How Danish Companies Can Hire in the Czech Republic Without Risk

For Danish companies hiring in the Czech Republic, applying your "flexicurity" model is a costly mistake. The Czech Labour Code is one of the most rigid in Europe, and what is standard practice in Denmark can lead to invalid contracts and severe penalties. This guide from a leading Czech law firm based in Prague, European Union, provides the clear answers you need. 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 'Flexicurity' Shock: Why Czech Labour Law Is Nothing Like Denmark's

As a Danish manager, you are accustomed to the "flexicurity" model. This system, ranked as one of the most flexible in the world, gives employers significant freedom to hire and dismiss employees. This flexibility is balanced by a robust social safety net for the unemployed, all managed through a high-trust, tripartite cooperation between trade unions, employers, and the state.

When you arrive in the Czech Republic, you must forget this model.

The Czech Labour Code (Zákoník práce) is the philosophical opposite. It is not flexible. It is "strict" and "highly protective towards employees," whom the law considers the vulnerable party in the relationship.

In Denmark, your "managerial discretion" and good-faith agreements hold weight. In the Czech Republic, they are legally irrelevant. All employment relationships are governed by rigid statutory procedures. Any deviation, even if it seems like common sense, can invalidate your actions and expose your company to significant liability.

Navigating this shift requires local expertise. To understand your new obligations, get tailored legal solutions by writing to office@arws.cz.

What Are Your Termination Risks? The End of "At-Will" Employment. Can you dismiss an employee without a specific reason?

No. This is the single most critical adjustment for Danish employers. "At-will" employment does not exist in the Czech Republic. You cannot terminate an employee simply because they are a "poor fit," "underperforming," or "no longer needed" without following a strict, formal process.

An employer may only terminate an employee for a limited list of specific, legally-defined reasons. The primary grounds are:

1. Organizational Reasons: The company is dissolving, relocating, or the employee's position is made redundant due to restructuring.

2. Health Reasons: A medical report confirms the employee can no longer perform their current work.

3. Employee Fault: The employee fails to meet job prerequisites or, more commonly, breaches their duties.

"Breach of duty" is a complex legal term. You cannot fire an employee for a single minor mistake. For less serious breaches, you must first issue a formal, written warning letter and can only proceed to termination if the employee repeats the breach. Immediate dismissal is reserved only for "especially gross" misconduct (like theft) or specific criminal convictions.

What is "odstupné" (severance pay)?

We must introduce your first essential Czech legal term: odstupné. This is the mandatory, statutory severance pay.

If you terminate an employee for organizational reasons (like redundancy) or specific health reasons, you are legally required to pay them severance. This is not negotiable.

The minimum amount is tiered based on the employee's tenure:

• 1x average monthly salary if employed for less than 1 year.
• 2x average monthly salary if employed between 1 and 2 years.
• 3x average monthly salary if employed for more than 2 years.

You do not pay odstupné if you terminate the employee for misconduct. Critically, the Labour Office will not pay unemployment benefits to the employee until the period covered by their severance pay has passed.

Termination & Dismissal Risks for Danish Employers

Risks and Penalties	How ARROWS Helps
Risk: Firing an employee for "not being a good fit" (i.e., without a statutory reason). Penalty: The termination is ruled invalid. You face a lawsuit, reinstatement of the employee, and payment of all back-wages.	Legal Opinions: We provide an urgent legal analysis before you act to confirm your grounds for dismissal are valid. Want to understand your legal options? Email us at office@arws.cz.
Risk: Making a procedural error in the termination notice (e.g., wrong date, missing information). Penalty: The termination is invalidated, even if your reason was valid.	Drafting Documentation: We draft legally required termination agreements and notices to ensure 100% procedural compliance. Do not hesitate to contact our firm – office@arws.cz.
Risk: Failing to pay the mandatory odstupné (severance) in a redundancy. Penalty: Employee lawsuits, financial penalties, and inspections from the Labour Inspectorate.	Contract Drafting: We ensure all severance obligations are correctly defined in your agreements and termination documents. Do you need a contract prepared? Contact us at office@arws.cz.

How to Draft a Valid Czech Employment Contract (Pracovní Smlouva). What three elements must your contract include?

In the Czech Republic, an employment contract (pracovní smlouva) must be in writing. To be valid, it must contain three "essential elements" (podstatné náležitosti):

1. The Type of Work (druh práce): A clear description of the job and primary duties.

2. The Place of Work (místo výkonu práce): The specific city or address where work will be performed.

3. The Commencement Date (den nástupu do práce): The official start date.

If you miss any of these three points, the contract is invalid. Danish companies often make a critical error here. They translate their standard Danish employment agreement into English or Czech. This is a dangerous mistake. The underlying legal concepts are not interchangeable.

You are not hiring under Danish law. Your contract must be drafted from the ground up to comply only with the Czech Labour Code. As a law firm with a 10-year international network spanning 90 countries, ARROWS specializes in bridging this exact legal gap. We ensure your contracts are not just translated, but legally localized and fully compliant.

FAQ – Legal tips about Czech Contracts

• Must the employment contract be in the Czech language?
  For a foreign employee, a bilingual (e.g., English/Czech) contract is best practice. However, for any official filing, such as with the Labour Office for a work permit, a certified Czech translation is mandatory. Our firm provides compliant bilingual contract drafting. Need this? Write to office@arws.cz.
• What happens if I miss one of the "three essential elements"?
  The employment contract is invalid. The Labour Inspectorate can deem this "undeclared work," exposing you to massive fines and other penalties. Don't risk it. Get a professional contract review at office@arws.cz.
• Can I just hire my Czech team as "contractors" to be more flexible?
  This is extremely dangerous. Using "flexible" agreements for what is truly a full-time job is a major violation called the Švarc system, which carries catastrophic fines. We discuss this below. For immediate assistance, write to us at office@arws.cz.

The Probationary Period (Zkušební Doba): A Tool You Must Not Misuse. How long can our "trial period" be?

The probationary period (zkušební doba) is the only time you can terminate an employment relationship without giving a reason. This makes it a critical tool for foreign employers. However, it is not an automatic right. It must be agreed upon in writing in the employment contract, or it does not exist.

Recent changes to the Czech Labour Code (the "Flexi-Amendment") have updated the rules for probationary periods, making them more useful for employers. As of 2025, the new maximums are:

• 4 months for regular employees (increased from 3).
• 8 months for managerial employees (increased from 6).

This "flexible" period is, itself, a procedural minefield. For example, for fixed-term contracts, the probationary period cannot exceed half the total duration of the contract.

Furthermore, you cannot terminate an employee on probation during the first 14 calendar days of their sick leave. The probationary period is also automatically extended by any full-day absences (like sick leave), which requires careful tracking by your HR team.

Probationary Period (Zkušební Doba) Errors

Risks and Penalties	How ARROWS Helps
Risk: Agreeing to a "trial period" verbally or in an email, but not in the signed contract. Penalty: The probationary period is legally void. The employee has full protection from day one.	Drafting Legally Required Documentation: We ensure the zkušební doba is correctly drafted and legally binding from the start. Get tailored legal solutions by writing to office@arws.cz.
Risk: Setting the period for 5 months for a regular employee, believing the new 4-month rule is just a guideline. Penalty: The entire clause is invalid, not just the extra month. The employee has full protection.	Contract Drafting: We update your contract templates to comply with the new 2025 Flexi-Amendment, maximizing your protection. Need legal help? Contact us at office@arws.cz.
Risk: Firing an employee on probation while they are in their first week of sick leave. Penalty: This is a forbidden act. The termination is invalid and could lead to a discrimination claim.	Professional Training for Management: We train your local managers on how to legally manage probation, including sick leave rules. Email us at office@arws.cz to book a training.

The €400,000 Trap: DPP, DPČ, and the Švarc System. Can I use "flexible" agreements to avoid the Labour Code?

In your search for Danish-style flexibility, you will discover two "agreements for work performed outside an employment relationship":

1. DPP (Dohoda o provedení práce): An Agreement to Complete a Job. This is for temporary tasks and is strictly limited to 300 hours per calendar year for a single employer.

2. DPČ (Dohoda o pracovní činnosti): An Agreement to Perform Work. This is for more regular part-time work, but it cannot exceed an average of 20 hours per week.

These agreements are tempting. Below certain monthly income thresholds (currently CZK 10,000 for a DPP and CZK 4,000 for a DPČ), the employer does not pay social and health insurance contributions.

This is the biggest financial trap in Czech employment law. If you hire a full-time employee but put them on one of these agreements to save costs, you are committing a major violation known as the Švarc system.

The State Labour Inspectorate (Státní úřad inspekce práce) actively hunts for this violation. The penalties are catastrophic:

• A fine for the company of up to CZK 10,000,000 (over €400,000).
• An order to pay all back-taxes, social security, and health insurance for the employee.

The Czech Republic is considered an "Extreme Risk" country for worker misclassification. Labour inspections are common, and they specifically target companies with foreign ownership structures.

What is the "Undeclared Work" fine for hiring foreigners?

Here is another procedural trap that costs millions. A new offense, "undeclared work," is now strictly enforced.

This violation is defined as letting a foreign national start work one day before you have officially notified the Labour Office. If your new hire starts on Monday but HR files the paperwork on Tuesday, you have broken the law.

The fine for this simple administrative error is up to CZK 3,000,000.

Misclassification & Foreigner Hiring Penalties

Risks and Penalties	How ARROWS Helps
Risk: Paying a full-time developer on a "flexible" DPP agreement to save on insurance costs. Penalty: Švarc system violation. Fines up to CZK 10,000,000 (€400,000) plus back-payment of all taxes and insurance.	Legal Analysis: We review your entire workforce structure to identify and fix misclassification risks before an inspection. For immediate assistance, write to us at office@arws.cz.
Risk: A new non-EU hire starts work on Monday, but HR doesn't file the paperwork with the Labour Office until Tuesday. Penalty: "Undeclared work" violation. Fine up to CZK 3,000,000.	Help with Obtaining Licenses: We manage the entire work permit and reporting process to ensure 100% compliance before day one. Need legal help? Contact us at office@arws.cz.
Risk: An inspection by the State Labour Inspectorate (Státní úřad inspekce práce). Penalty: Major fines, reputational damage, and a potential ban on hiring foreigners.	Representation Before Public Authorities: If you are facing an inspection, we take charge. We handle all communication and legal defense. Get tailored legal solutions by writing to office@arws.cz.

Your Strategic Partner: How ARROWS Protects Your Danish Business in Prague. Bridging the gap between Danish and Czech law

Navigating the complexities of Czech employment law demands more than a template. It requires a strategic partner who understands both the rigid local regulations and the mindset of a foreign investor.

As an international law firm operating from Prague, European Union, ARROWS provides this exact support. Our ARROWS International network, built over 10 years and active in 90 countries, gives us the cross-border perspective to help you anticipate problems. We support over 150 joint-stock companies and 250 limited liability companies, handling the complex needs of businesses of all sizes.

We provide end-to-end support for your Czech operations:

• Drafting legally required documentation, including bilingual employment contracts.
• Preparation of internal company policies to legally manage performance and disciplinary issues.
• Contract review and legal analysis to fix misclassification risks.
• Professional training for your management (with certificates) on Czech law.
• Robust representation in court or before public authorities like the Labour Inspectorate.

Do not let preventable, multi-million crown mistakes undermine your Czech investment. Our team is known for speed, quality, and welcoming innovative business ideas. Get the expert cross-border support you need. Do not hesitate to contact our firm – office@arws.cz.

FAQ – Most common legal questions about Czech Employment Law

• What is the new maximum probationary period in the Czech Republic after the 2025 amendment?
  Following the 2025 "Flexi-Amendment," the maximum probationary period (zkušební doba) is now 4 months for regular employees and 8 months for managerial employees. It must be in writing. Need your contracts updated? Email us at office@arws.cz.
• What is the difference between a DPP and a DPČ agreement?
  A DPP (Dohoda o provedení práce) is for temporary tasks (max 300 hours/year), while a DPČ (Dohoda o pracovní činnosti) is for regular, part-time work (max 20 hours/week). Both are dangerous if used to misclassify full-time staff. Get a legal analysis of your staffing by writing to office@arws.cz.
• Can I ask about a candidate's family plans or pregnancy in a Czech job interview?
  Absolutely not. Employers may not ask questions about pregnancy or family relations, as this is unrelated to the job and a violation of anti-discrimination laws. For guidance on compliant hiring, contact our team at office@arws.cz.
• What are the "three essential elements" every Czech employment contract must have?
  To be valid, the written contract must state the Type of Work (druh práce), the Place of Work (místo výkonu práce), and the Commencement Date (den nástupu do práce). Missing one can invalidate the contract. For a compliant template, write to us at office@arws.cz.
• Do I have to pay severance pay (odstupné) if I fire an employee for poor performance?
  No. Severance pay is not required for terminations due to employee fault (e.g., breach of duties). It is mandatory for organizational reasons (redundancy) or health reasons. Need help with a termination? Contact us at office@arws.cz.
• Must my employment contracts be in the Czech language?
  While a bilingual contract is best for you and your employee, any documents filed with Czech authorities (like for a work permit) must be in Czech or have a certified translation. Our lawyers can provide this. Get tailored legal solutions by writing to office@arws.cz.

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