How Cypriot Businesses Should Approach Hiring in the Czech Republic

Key Differences in Employment Contracts

|Attorney|Czech Bar Association Reg. No. 14692

Published:1/20/2026Updated:6/30/2026

When Cypriot entrepreneurs expand into the Czech market, they quickly discover that employment law operates very differently. While Cyprus offers flexible procedures, the Czech Republic enforces a comprehensive Labour Code with strict requirements. Understanding these differences is essential to avoid costly mistakes, fines up to CZK 10,000,000, and unexpected legal disputes.

Key takeaways

Mandatory written employment contracts: Czech law is strictly formal. Verbal contracts are legally risky and prohibited. Ensure every employee has a compliant, written contract before starting work.

Rigid Termination Rules: You cannot fire "at will." You need a statutory reason, a 2-month notice period, and valid documentation. Invalid termination leads to expensive litigation and back-pay obligations.

Higher Payroll Burden: Budget for an additional ~34% on top of gross salary for employer levies.

Strict Probation: Max 3 months (6 for managers). No extension by agreement. Use this time wisely.

Administrative Duties for Foreigners: Even EU citizens must be reported to the Labour Office on their start date. Non-EU hiring is slow (months) and bureaucratic.

ARROWS law firm

245 007 740 consultation@arws.cz

Conclusion

For Cypriot business owners expanding into the Czech Republic, employment law represents both a significant operational challenge and a critical area where missteps carry severe financial consequences. The Czech Labour Code is far more prescriptive and protective of employees than Cyprus law.

The lawyers at ARROWS Law Firm have extensive experience advising Cypriot and other foreign employers on these exact challenges.

If you are planning to hire in the Czech Republic or are already operating there without comprehensive legal guidance, do not hesitate to contact ARROWS Law Firm at consultation@arws.cz.

FAQ – Frequently asked legal questions about hiring in the Czech Republic for Cypriot businesses

1. Can we start the hiring process in the Czech Republic without establishing a Czech subsidiary?

Yes. A foreign legal entity (e.g., Cypriot Ltd) can hire employees directly in the Czech Republic. However, you must register as an employer with the Czech Social Security Administration and health insurance companies and pay payroll taxes locally. Be aware that this may create a "Permanent Establishment" for corporate tax purposes. Consult with tax advisors first. For more information, contact consultation@arws.cz.

2. What is the actual cost of hiring a full-time employee in the Czech Republic?

If you offer a gross salary of EUR 2,000, your total employer cost is approx. EUR 2,676 (gross + 33.8%). The employee receives approx. EUR 1,600 net (depending on tax credits).

3. We have a Cypriot employee whom we're transferring to our Czech office. Do we need a new contract?

Yes, or an amendment governed by mandatory Czech rules. If they will habitually work in the Czech Republic, mandatory provisions of Czech law (min wage, working time, holidays, safety) apply regardless of the choice of law in the contract. It is usually best to draft a local Czech contract.

4. Can we hire Ukrainian workers under their temporary protection status?

Yes. They have free access to the labour market. You do not need a work permit, but you must notify the Labour Office and check the validity of their Temporary Protection visa.

5. What happens if we classify someone as a contractor (invoice) but they work like an employee?

This is illegal ("Švarc system"). You face fines up to CZK 10 million, and you may be assessed for unpaid payroll taxes and social security retrospectively.

ARROWS law firm

245 007 740 consultation@arws.cz

About the author

Mgr. Vojtěch Sucharda

Associate, partner

LinkedIn|Czech Bar Association Reg. No. 14692

Managing Partner ARROWS International | Head of Legal Practice Group ETL Global

sucharda@arws.cz 245 007 740

Disclaimer:

The information contained in this article is for general informational purposes only and serves as a basic guide to the issue as of 2026. Although we strive for maximum accuracy, laws and their interpretation evolve over time. We are ARROWS Law Firm, a member of the Czech Bar Association (our supervisory authority), and for the maximum security of our clients, we are insured for professional liability with a limit of CZK 400,000,000. To verify the current wording of the regulations and their application to your specific situation, it is necessary to contact ARROWS Law Firm directly (consultation@arws.cz). We are not liable for any damages arising from the independent use of the information in this article without prior individual legal consultation.