law. If an employee on a DPČ or DPP does not use their leave in the calendar year for which it is due, you as the employer have several options.

Primarily, you should order the employee to take the leave if there is a risk that they will not use it in time themselves. Overseeing the proper use of leave is a legal obligation of the employer. If you fail to do so, you risk a penalty from the labour inspectorate.

The second option is to carry over the unused leave to the following calendar year. You will use this option especially in situations where the employee could not take the leave for objective reasons (such as illness).

The third option is to pay out the unused leave, but this is only possible upon termination of the employment relationship or agreement. Under no other circumstances can you pay out the leave – not even if the employee requests it. If you were to pay out the leave during the term of the agreement, you would risk a fine from the labour inspectorate.

In practice, this means that if the agreement ends (for example, due to the expiration of the agreed period or by notice), you must pay the employee wage compensation for all unused hours of leave at the rate of their average earnings. This compensation is paid as part of the final salary.

If the leave is not used even in the following year, the employee's right to leave does not expire, but the employer is exposed to the risk of a sanction from the labour inspectorate. The labour inspectorate can impose a fine of up to CZK 200,000 for failing to allow leave to be taken. This sanction is one of the most frequently imposed fines in the field of labour law.

What Are the Employer's Obligations for Timekeeping?

Since 2024, employers have been obliged to keep records of working time for employees on DPP and DPČ agreements as well. This record serves as proof of hours worked and is the basis for calculating wages and leave entitlement.​

Timekeeping records must be verifiable, clear, and reflect reality. The form of the record is not directly prescribed by law – it can be paper reports, electronic attendance systems, or other methods that meet legal requirements. The key is that the records can be demonstrably presented to the labour inspectorate during an inspection.

Each work report should contain the following information:

• Employee's first and last name

• Personal identification number (or date and place of birth if not assigned)

• Employee's health insurance company

• Start and end date of work

• Gross wage for the given month

• Start and end of each shift worked

The employer is also obliged to keep records of on-call hours that the employee was available for, even if no work was performed. The records must also indicate overtime, night work, and other types of work for which supplements or compensatory time off are due.

Timekeeping records serve not only for wage calculation but also for monitoring compliance with the relevant provisions of the Labour Code concerning working time and rest periods. Timekeeping records must be archived for a specified period (usually for the period necessary for processing wages and pension insurance). The employer must also, upon the employee's request, allow them to inspect the records and obtain extracts or copies at the employer's expense.

For failing to keep proper timekeeping records or for incomplete records, the labour inspectorate can impose a fine of up to CZK 400,000. Timekeeping is one of the most frequently inspected areas by the labour inspectorate. Errors in attendance can lead to incorrect wage calculations, non-compliance with statutory deductions, or sanctions from the authorities.

The lawyers at ARROWS will prepare a tailor-made timekeeping system for your company that will meet all legal requirements and protect you from fines. For a consultation, contact us at konzultace@arws.cz.

Sanctions and Fines: What Risks Do You Face for Errors?

Violating the rules related to leave for agreement workers can have very significant financial consequences for employers. The State Labour Inspection Office (SÚIP) has a wide range of sanctions at its disposal that it can impose for individual offences.

Fine for not allowing leave to be taken

If an employer does not allow an employee to take their leave within the statutory deadlines, the labour inspectorate can impose a fine of up to CZK 200,000. This sanction is imposed in cases where the employer neither carries over the leave to the following year nor orders it to be taken, thereby effectively depriving the employee of their statutory right.

Fine for not keeping timekeeping records

For failing to keep proper timekeeping records or for not adhering to the scope of working time, the labour inspectorate can impose a fine of up to CZK 400,000. This sanction also applies to incomplete or distorted records – for example, when employers report only eight-hour shifts, although employees worked longer, and the overtime hours are not recorded anywhere.

Fine for a serious violation of the Labour Code

An amendment to the Act on Labour Inspection (effective from 1 January 2025) strengthens the powers of inspectors and introduces stricter sanctions. For a serious violation of the Labour Code or for engaging in a disguised employment relationship (švarcsystém), companies face a fine of up to CZK 10 million (with a minimum of CZK 50,000). In addition, the inspectorate can order the publication of the offence on its official notice board.

Labour Law Disputes

In addition to fines from the labour inspectorate, employers face the risk of labour law disputes with employees. If an employee does not receive the leave or wage compensation to which they are entitled, they can turn to the court and demand payment, including interest on late payment.

Labour law disputes are among the second most common types of disputes in the Czech Republic. The biggest threat for most employers are disputes over unpaid wages, supplements, and wage compensation, which includes leave. The financial impact can be significant – in addition to the back pay itself, the employee is also entitled to reimbursement of legal costs and interest on late payment.​

According to the case law of the Supreme Court, an employee may be entitled to wage compensation for leave even for the period of a court dispute over the invalidity of a termination of employment. This means that if the court rules that a notice of termination or immediate dismissal is invalid, the employer may be required to pay not only the wages for the entire period of the dispute but also compensation for the leave that would have accrued to the employee during that time.

The Most Common Employer Mistakes in Calculating Leave

In practice, several typical mistakes repeatedly occur when employers calculate leave for agreement workers. These mistakes are not just a theoretical risk – the labour inspectorate systematically uncovers and sanctions them during inspections.

Mistake 1: Using mathematical rules instead of rounding up

The most common mistake is that employers use standard mathematical rules to round the result of the leave calculation. If the result is, for example, 23.4 hours, they round it to 23 hours instead of the correct 24 hours. This is a clear violation of the law that the labour inspectorate does not tolerate.

Mistake 2: Using the actual instead of the notional weekly working time

Many employers base their leave calculations on the actual weekly working time stipulated in the agreement instead of the notional 20 hours. This leads to significantly different (and incorrect) results. For example, if an employee is contracted for 10 hours a week, the employer mistakenly uses this number, even though the law requires the use of 20 hours for all agreement workers.

Mistake 3: Not including leave taken in the limit for DPČ agreements

Many employers overlook that for DPČ agreements, leave taken is counted towards the limit of an average of 20 weekly working hours. The result is an unintentional exceeding of the legal limit, which can lead to penalties from the labour inspectorate.

Mistake 4: Incorrect calculation of average earnings for wage compensation

Employers sometimes incorrectly calculate the average earnings for wage compensation for leave – for example, they forget to include bonuses and premiums or incorrectly determine the reference period. This leads to the employee receiving lower compensation than they are entitled to, which can result in a labour law dispute.

Mistake 5: Chaining short-term agreements to avoid the obligation

Some companies try to avoid the obligation to provide leave by concluding only short-term contracts with agreement workers for periods of less than 28 days. This practice is very risky and can be assessed by the labour inspectorate as circumventing the law with the aim of depriving employees of their rights, which will lead to sanctions.

At the ARROWS law firm, we specialise in labour law and deal with cases related to agreements outside of an employment relationship on a daily basis. Thanks to our experience in providing long-term services to our clients, we can quickly identify risk areas and propose solutions. Our portfolio includes more than 150 joint-stock companies, 250 limited liability companies, and 50 municipalities and regions. We pride ourselves on speed and high quality. For a consultation, contact us at konzultace@arws.cz.

Practical Advice: How to Avoid Problems

Correctly setting up processes related to leave for agreement workers is not just an administrative formality but a necessity for every responsible employer. In this section, you will find specific steps to help you minimise risks.

Implementing accurate timekeeping

The first step is to implement a reliable timekeeping system for all employees on DPP and DPČ agreements. Modern attendance systems allow for automated time tracking, which significantly reduces the administrative burden and minimises the risk of errors. The records must be verifiable, clear, and contain all legally required data.

Regular training for the HR department

The rules for leave for agreement workers are complex and specific. It is crucial to ensure that your HR specialists and payroll accountants understand all the details of leave calculation, including the notional weekly working time, rounding up, and the differences between DPP and DPČ. The ARROWS law firm offers expert training in labour law, including certification. For more information, contact us at konzultace@arws.cz.

Review of contractual documentation

We recommend having an audit of all DPP and DPČ contractual documents performed to verify that they do not contain any risk elements. Contracts must always be in writing and must contain all mandatory elements. Failure to conclude a written agreement is an offence for which the labour inspectorate can impose a fine.

Implementation of a leave planning system

Implementing a system that automatically alerts you to employees who have reached 80 hours worked and met the 28-day duration condition is key to timely identification of leave entitlement. It is equally important to track how much leave each employee has taken to avoid a situation where leave remains unused at the end of the year.

Preparation for a labour inspection

Timekeeping is one of the most frequently inspected areas by the labour inspectorate. We recommend regularly conducting internal audits that simulate a labour inspection to identify any shortcomings in a timely manner. During an inspection, you must be able to present complete timekeeping records, leave calculations, and proof of wage compensation payments.

The lawyers at ARROWS will prepare you for a labour inspection and can represent you during negotiations. Our firm is insured against damages up to CZK 500,000,000, which means maximum security for the client. Need legal assistance? Contact us at konzultace@arws.cz.

Why Is It Better to Entrust This to Experts?

The issue of leave for Agreements on Work Activity and Agreements on Work Performance is much more complex in practice than it may seem at first glance. The individual steps, which appear simple, have hidden exceptions, procedural details, connections to other regulations, and risks in the real world that a layperson often does not see.

For example, calculating leave has several pitfalls – from correctly determining the notional weekly working time and rounding up, to the different treatment of leave taken under DPP and DPČ agreements. Each of these rules has its legal reason, and failure to respect it leads to sanctions.

Moreover, the rules are constantly changing. The entitlement to leave for agreement workers has only existed since January 2024, 2025 brought further tightening in the area of labour inspection, and new obligations for reporting DPPs to the Czech Social Security Administration. It is almost impossible for an ordinary business owner or HR specialist to keep track of all the changes and implement them correctly.

The ARROWS law firm deals with this agenda daily, which allows us to significantly save clients' time and minimise the risk of errors. Our Czech legal team specialises in labour law and has extensive experience in setting up internal processes, preparing directives, and representing clients during labour inspections. We also commonly partner with in-house corporate lawyers to resolve special matters.

It is safer for the client to have the matter professionally handled because ARROWS is insured against damages up to CZK 500,000,000. If you do not want to risk mistakes, damages, or fines, you can safely entrust the entire matter to ARROWS. Thanks to our ARROWS International network, we handle cases with an international element almost daily, so if you employ foreigners or have branches abroad, we can provide you with comprehensive legal support.

If you are dealing with financing or looking for a business partner for your company, we can connect clients with each other in case of interesting investment or business opportunities. We are happy to listen to interesting entrepreneurial or business ideas. For an immediate solution to your situation, write to us at konzultace@arws.cz.