Austrian vs. Czech Employment Contracts:

Expanding from Austria to the Czech Republic? Assuming familiar employment laws apply can lead to costly legal issues. This guide offers Austrian companies specific answers for hiring in the Czech Republic. At ARROWS, a leading Czech law firm in Prague, EU, our English-speaking lawyers ensure your cross-border operations are secure and fully compliant.

Need advice on this topic? Contact the ARROWS law firm by email office@arws.cz or phone +420 245 007 740. Your question will be answered by "Mgr. Vojtěch Sucharda", an expert on the subject.

The first hurdle: Why your Austrian employment contract is invalid in the Czech Republic

The most immediate risk for an Austrian company is assuming its standard employment practices will suffice. The legal philosophies underpinning Austrian and Czech labour law are fundamentally different.

Austria’s system allows for significant contractual freedom, whereas the Czech Labour Code is built on the principle of protecting the employee as the "weaker party" in the relationship. This divergence creates immediate compliance gaps that can have serious consequences.

The critical difference in contract formality

In Austria, it is common for employment contracts to be concluded orally or even implied through actions, with a written statement of terms (Dienstzettel) provided later.

This flexibility does not exist in the Czech Republic. Czech law strictly mandates that every employment contract must be in writing before the employee commences work.

An oral agreement is not merely an administrative oversight; it is a critical legal failure. If challenged before work begins, the contract can be deemed invalid. 

Even if work has started, the employer faces severe penalties from the Labour Inspection Authority, with fines reaching up to CZK 10,000,000. This written contract is the legal foundation of your entire relationship with the employee.

The three mandatory clauses of a Czech employment contract

Beyond the written form, every Czech employment contract must contain three essential elements to be valid under the Labour Code:

1. The Type of Work (druh práce): This clause defines the scope of the employee's duties. It must be specific enough to prevent the employer from assigning completely unrelated tasks, but can be broad enough to allow for flexibility.

2. The Place(s) of Work (místo výkonu práce): This specifies where the employee will perform their duties. Defining this too narrowly (e.g., a single office address) can prevent you from transferring an employee to another location without their explicit consent.

3. The Commencement Date (den nástupu do práce): This is the official start date of the employment relationship, from which both parties' rights and obligations begin.

Failing to clearly define these three points in a written contract creates a legally unstable foundation for employment, exposing your company to disputes and regulatory action.

FAQ – Legal tips about Czech Employment Contracts

• Q: Does the contract need to be in Czech?
  A: The contract must be in a language the employee understands. A bilingual Czech-German or Czech-English version is highly recommended to prevent any disputes over interpretation. Need help drafting a bilingual contract? Contact us at office@arws.cz. 
• Q: What happens if I don't provide a written contract?
  A: You risk substantial fines of up to CZK 10,000,000 from the Labour Inspection Authority. Protect your business by ensuring all contracts are compliant from day one. For a professional review, write to office@arws.cz. 
• Q: Can I sign the contract electronically?
  A: Yes, electronic signatures are legally recognized in the Czech Republic. However, the requirements are specific, and a simple email exchange may not suffice. ARROWS can advise on the correct digital signature process to ensure validity. Get in touch at office@arws.cz. 

Testing the waters: Navigating probationary and fixed-term contracts

The initial phase of employment is critical for assessing a new hire's suitability. However, the rules governing probationary periods and fixed-term contracts in the Czech Republic differ significantly from Austrian practice, requiring careful attention to detail in your contracts.

Probationary periods – A tale of two timelines

In Austria, the probationary period is strictly limited to a maximum of one month, during which either party can terminate the relationship without notice.The Czech Republic offers employers a considerably longer timeframe for evaluation.

Currently, the maximum probationary period is three months for regular employees and six months for managerial positions.

A significant amendment to the Labour Code effective in 2025 extends these periods to four months and eight months, respectively. This change provides greater flexibility, but it is crucial that the probationary period is agreed upon in writing before the employee's start date to be legally valid.

The rules for fixed-term contracts

Austrian law places very few restrictions on the use of fixed-term contracts, giving employers considerable freedom.

The Czech approach is far more structured to prevent the indefinite use of temporary employment. A fixed-term contract can be concluded for a maximum of three years and can only be renewed or extended twice.

This means the total duration of consecutive fixed-term contracts with the same employee cannot exceed nine years. 

If these limits are surpassed, the employment relationship automatically transforms into one of an indefinite duration, fundamentally altering your legal obligations and making termination much more difficult.

Probationary & Fixed-Term Contract Pitfalls

Risks and penalties	How ARROWS helps
Invalid Probationary Period: Agreeing to a probation period verbally or after work starts makes it void. You lose the right to terminate an unsuitable employee without cause during this critical initial period.	Drafting legally required documentation: We ensure your employment contracts include valid, enforceable probationary clauses that comply with Czech law. Need a contract prepared? Contact us at office@arws.cz.
Unintended Permanent Employment: Incorrectly renewing a fixed-term contract more than twice automatically creates an indefinite contract, restricting your flexibility and increasing termination costs.	Legal consultations to prevent penalties: Our lawyers advise on the correct use and tracking of fixed-term contracts to avoid creating unintended long-term liabilities. For immediate assistance, write to us at office@arws.cz.
Exceeding Maximum Probation Length: An Austrian manager might assume a longer probation is possible, but any period agreed beyond the Czech statutory limit (4/8 months from 2025) is invalid and unenforceable.	Contract review: We review your existing Austrian or international templates to ensure they comply with the latest Czech Labour Code amendments. Get tailored legal solutions by writing to office@arws.cz.

A Critical difference: The rules for terminating an employee

Perhaps the most significant and financially dangerous difference between Austrian and Czech employment law lies in the rules for termination. 

An approach that is standard procedure in Vienna could easily trigger a wrongful termination lawsuit in Prague, resulting in costly litigation and mandated employee reinstatement.

Contact our experts:

The burden of proof – Why you need a valid reason to dismiss

In Austria, employers are generally not required to provide a reason for an ordinary dismissal (Kündigung), provided they respect the statutory notice periods.

This principle of "termination without cause" is a cornerstone of Austrian employment practice.

This concept is completely absent in the Czech Republic. An employer must have a legally valid reason for termination, and this reason must be one of those explicitly listed in the Labour Code.

These grounds are limited and strictly interpreted by Czech courts. They include reasons such as redundancy (organizational changes), long-term health issues preventing the employee from working, failure to meet job requirements, or a breach of work duties.

Simply stating that an employee is "no longer a good fit" is not a valid reason and will not withstand a legal challenge.

Notice periods – It's not just how long, but when it starts

The calculation of notice periods also differs. In Austria, the notice period for employers is tiered based on the employee's length of service, starting at six weeks and increasing to five months after 25 years.

In the Czech Republic, the statutory notice period is a standard two months for both the employer and the employee, regardless of tenure.

A crucial change under the 2025 Labour Code amendment alters how this period is calculated. Previously, the notice period started on the first day of the calendar month following the delivery of the notice. 

The new rule states that the notice period begins on the day the notice is delivered. This seemingly small change significantly impacts the employee's final working day and must be factored into all termination planning.

The High Cost of Wrongful Termination

Risks and penalties	How ARROWS helps
Wrongful Termination Lawsuit: Terminating an employee without a legally valid Czech reason can lead to a court declaring the dismissal invalid, creating a significant legal and financial liability.	Legal opinions: We can provide a formal legal opinion on the validity of your grounds for termination before you act, helping you make informed decisions. Want to understand your legal options? Email us at office@arws.cz.
Employee Reinstatement & Back Pay: If a termination is found invalid, you may be forced to reinstate the employee and pay their full salary for the entire litigation period, potentially capped at six months' wages or more.	Representation in court: Our experienced litigators can defend your company's interests in complex employment disputes before Czech courts. Need legal representation? Write to office@arws.cz.
Severance Pay Obligations: Terminating an employee for "organizational reasons" (e.g., redundancy) triggers a mandatory severance payment of one to three months' salary, based on their length of service.	Drafting documentation to prevent fines: We prepare legally sound termination agreements that correctly address all statutory entitlements, including severance pay, to minimize the risk of legal challenges. Our lawyers are ready to assist you – email us at office@arws.cz.

Daily operations: Understanding working hours, overtime, and holiday rules

Compliance extends beyond contracts and termination into the day-to-day management of your workforce. 

Austrian employers must adapt to different regulations concerning working hours, overtime compensation, and statutory holiday entitlements to avoid penalties.

Working hours and overtime

Both Austria and the Czech Republic have a standard 40-hour workweek. However, the management of overtime differs.

• Czech Republic: Overtime is limited to a maximum of 8 hours per week and 150 hours per calendar year. This can be extended by agreement with the employee, but the total amount of overtime work may not exceed an average of 8 hours per week over a specified period. Employees are entitled to a minimum bonus of 25% of their average earnings for overtime work, or compensatory time off.
• Austria: The system is more flexible on a weekly basis, allowing up to 20 hours of overtime per week, but it is capped by an average of 48 hours per week over a 17-week period. The statutory overtime bonus is higher, at a minimum of 50% of the regular rate, or time off in lieu at a rate of 1.5 hours for every overtime hour worked.

The key takeaway is that while Austria allows for greater short-term flexibility, the Czech system imposes a stricter annual cap unless a specific agreement is in place with the employee.

Holiday entitlement

There is a notable difference in the statutory minimum holiday entitlement.

• Austria: Employees are entitled to a minimum of five weeks of paid annual leave (25 days for a five-day work week, 30 days for a six-day week). This increases to six weeks after 25 years of service.
• Czech Republic: The statutory minimum is lower, at four weeks (20 days) of paid annual leave. However, it is extremely common in the Czech labor market for employers to offer five weeks of holiday as a standard employee benefit to attract and retain talent.

FAQ – Legal tips about Overtime Compliance

• Q: Can I just pay a flat salary to cover overtime, like an "all-in" contract in Austria?
  A: This is very risky in the Czech Republic. While possible, the agreed salary must be high enough to demonstrably cover the base wage plus the statutory 25%+ overtime premium for all potential overtime hours. ARROWS can help structure compliant executive compensation packages that withstand scrutiny. For advice, email office@arws.cz. 
• Q: Do I have to record all working hours?
  A: Yes. Czech law requires employers to maintain accurate and detailed records of all working hours, breaks, and overtime for each employee. Failure to do so can result in significant fines during a labor inspection. We can help you implement compliant internal time-tracking policies. Contact us at office@arws.cz. 

Hidden dangers: Critical compliance risks for foreign employers

Beyond the major differences in contracts and terminations, several Czech-specific regulations pose a significant threat to uninformed foreign companies. 

These "hidden dangers" are aggressively enforced by local authorities and carry severe financial penalties.

The "Švarc System" – Avoiding employee misclassification

A common temptation for foreign companies is to hire local staff as self-employed contractors or freelancers (OSVČ) to simplify administration and avoid payroll taxes. 

In the Czech Republic, this practice is known as the "Švarc system" and is illegal if the relationship is, in substance, one of dependent work.

Authorities look beyond the contract's title and examine the reality of the working relationship. If the work is performed under the employer's control, on the employer's premises or with their tools, for a regular wage, and exclusively for one company, it will be deemed a "hidden employment relationship.

This misclassification can result in devastating fines of up to CZK 10,000,000 (approx. €400,000) for the company, plus back-payments of all social security and health insurance contributions.

Hiring foreigners – The peril of "Unreported Work"

Even when hiring legitimate employees, strict administrative duties apply. Employers in the Czech Republic must notify the regional Labour Office of the hiring of any foreign national, and this includes citizens from other EU countries like Austria.

A recent legislative change has dramatically increased the stakes. Failure to report the employee's commencement of work to the Labour Office at the latest on the day before they start is now classified as a new administrative offense: "unreported work."

This offense carries a standalone penalty of up to CZK 3,000,000 (approx. €120,000). This is a critical procedural step that can be easily missed by a foreign HR department unfamiliar with local requirements.

Major Compliance & Reporting Risks

Risks and penalties	How ARROWS helps
Employee Misclassification ("Švarc System"): Hiring an individual as a contractor when they function as an employee. Penalty: Fines up to CZK 10,000,000 (€400,000) and back-payment of taxes and social security.	Legal Analysis: We assess your planned working relationships to determine the correct legal classification and draft appropriate contracts to prevent devastating fines. Do not hesitate to contact our firm – office@arws.cz.
"Unreported Work" Offense: Failing to notify the Labour Office of a foreign employee's start date before they begin work. Penalty: A new, severe fine of up to CZK 3,000,000.	Representation before public authorities: We handle all necessary registrations and communications with the Czech Labour Office on your behalf, ensuring your hiring process is fully compliant. Need legal help? Contact us at office@arws.cz.
Failure to Register for Social Security: Employers must register for payroll tax and social security within eight days of the first employee's start date. Failure can lead to penalties and administrative complications.	Legal consultations: We guide you through the entire company and employee setup process, ensuring all registrations with tax, social security, and health insurance authorities are completed correctly and on time. Get tailored legal solutions by writing to office@arws.cz.

Your strategic partner in Prague: How ARROWS protects your Czech operations

Navigating the complexities of a new legal system is a significant challenge. The risks of non-compliance—from invalid contracts and wrongful termination lawsuits to massive fines for administrative failures—are substantial. 

As an international law firm operating from Prague, European Union, ARROWS is perfectly positioned to protect your investment and ensure your Czech operations are built on a solid legal foundation.

Our services are designed to address every risk highlighted in this guide. We provide expert contract drafting and review, prepare compliant internal company policies, offer strategic legal consultations to prevent penalties, and provide robust representation in court or before public authorities. 

We can also deliver professional training for your management team on the nuances of Czech labour law.

Furthermore, ARROWS' expertise is not confined to the Czech border. For over 10 years, we have built the ARROWS International network, a dynamic alliance of trusted law firms across 90 countries. 

This network, powered by our innovative anywhere.legal platform for managing cross-border matters, allows us to provide seamless, high-quality legal support for clients with complex international needs.

Navigating a new legal system is complex, but you don't have to do it alone. Protect your investment and ensure your Czech operations are successful from the very beginning. For a consultation on your specific needs, contact our team of experts today at office@arws.cz.

FAQ – Most common legal questions about hiring in the Czech Republic

1. Can I use my standard Austrian employment contract in the Czech Republic?
No. It will almost certainly be non-compliant regarding its form, mandatory clauses, probationary period, and termination rules, exposing you to significant legal and financial risk. For a fully compliant Czech contract tailored to your needs, get in touch with our experts at office@arws.cz.

2. What is the biggest mistake Austrian companies make when firing someone in Prague?
Assuming they can terminate employment without a legally specified reason. Unlike in Austria, Czech law demands strict, provable grounds for dismissal. A failure here can easily lead to a successful wrongful termination lawsuit. To manage terminations correctly and safely, seek legal advice by writing to office@arws.cz.

3. Do I need to establish a Czech company to hire an employee here?
While the Labour Code is broad, Czech tax and corporate laws generally require a foreign company to register a branch or establish a local legal entity (like an s.r.o.) to conduct business and hire employees. Our law firm based in Prague, European Union, can advise on the best corporate structure for your needs. Contact us for a consultation at office@arws.cz. 

4. How are social security contributions handled?
Both the employer and the employee contribute to social security and health insurance. In 2025, the employer's total contribution is 33.8%, and the employee's is 11.6% of the gross salary. The employer is responsible for withholding the employee's share and remitting the full amount to the authorities. For comprehensive legal support, email us at office@arws.cz. 

5. What is a non-compete clause like in the Czech Republic?
It is valid for a maximum of one year after employment ends, and you must pay the former employee financial compensation of at least 50% of their average monthly earnings for the entire non-compete period. This differs from Austria, where compensation is not always a statutory requirement. Need to draft an enforceable non-compete agreement? Our lawyers are ready to assist you – email us at office@arws.cz. 

6. Are there restrictions on interview questions?
Yes, absolutely. You are legally prohibited from asking questions about personal matters such as pregnancy, family status, sexual orientation, or religion, unless there is a substantive reason directly related to the nature of the work. For professional training on compliant hiring practices, write to us at office@arws.cz.

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