How to Work Legally with Your Relatives Under Czech Labour Law

9.4.2026 | ARROWS law firm

Employing your own husband or wife may seem like a logical step, but the Czech Labour Code strictly prohibits it. If you try to do it directly, you risk crippling fines for illegal employment. Nevertheless, there are several fully legal ways to build a family business together. In this article, we will show you how to set up these alternatives correctly and safely.

The illustrative image shows a specialist discussing the topic of employing one’s husband or wife.

Article contents

Why the law prohibits direct employment of spouses and partners
Alternative 1: a cooperating person – the most common and most flexible solution
Tax implications and insurance contributions
Alternative 2: a family enterprise – a civil-law framework that does not replace mandatory registration
Alternative 3: a silent partnership – a sophisticated solution for contributed capital
Alternative 4: a legal entity with a spouse as a shareholder or member of management
Practical risks and the most common mistakes

Key takeaways

Employment ban: A standard employment relationship cannot arise between spouses and registered partners (full-time employment, DPP or DPČ).
Cooperating person: The most popular legal alternative, allowing tax optimisation by splitting profit and expenses with a spouse up to 50%.
Family enterprise: A civil-law arrangement for family members sharing a household, but it does not avoid the need to address tax payments.
Limited liability company (s.r.o.) as a shield: If you own a legal entity, the ban does not apply and your company can employ your spouse in the standard way.
Risk of fines: Illegal “off-the-books” work within the family is punishable by a fine of up to CZK 10 million for the company and CZK 100,000 for the worker.

Why the law prohibits direct employment of spouses and partners

Under Section 318 of the Czech Labour Code, no employment-law relationship may arise between spouses or registered partners. You cannot validly conclude an employment contract with them, an agreement to perform work (DPP) or an agreement on work activity (DPČ). The prohibition is absolute, and if employees marry during the relationship, their employment automatically terminates on the date of the wedding.

The reason is the historical protection of property relations and the prevention of abuse of the system. It is based on the principle of the community property of spouses (SJM), where the employer would pay wages from the joint budget effectively back into the same joint budget. For registered partners, the legal logic of property relations is sufficiently similar despite the absence of SJM, so the prohibition applies to them as well.

In practice, this means only one thing: if you want to involve your husband or wife in your business legally, you must find another route. When choosing a specific way of involving a family member, it is advisable to assess the employment-law implications and related risks as well, with which the employment law practice can assist. The Czech legal system offers several options, from the status of a cooperating person to establishing a legal entity. Each of them, however, has its own specific pitfalls and administrative requirements.

Alternative 1: a cooperating person – the most common and most flexible solution

By far the most widely used model is the concept of a so-called cooperating person. In this case, one spouse remains the main entrepreneur with their own company ID number (IČO). The other registers with the authorities as a cooperating person and, at the end of the year, income and expenses are allocated between them, which can very effectively reduce the family’s overall tax burden.

In practice, it works as follows: if the main entrepreneur earns CZK 1 million and has expenses of CZK 500,000, they can formally transfer part of the profit to their wife. This prevents the other spouse’s tax credits from being wasted and often makes use of a lower tax bracket. However, this transfer is subject to very strict statutory limits under the Czech Income Taxes Act. We also discuss the practical setup of transfers between spouses (and how defensible they are in an audit) in our article External suppliers versus employees: How to properly set up contractual relationships and eliminate the tax risks of disguised employment.

Conditions for a cooperating person

For the tax authority to recognise this model, it must be genuine cooperation by a fully legally capable person over 18 years of age. Merely allocating income on paper to a wife who does not help the business in any way is circumvention of the law. Under Section 13 of the Income Taxes Act, a maximum of 50% of income and expenses may be transferred to a husband or wife (and the transferred tax base may not exceed CZK 540,000 per year).

For other members of the household (children, parents, etc.), the law is stricter. A maximum of 30% of income and expenses may be transferred to them, up to a total of CZK 180,000 per year. In addition, a cooperating person must always register before commencing the activity with the tax authority (they will obtain a tax ID number – DIČ), the Czech Social Security Administration and their health insurance company. With registrations, setting up contributions and links to tax obligations, tax advisory services typically help.

Tax implications and insurance contributions

From the perspective of mandatory contributions, a cooperating person becomes a fully-fledged self-employed individual (OSVČ). If the cooperation is their main activity, they must pay regular monthly advances for social security and health insurance, even if no regular payments are actually made to their account. For setting remuneration and contracts so that they also withstand scrutiny by the Czech Social Security Administration (OSSZ) and the tax authority, our article Combination of roles and remuneration of statutory bodies: How to set up management contracts so they safely withstand an audit by the tax authority and OSSZ may also be useful. This is where many families make a fatal mistake and generate huge debts to insurance companies.

If the activity is secondary (the person is otherwise employed or, for example, on parental leave), no social security contributions are payable up to a certain annual profit threshold. Health insurance is then paid only on the actually achieved transferred profit, and no monthly advance payments are required at all.

Most common questions about a cooperating person

Clients often ask whether the cooperating person concept can also be used in an s.r.o. The answer is no; this solution is reserved exclusively for individuals (self-employed persons – OSVČ). In the case of legal entities, spouses are independent, the company operates as a separate entity, and the prohibition on employing spouses does not apply to it. You can therefore be employed in the standard way.

The percentage that can be allocated for an OSVČ is not fixed; you can transfer 10%, 30% or even the maximum 50%. However, the ratio must always correspond to the work actually performed. If you transfer more than the law allows, the authorities will add the excess back to the main entrepreneur, which often leads to severe penalties and unnecessary double taxation.

Attorneys from ARROWS, a Prague-based law firm, will represent you in these negotiations so that the structure is legally safe and makes economic sense. We will set the income and expense ratio with you so that it reflects reality and reliably withstands a tax audit. Contact us for an initial consultation at office@arws.cz.

Alternative 2: family enterprise – a civil-law framework that does not replace mandatory registration

This concept (Section 700 of the Czech Civil Code) is more typical of traditional and agricultural families. A family enterprise is not a separate legal entity with its own company ID number (IČO). It arises in practice at the moment when family members (spouses, siblings) living in the same household work on a long-term basis to develop a single business operated by one of them.

The main principle is the right of family members to an adequate share of the profit and acquired assets. However, this does not mean you avoid administration and tax obligations. The involved members must still have their remuneration covered either as cooperating persons, or—where relatives are not closely related—under standard contracts.

Conditions for a family enterprise

The basic requirement is direct or collateral kinship (or marriage) and primarily a shared household. However, a family enterprise is fundamentally not intended to legalise “off-the-books” work. If the activity shows the characteristics of dependent work, the family member must pay both health and social security contributions.

The risk here arises during inspections by the State Labour Inspection Office (SÚIP). If officials find a family member working at the premises without registration, they will assess it as illegal employment. In such cases, we strongly recommend at least drawing up a basic informal agreement on the arrangement of the family enterprise.

Possible issues	How ARROWS helps (office@arws.cz)
Illegal employment within the family	Analysis of relationships and setting up a lawful model (cooperating person, silent partner) in compliance with Czech legislation.
Challenge to the income split by the tax authority	Preparation of evidence and agreements to defend the profit-sharing ratio between partners.
Risk relating to insurance contributions	Legal assessment of the activity and precise determination of whether you are required to pay insurance advances.
Property disputes in divorce	Precise drafting of agreements on shares in the family business to protect your corporate and personal assets.

Alternative 3: silent partnership – a sophisticated solution for invested capital

A silent partnership (silent company) is ideal for situations where one spouse only invests money or assets into the other spouse’s business but does not actively work in it. The silent partner shares financially in the profit and any loss of the business, but does not appear externally at all and does not manage its operations in any way.

The advantage is discretion and the fact that the profit share is subject to a 15% withholding tax at source, paid directly by the main entrepreneur upon payment. The silent partner therefore does not tax this income anywhere, and a major advantage is also that no social security or health insurance contributions are paid on it. You do not need to set up a new company; a contract is sufficient. However, if the relationship breaks down, a poorly drafted document can generate severe court disputes over repayment of contributions.

In practice, a thorough analysis is necessary. Lawyers and tax advisors from ARROWS, a Prague-based law firm, will ensure due diligence and the preparation of a precise silent partnership agreement before the transaction, so that you do not risk future property disputes and tax issues.

Alternative 4: a legal entity with a spouse as a shareholder or member of management

Transforming an OSVČ into a limited liability company (s.r.o.) is a perfect shield against prohibitions under the Czech Labour Code. An s.r.o. is a separate legal entity, and the prohibition on employing spouses therefore logically does not apply to it. Your company can thus enter into a standard employment contract, DPP or DPČ with your spouse fully legally.

If the spouse is an employee of the company, exactly the same rules for tax and insurance contributions apply as for any unrelated worker. However, wage conditions must be market-based; if you assign your spouse an unreasonably high salary to artificially reduce corporate taxes, the Czech tax authority will disallow these wage costs.

Practical risks and the most common mistakes

Family business can tempt people into dangerous informality. Most problems arise from the feeling that “we won’t sue each other at home”. That may be true, but public authorities do not share this leniency. Missing contracts, failure to register for insurance, or incorrectly allocated profits end in draconian fines that can financially ruin a family.

Illegal employment – the most serious mistake

The most common and most destructive mistake is involving a spouse “off the books” in order to save on contributions or bureaucracy. Work without any contract or records is harshly prosecuted by the state. Inspectors from SÚIP carry out surprise inspections at workplaces and do not accept verbal family arrangements at all.

The fines are crippling. A self-employed individual or a company faces a fine of CZK 50,000 to CZK 10,000,000 for enabling illegal work. The spouse working illegally may be fined up to CZK 100,000. In addition, the Financial Administration will disallow all related deductions and will assess the tax without mercy.

If you do not want to risk additional tax assessments and penalties, entrust the preparation of the transaction and contracts to professionals. The lawyers at ARROWS, a Prague-based law firm, specialise in family law and its tax aspects and will guide you safely through the entire process. Contact us at office@arws.cz.

Incorrect setup of a cooperating person

When registering a cooperating person, entrepreneurs often make mistakes in basic administration. They do list their wife in the tax return, but forget to register her in time with the Czech Social Security Administration and the health insurance company. The authorities then do not recognise this status, assess penalties, and challenge the entire tax return.

Equally risky is exceeding the statutory limits for the profit share (e.g., transferring 60% instead of the permitted 50% for a spouse). The Financial Administration will add the excess amount back to the main entrepreneur’s tax base and tax it. This can lead to unnecessary double taxation that could have been avoided with a simple calculator.

Conclusion

Employing family members, although directly prohibited by the Labour Code, has several elegant and fully legal solutions. The key to success is choosing the right model—whether it is a cooperating person for tax optimisation, a silent partnership for capital appreciation, or a transition to an s.r.o. to preserve standard employment contracts.

The greatest risk in a family business is administrative negligence. Verbal agreements and undeclared work will not protect you from severe penalties imposed by the labour inspectorate and the tax authorities. If you take your business seriously, every role must be supported by flawless documentation.

FAQ – Most common questions about employing family members

1. Can I enter into an Agreement to Perform Work (DPP) with my spouse?
No. Section 318 of the Labour Code prohibits any employment-law relationship between spouses, including agreements (DPP and DPČ). This prohibition applies throughout the duration of the marriage.

2. Does an employment contract terminate automatically when we get married?
Yes. If your partner worked for you under an employment contract and you subsequently get married, the employment-law relationship automatically terminates by operation of law on the wedding day itself. From that moment, you must choose another form of cooperation (e.g., a cooperating person).

3. Does the prohibition on employment also apply to the parent-child relationship?
No. The prohibition under the Labour Code applies exclusively to spouses and registered partners. You may employ your child, parents, or siblings as an individual (self-employed) under a standard employment contract or agreement without any restrictions.

4. Does a family enterprise have to keep double-entry accounting?
A family enterprise is not a separate legal entity and therefore does not have its own accounting. Taxes, tax records, or accounting are kept by the family member (the main entrepreneur) under whose company ID number (IČO) the business is officially operated.

5. How is profit from a silent partnership taxed?
Profit paid to a silent partner (an individual) is classified as income from capital assets. It is subject to a special withholding tax of exactly 15%. This tax is withheld and remitted to the state directly by the main entrepreneur when paying out the profit. The silent partner does not report this income in their tax return, and a major advantage is that no health or social insurance contributions are paid on this amount.

Notice: The information contained in this article is of a general informational nature only and is intended for basic guidance on the issue based on the legal status as of 2026. Although we take the utmost care to ensure accuracy, legal regulations and their interpretation evolve over time. We are ARROWS advokátní kancelář, an entity registered with the Czech Bar Association (our supervisory authority), and for maximum client protection we are insured for professional liability with a limit of CZK 400,000,000. To verify the current wording of regulations and their application to your specific situation, it is necessary to contact ARROWS advokátní kancelář directly (office@arws.cz). We accept no liability for any damages arising from the independent use of the information in this article without prior individual legal consultation.

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