How Belgian Companies Should Hire in the Czech Republic

The Employment Contract: Navigating Critical First Steps

Is a Written Contract a Necessity? The First Compliance Trap

In the Czech Republic, the answer is an unequivocal yes. The Czech Labour Code mandates that every employment relationship must be documented in a written Employment Contract (Pracovní smlouva). This is not a mere formality; it is a high-stakes compliance gate. Failure to provide a written contract is a serious offense that can result in fines of up to CZK 10,000,000 from the labour inspectorate.

This stands in stark contrast to Belgian law, where an open-ended employment contract can, in principle, be verbal. A Belgian manager might assume that basic EU harmonization applies here, but that assumption is incorrect and dangerous. 

The Czech requirement for a written contract containing, at a minimum, the type of work, place of work, and start date, is absolute and rigorously enforced. Overlooking this fundamental difference can jeopardize your entire Czech operation from day one.

The Probationary Period: Your Most Important Strategic Tool

One of the most significant strategic advantages for employers in the Czech Republic is the probationary period (zkušební doba). While not mandatory, it is a highly recommended tool that must be agreed upon in writing within the employment contract. It allows either party to terminate the employment for any reason, or no reason at all, without the need for a notice period.

This is a powerful risk-management tool that Belgian employers are no longer accustomed to, as trial periods were largely abolished in Belgium in 2014. A recent amendment to the Czech Labour Code, effective from June 2025, extends the maximum probationary period to four months for regular employees and eight months for managerial staff. 

This legal difference should fundamentally alter your hiring risk assessment. It enables a more dynamic talent acquisition strategy, allowing you to evaluate a candidate's fit and performance over a prolonged period with a low-cost, no-fault exit option.

Fixed-Term vs. Indefinite Contracts: Understanding the Limits

Both jurisdictions regulate the use of fixed-term contracts to prevent abuse, but the Czech rules are particularly prescriptive. A fixed-term contract in the Czech Republic cannot exceed a total of three years and may only be repeated or extended twice between the same parties. After this, the relationship is automatically considered an indefinite-term contract.

This "three times and you're in" rule means that careful tracking is essential to avoid unintentionally creating a permanent employment relationship. While an exception exists for replacing employees on long-term leave, such as maternity or parental leave, the general rule is strict. 

Belgian law also requires fixed-term contracts to be in writing before work commences to avoid them being deemed open-ended, highlighting the need for formal precision in both countries.

Managing Your Workforce: Daily Operations and Compliance

Establishing a compliant contract is only the first step. Day-to-day management of your Czech workforce requires ongoing attention to local regulations, particularly concerning working hours and overtime, where differing standards can lead to unexpected costs and administrative penalties.

Working Hours and Overtime: A Costly Oversight

At first glance, the Czech system appears favorable. The standard work week is 40 hours, compared to the typical 38 hours in Belgium. The mandatory pay premium for overtime in the Czech Republic is a minimum of 25% of the employee's average earnings, significantly lower than the 50% (or 100% on Sundays/holidays) common in Belgium.

However, a critical detail often missed by foreign employers lies in how salary is structured. The Czech Labour Code allows for an employee's salary to be agreed "inclusive" of a certain amount of overtime (up to 150 hours per year for regular staff, or up to 416 hours for managers).

If this provision is not explicitly and correctly drafted into the employment contract, the perceived labor cost advantage vanishes. Without this clause, you are legally obligated to pay the 25% premium for every single hour of overtime worked, potentially leading to significant unplanned expenses and employee disputes.

Risks of Non-Compliance with Working Time Regulations

The End of the Relationship: Termination Rules and Procedures

Terminating an employment relationship is the highest-risk area for foreign employers in the Czech Republic. The system is rigid, the grounds for dismissal are narrow, and the consequences of procedural errors are severe.

Dismissal in the Czech Republic: The 'Just Cause' Hurdle

Unlike legal systems that allow for more flexibility, at-will termination does not exist in the Czech Republic. An employer can only dismiss an employee by issuing a Termination Notice (Výpověď) for a limited set of reasons explicitly defined in Section 52 of the Labour Code. These reasons primarily fall into three categories:

1. Organizational changes (e.g., the business is closing, relocating, or the employee becomes redundant).
2. Health reasons (the employee is medically unable to perform the work).
3. Breach of duties or poor performance by the employee.

For poor performance, the law requires that the employer first issue formal written warnings giving the employee a chance to improve. This contrasts with the Belgian system, where an employer must also have a valid reason but the concept of "patently unfair dismissal" allows for broader judicial interpretation. In the Czech Republic, the burden of proof is squarely on the employer to demonstrate that the dismissal fits perfectly within one of the prescribed statutory categories.

Notice Periods and Severance Pay: Key Financial Differences

The financial implications of termination also differ significantly. The statutory notice period in the Czech Republic is a standard two months. A major 2025 amendment (the "flexinovela") changes the start date of this period from the first day of the following month to the day the notice is delivered, speeding up the process considerably. The amendment also introduces a shorter, one-month notice period for certain performance-related breaches.

Severance pay (odstupné) is mandatory only for dismissals due to organizational or health reasons. The amount is based on the employee's length of service: one month's salary for less than a year of service, two months' for one to two years, and three months' for over two years. 

This is far more predictable and generally less costly than in Belgium, where notice periods scale dramatically with seniority—potentially exceeding a year—and severance is often paid as a large indemnity in lieu of this long notice period. The recent Czech reforms make the termination process not only cheaper but also operationally more efficient than what Belgian firms are used to at home.

Risks Associated with Improper Employee Termination

The Financial Framework: A Comparison of Social Security Burdens

A key component of your operational budget will be social security contributions. While the headline rates may appear similar, the total burden on the employer is slightly higher in the Czech Republic, a fact that must be factored into your financial planning.

Employer Contributions: Planning Your Czech Payroll

As of 2025, employers in the Czech Republic contribute a total of 33.8% of an employee's gross wage. This is composed of 24.8% for social security and 9% for health insurance. In Belgium, the employer's contribution is lower, at around 27% of the employee's remuneration.

This difference of approximately 6.8 percentage points is significant, but a deeper analysis reveals another crucial factor. As of July 2025, Belgian employer social security contributions are calculated on remuneration capped at EUR 85,000 gross per quarter for high earners.

The Czech system generally does not have a similar cap on the employer's portion. This means that for highly compensated executives or specialists, the actual cash cost difference for the employer could be substantially more than the headline percentage suggests, a critical detail for accurate financial modeling.

The Critical Pre-Employment Hurdle: Hiring Foreigners in the Czech Republic

For any foreign company, the administrative process of registering employees is the first and most urgent compliance challenge. Recent legal changes in the Czech Republic have significantly raised the stakes, transforming minor administrative oversights into major offenses with severe penalties.

Avoiding "Undeclared Work": The New Reporting Imperative

A recent amendment to the Employment Act creates a new legal offense called "undeclared work". Previously, employers had until the end of an employee's first day to report their hiring to the Labour Office. The new rule is absolute: you must now complete this reporting before the employee begins their first day of work.

This is not a simple deadline change; it is a fundamental shift in enforcement. The government has weaponized this administrative requirement, attaching a fine of up to CZK 3,000,000 for non-compliance. This means your company's very first interaction with the Czech regulatory system is a pass/fail test with immediate and punitive consequences for failure. Procedural perfection is no longer an aspiration; it is a non-negotiable requirement.

Risks of Non-Compliance in Hiring Foreign Nationals

Your Strategic Partner in Prague: How ARROWS Ensures Your Success

The complexities of Czech employment law present clear risks: invalid contracts, costly wrongful dismissal lawsuits, and massive fines for simple administrative errors. Navigating these challenges successfully requires more than a standardized template; it demands expert local knowledge combined with an understanding of international business needs.

What’s Your Next Step?

As an international law firm operating from Prague, European Union, ARROWS offers the perfect blend of deep local expertise and a global mindset. Our experience supporting over 150 joint-stock companies and 250 limited liability companies gives us unparalleled insight into the challenges you face. Through our ARROWS International network, built over 10 years and active in 90 countries, we are adept at handling complex cross-border matters.

We provide a full suite of services to ensure your compliant entry and continued success in the Czech market, including expert contract drafting, creation of internal policies, representation before authorities, and professional training for your local teams.

Protect your investment and ensure a smooth start in the Czech Republic. For a consultation on your specific hiring needs, contact our expert team today at consultation@arws.cz.