Swiss vs. Czech Employment Contracts

Are you a Swiss employer planning on hiring in the Czech Republic? Understanding the significant differences between Swiss and Czech employment contracts is crucial for a smooth expansion and avoiding costly legal errors. This guide provides specific answers from an English-speaking lawyer in Prague, helping you navigate the local legal landscape. As a leading Czech law firm in Prague, EU, we specialise in helping foreign businesses succeed in the Czech market.

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.

The Employment Contract: Navigating Formal Requirements

The very foundation of an employment relationship is treated differently in the Czech Republic compared to Switzerland. What is a matter of flexible practice in Switzerland is a point of strict legal formality in Prague. This initial difference reflects a deeper divergence in legal philosophy that foreign employers must grasp from day one.

Why a Written Contract is a Legal Necessity in the Czech Republic

In Switzerland, the principle of freedom of contract is paramount, meaning an employment agreement can be concluded orally or even implied through actions. The relationship is valid without a signed document. This approach trusts the parties to define their own terms.

The Czech Republic, however, operates under a more protective legal framework. The Czech Labour Code (Zákoník práce) mandates that every employment contract (pracovní smlouva) must be in writing. This is not a mere recommendation; it is a strict legal requirement. 

This rule ensures that the core terms of employment are clearly documented, protecting the employee and providing legal certainty for both parties. For a Swiss employer, relying on an informal or verbal agreement in the Czech Republic is a significant legal risk that can invalidate key terms and expose the company to penalties.

The Three Pillars of a Czech Employment Contract

According to the Czech Labour Code, a valid employment contract must contain three essential elements, or "pillars":

1. The type of work (druh práce): This defines the employee's job role and responsibilities.
2. The place of work (místo výkonu práce): This specifies where the work will be performed.
3. The date of commencement (den nástupu do práce): This is the official start date of the employment.

While other details like salary and vacation can be provided in a separate document within one month of starting, the absence of any of these three pillars in the main written contract renders it invalid. How you define these terms has significant strategic consequences. 

For example, defining the "place of work" narrowly as "Prague office" means any work performed elsewhere legally constitutes a business trip (pracovní cesta), entitling the employee to travel allowances. A broader definition like "the Czech Republic" offers more flexibility but must be reasonable for the role.

FAQ – Legal tips about contract essentials

• Can the employment contract be in English?
  Yes, as long as the employee fully understands the language. However, we strongly recommend a bilingual Czech-English version to prevent any misunderstandings or disputes over interpretation. For assistance drafting a bilingual contract, contact us at office@arws.cz.
• What happens if we forget to put the contract in writing?
  A verbal agreement may be deemed invalid by a court. This exposes your company to potential fines from the Labour Inspectorate and makes it extremely difficult to enforce the terms you agreed upon, especially regarding termination or confidentiality. Protect your business by ensuring all contracts are written. Need a review? Email us at office@arws.cz.

The Probationary Period (Zkušební doba): A Critical Comparison

The trial period is a key tool for evaluating new hires, but its rules and strategic use differ significantly between the two countries. Furthermore, upcoming changes in Czech law will provide employers with new options.

Understanding the Rules and Duration

In Switzerland, a probationary period typically lasts from one to three months, during which employment can be terminated with a very short notice period of just seven calendar days.

In the Czech Republic, the probationary period must be agreed in writing, at the latest on the employee's start date. Currently, the maximum duration is three months for regular employees and six months for managers. Critically, it cannot be longer than half the duration of a fixed-term contract.

A Look Ahead: How the 2025 'Flexi-Amendment' Will Change Czech Probationary Periods

A major amendment to the Czech Labour Code, effective from 1 June 2025, will extend these limits significantly. The new maximum probationary periods will be:

• 4 months for standard employees.
• 8 months for managerial employees.

This change offers employers more time to assess a new hire's suitability, which is especially valuable when integrating talent from different business cultures. However, Swiss employers should use this new flexibility strategically. While a longer period provides security for the employer, it may deter top candidates who are accustomed to the shorter trial periods and greater job security common in Switzerland. We recommend applying the maximum periods selectively for senior or highly specialised roles.

Navigating Probationary Period Risks

Risks and penalties	How ARROWS Helps
Invalid Probationary Period: Agreeing to a trial period verbally or after the employee has started work makes it legally void. You lose the right to terminate easily and must follow standard notice period rules.	Legally Compliant Contract Drafting: We ensure the probationary period is correctly documented in the employment contract from the outset. Do you need a contract prepared? Contact us at office@arws.cz.
Unlawful Extension: Attempting to extend a probationary period beyond the statutory limits (even with employee consent) is invalid and unenforceable.	Legal Consultation: We advise on the new 2025 rules, including the conditions under which a shorter, initially agreed period can be extended up to the new maximums. Want to understand your options? Email us at office@arws.cz.
Termination During Sick Leave: Terminating an employee during the first 14 calendar days of their sick leave within the trial period is prohibited and will be deemed invalid by Czech courts.	HR Policy Review and Training: We provide professional training for your HR and management teams on Czech termination procedures to prevent costly mistakes. For immediate assistance, write to us at office@arws.cz.

Termination of Employment: Contrasting Freedom with Statutory Grounds

The process of ending an employment relationship is perhaps the most significant legal difference between the two jurisdictions. A standard Swiss management practice could be illegal in the Czech Republic, exposing your company to serious litigation.

Swiss "Freedom of Termination" vs. Czech Republic's Protective Framework

Swiss law is governed by the principle of "freedom of termination." This means either party can terminate an indefinite contract at any time, for any reason or no reason at all, as long as the contractual notice period is respected. A dismissal is only unlawful if it is for "abusive" reasons, such as discrimination, and the burden is on the employee to prove this.

This freedom does not exist in the Czech Republic. Here, the employer's right to terminate is strictly limited. An employer can only dismiss an employee for a specific set of reasons explicitly listed in Section 52 of the Labour Code. The burden of proof is entirely on the employer to demonstrate that a valid, legally recognised reason existed. An approach of "it's just not working out," while common in Switzerland, is a direct path to an unlawful termination lawsuit in Prague.

What are the Legal Grounds for Dismissal in the Czech Republic?

The reasons for termination by an employer are exhaustive and primarily fall into these categories:

• Organisational reasons: Redundancy due to restructuring, relocation of the business, or company closure.
• Health reasons: The employee has a long-term medical incapacity to perform their current job, confirmed by a medical certificate.
• Poor performance: The employee fails to meet the requirements for the job. This requires prior written warning and a chance to improve.
• Breach of obligations: This can range from repeated, less serious breaches (which also require prior warnings) to a single gross violation of duties that justifies immediate termination.

Notice Periods (Výpovědní doba): Key Differences

In Switzerland, the statutory notice period increases with the employee's length of service: one month in the first year, two months for years two through nine, and three months thereafter.

In the Czech Republic, the notice period is a statutory minimum of two months for both parties, regardless of tenure. A significant change is coming in 2025: currently, the notice period begins on the first day of the month following the notice delivery. The new amendment will change this so the period begins on the day the notice is delivered, making the process faster.

Avoiding Unlawful Termination and Litigation in the Czech Republic

Risks and penalties	How ARROWS Helps
Dismissal without Statutory Grounds: Firing an employee for reasons not listed in the Labour Code (e.g., "poor cultural fit") will lead to the termination being declared invalid by a court.	Legal Opinions: We provide a formal legal opinion on the validity of your intended termination grounds before you act, protecting you from litigation. Get tailored legal solutions by writing to office@arws.cz.
Invalid Termination Lawsuit: An employee can sue within two months. If they win, the employment relationship is deemed to have continued, and you are liable for full back pay for the entire duration of the legal dispute.	Representation in Court: Our experienced litigators can represent you in any employment disputes before Czech courts and authorities. Need legal representation? Write to office@arws.cz.
Procedural Errors: Failing to state the reason for termination clearly and correctly in the written notice, or failing to deliver it properly, can invalidate the entire process.	Drafting Legally Required Documentation: We draft termination notices and related documents that are procedurally flawless and compliant with the Labour Code. Our lawyers are ready to assist you – email us at office@arws.cz.

Post-Employment Restrictions: The Non-Compete Clause (Konkurenční doložka)

Protecting your business after an employee leaves is a common goal, but the Czech approach to non-compete clauses involves a significant financial commitment that often surprises foreign employers.

Enforcing a Non-Compete Clause in the Czech Republic vs. Switzerland

Both countries require a non-compete clause to be in writing and be reasonable in scope, time, and geography. In the Czech Republic, the maximum duration is one year post-employment. In Switzerland, the legal maximum is three years, though courts rarely enforce clauses longer than one to two years.

The Critical Financial Difference: Mandatory Compensation

Here lies the crucial distinction. In Switzerland, a non-compete clause does not require the employer to pay any compensation to the former employee for it to be valid. It is seen as a protective measure agreed upon at the start of employment.

In the Czech Republic, a non-compete clause is only valid if the employer agrees to pay the former employee a monthly financial compensation of at least 50% of their average monthly earnings for the entire duration of the restriction. This transforms the clause from a simple contractual tool into a significant financial investment. 

You must carefully calculate whether paying an ex-employee half their salary for a year is worth the protection it affords. For this reason, these clauses should be used selectively only for key employees with access to truly sensitive business information.

FAQ – Legal tips about restrictive covenants

• Can we stop paying the non-compete compensation if the ex-employee gets another (non-competing) job?
  No. The compensation is mandatory for the entire agreed period, regardless of the former employee's other income. For advice on structuring these clauses, email office@arws.cz.
• What about non-solicitation clauses?
  Unlike the non-compete clause, Czech law does not specifically regulate non-solicitation of customers or employees. This makes their enforceability less certain and requires expert drafting to be effective. Get in touch with our team at office@arws.cz.

Financial Obligations: A Comparative Look at Social Security

The total cost of employment is a critical factor in any expansion. While the Swiss social security system is complex, the Czech system involves a high, flat-rate employer contribution that must be factored into your budget.

Employer and Employee Contribution Rates in the Czech System

In the Czech Republic, the system is straightforward. The total employer contribution is 33.8% of the employee's gross salary (comprising 24.8% for social security and 9% for health insurance). The employee contributes 11.6% from their salary. There is an annual cap on the assessment base for social security contributions, but not for health insurance.

Our experts on the topic:

Comparing the Costs: Czech Contributions vs. the Swiss Three-Pillar System

The Swiss system is more fragmented, with contributions split across different pillars and funds: Old-age and survivors' insurance (AHV/IV/EO), unemployment insurance (ALV), a mandatory occupational pension (BVG) with age-dependent rates, accident insurance, and cantonal family allowance funds. 

While this makes calculation more complex, the total employer burden can sometimes be lower than in the Czech Republic. For Swiss companies, the high and non-negotiable 33.8% employer contribution in the Czech Republic is a key data point for financial modelling and must be anticipated to accurately assess the cost of your Czech operations.

Urgent Compliance for Foreign Employers: The Risks You Cannot Ignore

Beyond the employment contract itself, foreign employers face strict administrative and reporting obligations. Recent and upcoming changes in Czech law have significantly raised the stakes for non-compliance.

Hiring Non-EU Nationals: An Overview of Permits and Procedures

As in Switzerland, non-EU/EFTA citizens require a work and residence permit to be legally employed in the Czech Republic, most commonly an Employee Card or an EU Blue Card. The process can take several months, and it is a common mistake to promise candidates a quick start date before the permit is secured. It is also important to note that even EU citizens are legally considered "foreigners" and their employment must be registered with the authorities.

Crucial Update: The New "Unreported Work" Offense (Effective 1 October 2025)

The Czech government is tightening its oversight of foreign employment. A critical amendment to the Employment Act introduces a new offense of "unreported work" (neohlášená práce), effective from 1 October 2025.

Under this new rule, employers must notify the regional Labour Office of a foreign employee's start date before they begin work (at the latest, one day prior). Previously, this was an administrative task that could sometimes be completed after the fact. Now, failing to meet this deadline will be treated as a form of illegal employment. This rule applies to all foreign workers, including citizens of Switzerland and the EU. The penalty is severe: a fine of up to CZK 3 million (approx. CHF 110,000).

Key Compliance Risks and Penalties for Foreign Employers

Risks and penalties	How ARROWS Helps
"Unreported Work" Fine (from Oct 2025): Failure to notify the Labour Office before a foreign employee's first day can result in a fine of up to CZK 3,000,000.	Compliance and Registration Services: We manage the entire registration process with Czech authorities, ensuring all notifications are filed correctly and on time. Do not hesitate to contact our firm – office@arws.cz.
Illegal Employment: Employing a non-EU national without a valid work permit can lead to fines up to CZK 10,000,000 and a potential ban on hiring foreigners.	Work Permit and Visa Assistance: Our international team guides you through the complex process of obtaining the necessary Employee Cards or Blue Cards for your key personnel. Need legal help? Contact us at office@arws.cz.
Incorrect Payroll and Tax Reporting: Failure to correctly register employees for social security and tax, or miscalculating contributions, leads to penalties from multiple authorities.	Comprehensive Legal and Tax Support: We ensure your payroll setup is fully compliant with Czech tax and social security laws from day one. Get tailored legal solutions by writing to office@arws.cz.

Your Legal Partner in Prague: How ARROWS Provides a Safe European Harbour

Navigating the Czech employment landscape requires more than just translating Swiss contracts; it demands a fundamental shift in approach. The Czech system is more regulated, procedurally demanding, and protective of employees. Mistakes are not just costly—they can damage your reputation and ability to operate.

ARROWS is more than a law firm; we are your strategic business partner. With over 10 years of experience building our ARROWS International network, we combine deep local knowledge with an understanding of foreign markets. As an international law firm operating from Prague, European Union, we are perfectly positioned to guide you. We support over 150 joint-stock companies and 250 limited liability companies, providing services from contract drafting and the preparation of internal policies to professional training for management and representation before public authorities.

To ensure your hiring process in the Czech Republic is secure and compliant, contact our team of experts today for an initial consultation. Email us at office@arws.cz.

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

 

• In what currency must we pay salaries in the Czech Republic?
  Salaries must be paid in the local currency, Czech Koruna (CZK), typically via direct deposit to a Czech bank account. For help navigating payroll setup, please write to us at office@arws.cz.

 

• What are the main types of flexible work agreements besides a standard employment contract?
  The Czech Labour Code allows for an "Agreement to Complete a Job" (Dohoda o provedení práce - DPP) for up to 300 hours per year per employer, and an "Agreement to Perform Work" (Dohoda o pracovní činnosti - DPČ) for up to 20 hours per week on average. To determine the right agreement for your needs, our lawyers are ready to assist you – email us at office@arws.cz.

• What are the rules for overtime work?
  An employer can mandate up to 150 hours of overtime per year. With the employee's agreement, this can increase to an average of 8 hours per week (approx. 416 hours/year). Compensation is the employee's salary plus a premium of at least 25% or compensatory time off. Our lawyers can help draft compliant overtime policies. For immediate assistance, write to us at office@arws.cz.

• Are there restrictions on questions we can ask during a job interview in the Czech Republic?
  Yes. You cannot ask questions about marital status, number of children, pregnancy, sexual orientation, or religious and political beliefs, as this is considered discriminatory. For guidance on compliant interview practices, get in touch at office@arws.cz.

• How long does it typically take to get a work permit (Employee Card) for a non-EU citizen?
  The process can take several months and should be started well in advance of the planned start date. Promising a quick start is a common mistake that leads to frustration for everyone involved. For expert assistance with the immigration process, contact our firm at office@arws.cz.

• Do we need to register with multiple health insurance companies?
  Yes. In the Czech Republic, employees can choose their health insurer. The employer must then register with each employee's chosen company, meaning you may need to manage registrations and payments with several different insurers. We can help streamline this process. For support, email office@arws.cz.

 

 

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