Italian vs. Czech Employment Contracts:

Expanding your business into the Czech Republic offers significant opportunities, but success depends on navigating a legal landscape very different from Italy's. This guide provides clear answers for Italian companies on Czech employment contracts, helping you avoid costly mistakes. 

Do you 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.

Understanding the landscape: Key differences between Italian and Czech employment law

For an Italian company, the first step is to recognize that Czech employment law operates on a fundamentally different framework. 

In Italy, your human resources practices are shaped by the Italian Civil Code, the Workers' Statute (Statuto dei Lavoratori), and, crucially, by National Collective Bargaining Agreements (CCNLs) that set detailed rules for specific industries.

This sector-specific approach does not exist in the Czech Republic. Here, the entire employment relationship is governed centrally by one primary piece of legislation: the Labour Code (Zákoník práce).

This code establishes a uniform set of rules that apply across almost all industries. An Italian manager’s natural instinct to search for a "Czech CCNL for the tech industry," for example, would be a fruitless exercise that could lead to overlooking the binding, universal rules of the Labour Code.

This difference is more than a technicality; it represents a potential cognitive trap. Assuming the absence of a CCNL means less regulation is a dangerous mistake. The Czech Labour Code is comprehensive and strict, and failing to adhere to its general provisions while searching for non-existent sector-specific rules is a common path to non-compliance for foreign companies.

What are the mandatory requirements for a Czech Employment contract?

While the Czech Labour Code is extensive, the mandatory core of a valid employment contract is deceptively simple. 

To be legally binding, a written contract must contain three essential elements (podstatné náležitosti): the type of work (druh práce), the place or places of work (místo výkonu práce), and the date of commencement of employment (den nástupu do práce). If any of these are missing, the contract is invalid.

Beyond these three pillars, the employer has a duty to provide the employee with written information on other key terms. These include details on annual leave, notice periods, salary and payment dates, and the schedule of weekly working hours.

This information can be included directly in the contract or in a separate document, but it must be provided. For foreign employees, it is highly recommended to provide a bilingual contract in a language they understand.

The simplicity of the three core requirements masks their strategic importance. Vague wording can severely limit your future operational flexibility.

For instance, defining the "type of work" too broadly makes it difficult to later make a role redundant. Similarly, an imprecise "place of work" can prevent you from requiring an employee to move to a new office without their consent.

FAQ – Legal tips about Czech contract essentials

1. Can we define the "place of work" as the entire Czech Republic?

Yes, this is legally possible and common for roles like traveling sales representatives. However, for office-based staff, defining the location so broadly gives the employee significant flexibility and limits your ability to manage their work location. Need help defining this clause correctly? Contact us at office@arws.cz.

2. What happens if the contract isn't in writing?

The employer faces significant risk. The Labour Inspection Authority can impose a fine of up to CZK 10,000,000 (approx. EUR 400,000) for this failure, even if the work has already started and the relationship is later formalized.To ensure your contracts are compliant from day one, email our experts at office@arws.cz.

Fixed-Term vs. Indefinite Contracts: Navigating the rules in Prague

Italian companies often use fixed-term contracts (contratto a tempo determinato) for flexibility, which are typically limited to a 24-month duration.

While the Czech Republic also allows fixed-term employment, the rules are distinct and must be followed precisely to avoid unintended long-term commitments.

Under the Czech Labour Code, a fixed-term contract cannot exceed three years in a single instance. Furthermore, it can only be renewed or extended a maximum of two times with the same employee. 

This is often referred to as the "three times and out" or "3x3 rule," meaning the total duration of consecutive fixed-term contracts cannot exceed nine years.

Crucially, if an employment contract does not specify an end date, it is automatically considered to be for an indefinite period (na dobu neurčitou).

If you violate the renewal limits for a fixed-term contract, the employee can petition a court to declare the relationship indefinite, locking you into a permanent employment status you did not intend.

Risks and penalties	How ARROWS helps
Unintentional Indefinite Contract: Exceeding the renewal limits can lead a court to declare the contract indefinite, locking you into a long-term commitment you did not plan for.	Contract Drafting & Review: We ensure your fixed-term contracts are fully compliant with Czech duration and renewal limits. Need a contract reviewed? Contact us at office@arws.cz.
Litigation from Employees: An employee whose contract was improperly renewed can sue, forcing you into costly and time-consuming legal battles.	Legal Representation: Our litigators can represent you in any employment disputes before Czech courts. Facing a legal challenge? Write to us at office@arws.cz for immediate assistance.
Inability to Terminate: If a contract becomes indefinite, you lose the ability to end the relationship at the contract's expiry and must follow strict dismissal rules.	Strategic Legal Advice: We provide strategic counsel on the proper use of different contract types to maintain operational flexibility. Want to understand your options? Email us at office@arws.cz.

The probationary period (Zkušební Doba): A Critical tool for assessment

One of the most powerful and employer-friendly tools in Czech labour law is the probationary period, or zkušební doba. This period allows both the employer and the employee to terminate the relationship for any reason, or no reason at all, without a notice period.

This provides an essential window to assess a new hire's skills, performance, and cultural fit before the full protections of the Labour Code apply.

To be valid, the probationary period must be agreed upon in writing, no later than the employee’s first day of work.

Currently, the maximum duration is three months for regular employees and six months for managers.

A major upcoming "Flexi-Amendment" to the Labour Code, effective from June 2025, will make this tool even more valuable. The maximum probationary period will be extended to four months for regular employees and eight months for managerial employees.

This change signals a move towards greater flexibility for employers and enhances the Czech Republic's attractiveness for foreign businesses compared to more rigid European labour markets.

How do you terminate an employment contract in the Czech Republic?

Unlike "at-will" employment systems, you cannot dismiss an employee in the Czech Republic without a legally recognized reason.

The process is formal and strictly regulated by the Labour Code. However, for an Italian company accustomed to Italy's highly protective termination laws—where "just cause" (giusta causa) is required and courts can order employee reinstatement—the Czech system is structured, predictable, and manageable.

The Labour Code provides an exhaustive list of valid grounds for dismissal by the employer. 

These include organizational reasons (redundancy), the employee's long-term inability to perform the work for health reasons, failure to meet job requirements, or a breach of work duties.

For poor performance, a formal written warning must be issued first, giving the employee a chance to improve.

The standard statutory notice period is two months for both parties, which begins on the first day of the calendar month following the delivery of the written notice.

For dismissals due to organizational or health reasons, the employer must also pay severance (odstupné), which ranges from one to three months' average salary depending on the employee's length of service.

Risks and penalties	How ARROWS helps
Invalid Dismissal and Reinstatement: If a court finds the termination unlawful, you may be forced to reinstate the employee and pay back wages for the entire duration of the legal dispute.	Representation in Court: We defend your company's interests vigorously in employment litigation. Need legal representation? Write to office@arws.cz.
Financial Penalties: You could be liable for months or even years of back pay, plus legal costs, turning a single dismissal into a major financial liability.	Drafting Termination Documents: We ensure your termination notices and agreements are legally sound and state the reasons correctly to minimize the risk of a successful challenge. Get tailored legal solutions by writing to office@arws.cz.
Damage to Company Reputation: Public legal disputes with former employees can harm your employer brand, making it harder to attract top talent in the future.	Legal Consultations: We provide preventative advice on performance management and disciplinary procedures to build a solid case before termination is even considered. For immediate assistance, write to us at office@arws.cz.

Protecting your business after an employee leaves: Non-Compete clauses

A non-compete clause is a vital tool for protecting your trade secrets and client relationships when a key employee departs. However, an improperly drafted clause is worthless. 

While Italian law requires "adequate" compensation for a non-compete clause—an ambiguous term that often leads to disputes—the Czech Labour Code provides clear, predictable rules.

This clarity, though costly, makes Czech non-compete clauses highly enforceable when drafted correctly.

To be valid in the Czech Republic, a non-compete agreement must:

1. Be in writing.
2. Be justifiable based on the employee's access to confidential information or know-how.
3. Last for a maximum of one year after the employment ends.
4. Provide the former employee with monthly financial compensation of at least 50% of their average monthly earnings for the duration of the restriction.

You can also include a contractual penalty for a breach. However, once the employee pays this penalty, their obligation under the non-compete clause is extinguished, and they are free to compete.

The high cost of the 50% compensation buys legal certainty—a valuable trade-off for protecting high-value business assets.

FAQ – Legal tips about Czech non-compete agreements

1. Can we decide not to pay the compensation if we no longer see the ex-employee as a threat?

No. The obligation to pay is automatic if the clause is valid. If you fail to pay the compensation within 15 days of its due date, the employee has the right to unilaterally terminate the non-compete agreement, freeing them from all restrictions. For help managing these obligations, email our lawyers at office@arws.cz.

2. Is a 50% salary payment for a year really worth it?

This is a strategic business decision. For employees with access to critical know-how, customer lists, or R&D secrets, preventing them from joining a competitor for a year is often a crucial investment in protecting your market position. We can help you assess the cost-benefit. Contact us at office@arws.cz.

Common pitfalls for foreign employers and how to avoid them

Beyond the specifics of an employment contract, foreign companies often fall into several common operational traps that carry severe financial penalties.

Understanding these risks is the first step toward mitigation.

The most serious offense is "disguised employment," known locally as the Švarcsystém. This is the illegal practice of hiring an individual as an independent contractor or freelancer to perform work that legally qualifies as dependent employment, thereby avoiding social security contributions and other employee protections.

The State Labour Inspection Authority actively investigates this, and fines can reach up to CZK 10,000,000 (approx. EUR 400,000).

Other frequent errors include mismanaging overtime and failing to meet reporting obligations. The Labour Code strictly limits overtime to 8 hours per week and 150 hours per year (unless a specific agreement is in place) and mandates a 25% wage premium.

Additionally, employers must report the hiring and termination of all foreign employees, including EU citizens, to the regional Labour Office. Failure to comply can result in fines.

Risks and penalties	How ARROWS helps
Fines for "Disguised Employment": Classifying an employee as a freelancer can result in fines up to CZK 10,000,000 and demands for back-payment of social security and health insurance contributions.	Legal Opinions & Structuring: We analyze your worker relationships to ensure correct classification and draft compliant contractor agreements. Do not hesitate to contact our firm – office@arws.cz.
Penalties for Overtime Violations: Exceeding overtime limits or failing to pay the required premium can lead to fines of up to CZK 2,000,000 from the Labour Inspection Authority.	Preparation of Internal Policies: We create clear internal guidelines on working hours and overtime that comply with the Labour Code and protect you from sanctions. Our lawyers are ready to assist you – email us at office@arws.cz.
Sanctions for Reporting Failures: Neglecting to report the hiring of your foreign EU staff to the Labour Office can trigger fines of up to CZK 100,000.	Compliance & Representation: We manage reporting obligations and represent you before public authorities like the Labour Office to ensure a smooth process. Need legal help? Contact us at office@arws.cz.

How ARROWS can secure your business operations in the Czech Republic

Navigating the complexities of the Czech Labour Code requires more than just translating your existing Italian contracts; it demands a strategic approach grounded in deep local expertise. 

Missteps can lead to invalid contracts, financial penalties, and protracted legal disputes that distract from your core business objectives.

ARROWS provides comprehensive legal support to ensure your entry into the Czech market is seamless and secure. 

Our services are tailored to the needs of foreign companies and include:

• Contract drafting or review of all employment-related documents.
• Preparation of internal company policies on working hours, data protection, and more.
• Legal consultations to prevent inspections or penalties.
• Representation in court or before public authorities like the Labour Office.
• Professional training for your management on Czech labour law compliance.

As an international law firm operating from Prague, European Union, we combine deep local knowledge with a global perspective.

Our ARROWS International network, built over 10 years, allows us to effectively handle cross-border matters, understanding the legal and cultural nuances that foreign clients face.

To ensure your Czech employment practices are secure, compliant, and strategically sound, contact our team of experts today. Write to us at office@arws.cz to schedule an initial consultation.

FAQ – Most common legal questions about Czech employment contracts

1. Do I need a different contract for a manager versus a regular employee?

The fundamental contract is the same, but clauses for managers—such as the probationary period (up to 8 months from June 2025) and the potential for a non-compete agreement—are distinct and require careful drafting. We can create contracts tailored to each specific role. Get expert help by writing to office@arws.cz.

2. Can I pay my employees in Euros?

Yes, the 2025 "Flexi-Amendment" to the Labour Code makes it possible to agree on salary payments in a foreign currency like the Euro. However, specific rules on exchange rates and payment methods must be followed. To set this up correctly, contact our legal team at office@arws.cz.

3. What is the minimum vacation entitlement in the Czech Republic?

The statutory minimum is four weeks of paid leave per year. However, five weeks has become the market standard and is often offered as a standard benefit to attract and retain quality employees. Ensure your policies are competitive and compliant by consulting with us at office@arws.cz.

4. Are verbal agreements or changes to the contract valid?

No. The employment contract and any subsequent amendments must be in writing to be legally valid and enforceable. Relying on verbal understandings is a significant legal risk that can lead to disputes and sanctions. For proper documentation, email us at office@arws.cz.

5. My Italian company has a global employee handbook. Can I just translate it and use it in the Czech Republic?

This is extremely risky. Your internal policies and handbook must comply with the mandatory provisions of the Czech Labour Code, which will differ significantly from Italian law and other jurisdictions on issues like termination, working hours, and data privacy. We can review and adapt your global policies for the Czech market. Get in touch at office@arws.cz.

6. What are DPP and DPČ agreements?

These are special agreements for work performed outside of a standard employment relationship. The Agreement to Complete a Job (DPP) is limited to 300 hours per calendar year per employer, while the Agreement to Perform Work (DPČ) cannot exceed an average of 20 hours per week.They offer flexibility but have different tax and social security implications. To choose the right agreement for your needs, seek our advice at office@arws.cz.