How Lithuanian companies can navigate Czech employment law: Key hiring pitfalls to avoid

If your Lithuanian company plans to hire employees in the Czech Republic, you must understand that local employment law differs significantly from Lithuanian regulations. The Czech Labour Code is strict on employee protections, termination procedures, and employer obligations. This guide covers critical pitfalls, legal requirements, and practical steps to build a compliant workforce in the Czech market.

Understanding the Czech employment law framework

The Czech Republic operates under one of Europe's most employee-protective legal systems, rooted in the Labour Code. This comprehensive legislation establishes the rights and obligations of both employers and employees. It places particular emphasis on protecting workers as the perceived weaker party in employment relationships.

The Labour Code is supplemented by several additional regulations that create a complex web of requirements. The Act on Employment governs foreign worker employment and work permits, while the Anti-Discrimination Act provides extensive protection against workplace discrimination.

This layered regulatory environment means that what appears simple on the surface often conceals hidden exceptions and procedural details. Businesses frequently overlook these interconnected obligations until they face penalties or disputes.

The fundamental principle underlying Czech employment law is that at-will employment does not exist in this jurisdiction. Unlike some other jurisdictions, employers cannot simply terminate employees without demonstrating valid, legally recognised grounds.

Related questions - Czech employment law 

1. What is the main difference between Czech and Lithuanian employment law?
Czech law is significantly more employee-protective. Employers cannot terminate workers at will, must provide extensive benefits, and face strict anti-discrimination requirements. The burden of proof in disputes often falls on the employer to demonstrate compliance.

2. Which authority enforces Czech employment law?
The State Labour Inspection Office and Regional Labour Inspectorates conduct inspections and impose fines for violations. They actively investigate complaints and conduct routine audits, particularly in areas involving foreign workers and equal treatment.

3. Do all Czech employment law rules apply to foreign employers?
Yes, if you operate in the Czech Republic, you must comply with Czech law regardless of your company's home country or your employees' nationalities. The only exceptions relate to posted workers from other EU member states under specific circumstances.

Work permits and foreign worker requirements

One of the most critical areas where Lithuanian companies encounter serious legal problems involves hiring foreign workers without proper authorisation. The Czech Republic maintains strict regulations about who can legally work and what documentation they must hold.

EU citizens and free movement rights

As a Lithuanian company operating within the European Union, you might assume that hiring citizens from other EU member states presents no special challenges. While EU citizens enjoy free access to the Czech labour market, they are not exempt from notification requirements.

The Czech Labour Office must be notified when an EU citizen begins employment. Under current legislation, employers must notify the relevant Labour Office no later than on the day the employee commences work.

Failure to comply with this notification requirement can result in fines of up to CZK 100,000 for administrative offenses. This represents a substantial financial penalty for what might appear to many employers as a minor administrative oversight.

Work permits for third-country nationals

If your company wishes to hire employees from outside the EU, the requirements become considerably more complex. Third-country nationals must obtain specific work authorisation before commencing employment.

The most common work permit for general employment is the Employee Card. To obtain an Employee Card, your company must first obtain a permit to employ foreigners from the Labour Office, demonstrating that no suitable EU citizen is available.

Your company must notify the Labour Office about the vacant position, which is then published on the Labour Office website. While this process is technically mandatory, in practice it functions primarily as a formality, provided the employer follows the procedure correctly.

The EU Blue Card represents an alternative permit pathway designed to attract highly qualified workers holding university degrees. This process can sometimes be completed more rapidly, particularly for specialists in shortage occupations, though strict salary thresholds apply.

Beginning July 1, 2024, the Czech Republic implemented a significant policy shift to attract skilled workers from low-risk countries. Citizens of the USA, UK, Canada, Australia, New Zealand, Japan, South Korea, Israel, and Singapore now have free access to the labour market.

These individuals no longer require a work permit to work, however, they still generally require a valid residence permit if their stay exceeds 90 days. This represents an important development for companies seeking to hire from these jurisdictions, though the specific administrative procedures still require professional guidance.

Ukrainian citizens granted temporary protection in the Czech Republic enjoy direct access to the labour market without requiring traditional work permits. However, this preferential access is tied to the validity of their temporary protection status.

The complexity of these regulations means that immigration timelines present one of the most common sources of error. Many Lithuanian employers promise candidates they can begin work within weeks, only to discover that obtaining proper work authorisation needs months of processing.

Related questions - work permits

1. How long does it take to obtain a Czech work permit for a third-country national?
The process typically requires 2-3 months minimum, sometimes considerably longer depending on the embassy's workload. The labour market test alone takes up to 30 days, and subsequent Ministry of Interior decision-making adds additional time.

2. Do EU citizens need work permits to work in the Czech Republic?
No work permit is required, but employers must still notify the Labour Office. This notification must occur no later than the day of commencement of work.

3. What happens if we hire a foreign worker without proper work authorisation?
This constitutes illegal employment. Your company faces fines of up to CZK 10,000,000, a potential ban on hiring foreign workers, and liability for the cost of the foreigner's expulsion.

Employment contracts: minimum requirements and hidden complexity

Czech employment law requires that all employment relationships be documented in written form. While this rule seems straightforward, the practical requirements that underlie it are substantially more complex than many foreign employers initially recognize.

An employment contract must contain three mandatory essentials to be valid under the Labour Code. First, it must clearly specify the type of work the employee will perform, defining the range of work tasks.

Second, the contract must specify the place or places of work. An employer cannot unilaterally transfer an employee to work at a different location without the employee's consent.

Third, the contract must clearly state the date of employment commencement. Beyond these essentials, the Labour Code requires employers to provide employees with written information about several additional matters within 7 days of commencing employment.

Many Lithuanian companies make critical errors when drafting Czech employment contracts by treating them as simplified documents. Czech contracts must include considerably more detail and specificity than employers often expect, and bilingual versions are strongly recommended.

An employment contract may include several optional provisions that address matters not specified by law. These commonly include provisions specifying the duration of employment, confidentiality requirements, and probationary period terms.

Probationary periods: rules and pitfalls

The probationary period is a standard tool in Czech employment contracts, but it is strictly regulated. Under current law, the maximum probationary period is 3 months for regular employees and 6 months for managerial employees.

Crucially, a probationary period cannot be extended by mutual agreement once validly established. However, the probationary period automatically extends by law if the employee is unable to work during the probation due to illness or approved leave.

Legislative proposals are periodically discussed to increase these limits, but employers must strictly adhere to the valid limits. Incorrectly calculating the end of probation, especially when accounting for sick days, is a frequent source of disputes.

ARROWS Law Firm regularly advises Lithuanian companies on Czech employment contract structures and probationary period compliance. The team at office@arws.cz can review your employment contract templates to identify compliance gaps and assist with contract adaptation.

Risks and sanctions	How ARROWS (office@arws.cz) helps
Invalid employment contract: Contract lacking mandatory essentials (type of work, place of work, or commencement date) creates disputes over employment terms and conditions.	Contract preparation and review: ARROWS drafts compliant employment contracts incorporating all mandatory Czech law requirements.
Wage confidentiality violations: Following the EU Pay Transparency Directive, wage confidentiality clauses are becoming unenforceable and legally risky.	Contract compliance audit: ARROWS reviews existing contracts to identify and eliminate obsolete wage confidentiality provisions.
Probationary period miscalculation: Incorrectly calculating probationary period extensions due to employee absences creates disputes regarding when probation ends.	Probationary period management: ARROWS advises on proper probationary period structuring and assists with extension calculations.

Employee benefits and mandatory obligations

Czech employment law imposes substantial mandatory benefit requirements on employers that often exceed what Lithuanian companies provide. These benefits represent non-negotiable legal obligations, not optional employee incentives.

Annual leave requirements

Employees in the Czech Republic are entitled to a minimum of four weeks (20 working days) of paid annual leave per calendar year. Part-time employees receive proportional leave calculated based on their actual working hours.

The calculation of leave entitlements is now based on hours worked rather than days. If an employee works 52 full multiples of their weekly working hours during a calendar year, they acquire the right to full leave for that year.

The employer, not the employee, bears responsibility for scheduling leave. The employer must plan leave based on operational needs and employee interests, providing employees written notice at least 14 days in advance.

Employees who do not use their full leave entitlement within the calendar year may carry over unused days. If employees leave the company, they are entitled to compensation for all unused leave days, calculated based on their average earnings.

Sick leave entitlements

The Czech Republic provides generous sick leave protections substantially different from those in many other jurisdictions. Employees with medical certification from a physician are entitled to time off for illness or temporary incapacity.

For the first 14 calendar days of any sick leave period, the employer pays wage compensation. This compensation is equal to 60% of the employee's reduced average earnings, paid from the first working day of the incapacity.

After the 14th day, the state social security system takes over and provides sickness benefits. This sick leave regime creates significant practical challenges for employers, as they cannot terminate based on medically justified absences.

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Public holiday and overtime compensation

The Czech Republic recognises 13 public holidays annually, and full-time employees generally receive time off. When employers require employees to work on public holidays, those employees must generally receive compensatory time off.

Overtime work must not exceed 8 hours per week on average or 150 hours per calendar year unless agreed otherwise. When overtime does occur, employees are entitled to wage and a surcharge of at least 25% of average earnings.

Related questions - Employee benefits

1. Can we offer less annual leave than the legal minimum?
No. Four weeks (20 working days) annually represents an absolute legal minimum. Offering less results in fines for the employer and breach of contract claims.

2. Do employees on sick leave receive full salary?
No. During days 1-14 of sick leave, employees receive wage compensation from the employer (approx. 60% of reduced average earnings). From day 15, the state provides sickness benefits.

3. What must we pay if an employee works on a public holiday?
The statutory rule is compensatory time off. However, the parties can agree on a surcharge instead (minimum 100% of average earnings).

Termination procedures: the high burden of proof

Terminating employment relationships in the Czech Republic represents one of the most legally complex and risky areas for foreign employers. Unlike jurisdictions recognizing at-will employment, Czech law requires employers to demonstrate valid grounds for termination.

Valid grounds for employer termination

The Labour Code specifies precise grounds upon which employers may lawfully terminate employees with notice. These include closure of business, redundancy, or an employee's failure to meet job requirements.

Each ground requires specific factual circumstances and prior procedural steps. If terminating for performance reasons, the employer must generally provide the employee with a written warning within the past 12 months.

When terminating for redundancy, the organizational change must be genuine and decided in writing before notice is given. Collective redundancies require strict procedural steps, including negotiation with union representatives.

Notably, employers cannot terminate employees during protection periods when the employee is vulnerable. These protected periods include times when employees are temporarily unfit for work or on maternity or parental leave.

The notice period and immediate termination

Standard termination requires a notice period of at least 2 months. This period begins on the first day of the calendar month following delivery of the notice.

Immediate termination is an exceptional measure reserved for the most serious situations. This applies to final criminal convictions or especially gross breaches of employment obligations, ending employment upon delivery of the notice.

Redundancy compensation

When employees are terminated for organisational reasons, they receive severance pay. The statutory minimum ranges from one to three times the average monthly earnings, depending on the duration of the employment relationship.

Probationary period termination

During the validly agreed probationary period, either party may terminate employment for any reason. This is the only time at-will style termination is permitted, though employers cannot terminate during the first 14 days of illness.

Common termination errors and consequences

Lithuanian companies frequently make critical termination errors that result in court rulings invalidating the termination. Common mistakes include failing to deliver the notice properly or terminating during protection periods.

When a termination is found invalid by a court, the consequences are severe. The court may order the employer to reinstate the employee and pay wage compensation for the entire period until valid termination occurs.

ARROWS Law Firm's lawyers regularly represent foreign companies in termination matters. Contact office@arws.cz before issuing a termination notice to ensure your grounds and procedures are legally sound.

Anti-discrimination protections and equal treatment requirements

The Czech Republic maintains extensive anti-discrimination protections based on EU directives. These protections represent fundamental legal principles with which employers must comply, and violations result in significant fines.

Protected characteristics and discrimination categories

Czech law prohibits discrimination based on gender, sexual orientation, racial origin, age, health status, and other factors. Direct discrimination and indirect discrimination are both recognised by the legal system.

Nationality-based discrimination is explicitly prohibited in the workplace. Foreign employers cannot provide less favourable treatment to Czech employees compared to foreign employees for the same work.

Pay transparency and equal pay requirements

The Labour Code grants all employees the right to equal pay for work of equal value. This applies regardless of gender or other protected characteristics, determined by complexity and responsibility.

Under the influence of the EU Pay Transparency Directive, wage confidentiality is becoming legally indefensible. While some old contracts still contain these clauses, enforcing them creates a high risk of being found in violation of equal treatment principles.

Czech labour inspectorates actively check for equal pay violations. Fines for unequal treatment or discrimination can reach up to CZK 1,000,000, and employees can sue for damages.

Temporary agency workers and equal treatment

When employing workers through temporary work agencies, the user company has specific responsibilities. The user company must ensure agency workers receive pay and working conditions comparable to permanent employees.

Employee benefits - equal treatment requirements

1. Can we pay different salaries to Czech and Lithuanian employees in the same role?
Only if justified by objectively different criteria (e.g., experience, measurable performance). Different nationality or "expat status" alone is not a valid justification for unequal pay.

2. Are wage confidentiality clauses enforceable in Czech employment contracts?
They are increasingly viewed as unenforceable and contrary to equal treatment principles. It is advisable to remove them.

3. What happens if a labour inspectorate finds equal treatment violations?
The employer may face fines up to CZK 1,000,000 and will be ordered to rectify the situation.

Risks and sanctions	How ARROWS (office@arws.cz) helps
Discriminatory termination: Terminating an employee based on a protected characteristic invalidates the termination.	Anti-discrimination compliance audit: ARROWS reviews employment policies and compensation structures to identify and eliminate discriminatory practices.
Wage confidentiality clause violations: Enforcing clauses preventing employees from discussing salaries carries legal risks.	Policy and contract revision: ARROWS updates employment contracts and policies to align with modern transparency requirements.
Unequal treatment of employees on protected leave: Excluding employees on maternity, parental, or sick leave from bonuses creates liability.	Leave and benefits compliance assessment: ARROWS ensures that bonus structures and benefits programs do not discriminate against employees in protected statuses.
Nationality-based discrimination: Providing less favourable working conditions to Czech employees compared to foreign employees constitutes discrimination.	International workforce compliance: ARROWS advises on managing mixed-nationality workforces, ensuring equal treatment regardless of national origin.

Notification requirements and administrative obligations

Foreign employers frequently underestimate the importance of proper administrative notifications. For EU citizens, employers must notify the Labour Office no later than on the day of commencement of work.

For third-country nationals, the notification obligations are tied to the validity of their work permits. Failure to notify properly or on time can lead to fines, or potentially huge penalties if misconstrued as illegal work.

Employers must maintain employment documentation for extended periods. Copies of employment contracts and salary sheets must be archived for up to 30 years for pension insurance purposes.

ARROWS Law Firm specialises in helping Lithuanian companies establish compliant notification procedures. The team at office@arws.cz can audit your current procedures to ensure you are audit-ready.

Common mistakes Lithuanian companies make when hiring in Czech Republic

Lithuanian companies frequently assume that hiring EU citizens involves no special requirements. This misses the notification requirement to the Labour Office, often leading to unnecessary violations during inspections.

A critical mistake involves promising candidates start dates before confirming work authorisation. Processing a work permit for a non-EU national typically takes months, not weeks, creating a disconnect between expectations and reality.

Using translated Lithuanian contracts often fails because they lack Czech mandatory essentials. These templates often contain unenforceable clauses, such as penalty clauses for breach of duties, which are generally prohibited.

Foreign employers regularly underestimate the cost of mandatory benefits. Social security and health insurance contributions paid by the employer amount to 33.8% on top of the gross salary.

Terminating without following the strict steps is the most expensive mistake. Invalid terminations lead to paying the employee for months or years while they do not work.

Working with professional legal counsel: Why complexity demands expertise

The complexity of Czech employment law means that general guides cannot address every specific circumstance. A single error in workforce reduction or termination processes can invalidate the entire procedure.

ARROWS Law Firm's lawyers work with foreign companies daily and understand the gap between home-country practices and Czech requirements. Whether you are hiring, firing, or restructuring, the lawyers at office@arws.cz provide the expert guidance necessary to navigate these risks.

Our experience with hundreds of corporate clients allows us to prevent escalation from concerns into disputes. ARROWS Law Firm's insurance coverage provides additional assurance for your international operations.

Czech employment law and your international operations

For Lithuanian companies operating across the EU, ARROWS Law Firm offers coordinated legal services. We handle cross-border employment, posting of workers, and multi-jurisdiction compliance.

Whether posting Czech employees to Lithuania, hiring Lithuanians in Prague, or managing international transfers, office@arws.cz can guide you through the tax and labour law intersections.

Executive Summary for Management

Here are the key decision points for leaders managing Czech operations:

• Notification requirements are strict, meaning all foreign workers must be notified to the Labour Office no later than the day work commences.
• At-will employment does not exist, so you need valid legal grounds for termination and genuine organisational changes documented in writing.
• Mandatory costs are high, so budget for 4 weeks leave, sick pay, and 33.8% employer social contributions on top of gross salary.
• Equal treatment is enforced, meaning wage secrecy is outdated and equal pay for equal work is the law.
• Professional guidance is essential, as the cost of legal review is minimal compared to the cost of invalid terminations or illegal work fines.

Conclusion of the article

Czech employment law is complex and protective. For Lithuanian companies, compliance is essential to avoid fines and reputational damage. The regulations on permits, contracts, benefits, and termination are interconnected.

ARROWS Law Firm understands these challenges. We can guide you through the procedures to achieve compliance and business success, so contact us at office@arws.cz.

FAQ – Frequently asked legal questions about Czech employment law for Lithuanian companies

1. Do Lithuanian citizens need work permits to work in the Czech Republic?
No. As EU citizens, they have free access to the labour market. However, you must notify the Labour Office no later than the day they start work. Failure to notify is a punishable administrative offense.

2. Can we terminate a Czech employee more easily than in Lithuania?
Likely not. Czech law is very protective. You cannot terminate at will; you need specific grounds and must follow strict procedures. Always consult office@arws.cz before termination.

3. How much more does it cost to employ people in the Czech Republic?
Employers pay 24.8% social security and 9% health insurance on top of gross salary (total 33.8%). Plus mandatory leave and sick pay coverage.

4. What is the most common mistake foreign employers make?
Invalid termination. Employers often fire for performance without prior written warnings or for redundancy without a genuine organizational change. Courts frequently overturn these decisions.

5. Can we include wage confidentiality clauses in contracts?
It is highly inadvisable and likely unenforceable under current and upcoming EU-based legislation.

6. How do we ensure compliance with equal treatment?
Ensure Czech and foreign employees in comparable roles receive comparable pay and benefits. Do not differentiate based on nationality. Audit your policies with office@arws.cz.

Disclaimer: The information contained in this article is for general informational purposes only and serves as a basic guide to the issue. Although we strive for maximum accuracy in the content, legal regulations and their interpretation evolve over time. To verify the current wording of the regulations and their application to your specific situation, it is therefore necessary to contact ARROWS Law Firm directly.