Avoiding HR Litigation and Common Legal Misconceptions in Czech Employment Law

19.2.2026 | ARROWS law firm

Managers and entrepreneurs in the Czech Republic face daily frustration when employees mistakenly assume rights that are not guaranteed under Czech law. This article illustrates how information asymmetry creates conflict and how to understand the actual legal rights of both parties. You will discover which HR communication errors lead to litigation in Czech courts or regulatory fines, and how to effectively prevent them with the assistance of our Prague-based legal team.

A photograph of specialists from the ARROWS law firm.

Article Content

What employees don't know (and what you often tell them incorrectly)
The employment contract as a foundation: What happens if it is poorly drafted
New rules for entering into and terminating employment (The "Flexi-amendment")
Termination and common mistakes: When the employer gets burned
Wages and benefits: Tax traps and wage regulations in the Czech Republic
What threats await you and how to address them
Levies for high-risk professions and the Czech pension reform

Quick Summary

Legislative changes, such as the Flexi-amendment effective from June 1, 2025, and the pension reform, are significantly changing the rules for termination, probationary periods, and employment in demanding professions. Entrepreneurs and HR specialists must update their internal processes to avoid fines and legal risks arising from the amendment to the Czech Labour Code.
Ignorance of the difference between a legal entitlement and an internal agreement is the most common cause of conflict. Without clear communication and written documentation (employment contract, wage statement), unrealistic expectations arise, which later lead to disputes in the Czech Republic.
Our attorneys in Prague at ARROWS law firm handle labor law disputes daily that could have been easily resolved with proper legal preparation. With their help, you can protect your company from the most common risks and minimize time spent solving problems instead of preventing them.

How Czech labor law is fundamentally changing

In recent years, a series of changes have come into effect that have impacted the operations of every company. This is most visible in the changes to registration obligations for workers on agreements (DPP/DPČ) under the amendment to the Sickness Insurance Act and new obligations regarding levies for high-risk professions. These changes are not merely administrative adjustments but represent a fundamental transformation of the flexibility in the relationship between employer and employee under Czech legislation.

The problem is that many employers and HR specialists perceive these changes only as additional paperwork. In reality, it is an opportunity to systematically set up communication and processes to ensure compliance with the law. Our Prague-based attorneys at ARROWS law firm have extensive experience in how lack of preparation for these changes leads to violations of legal obligations and subsequent sanctions from the Czech Labor Inspection Authority.

Although the new rules may seem simple, the reality is more complex. Individual steps that appear trivial hide procedural details and links to Czech social security. Without professional guidance, you can easily find yourself in breach of the law without even realizing it.

Legal reality versus employee expectations: Where conflicts arise

A seemingly simple employment relationship proves in practice to be a complex sequence of regulations, interpretations, and exceptions. Employees often think that if they feel they deserve something, it is their right. Employers, on the other hand, assume that if something is not explicitly in the employment contract, they can agree on it orally with the workers.

This asymmetry creates a breeding ground for conflicts, and without a clearly set employment contract and internal regulations, neither party can be at ease. The Czech Labour Code protects the employee as the weaker party under Section 1a of the Labour Code, and in cases of unclear interpretation, Czech courts often rule in their favor.

What employees don't know (and what you often tell them incorrectly)

Employees often imagine that the right to a wage means you cannot change their income. The legal reality is more complex because if the wage is determined in a wage statement (mzdový výměr), the employer can, under certain conditions, reduce it for the future. Conversely, if the wage is a fixed part of the employment contract, the consent of both parties is required for any change.

Employees also believe they have an automatic right to home office, but in practice, remote work has its own rules in the Czech Republic. The employer has the right not to order home office, or to terminate a remote work agreement with a 15-day notice period, if such an agreement is in place. An exception is made for parents of children under 9 and other selected groups, whose request for home office you must justify in writing if you reject it under Section 241a of the Czech Labour Code.

Even more critical is the issue of vacation, where employees think they decide on the timing themselves. However, the Czech Labour Code stipulates that the timing of vacation is determined by the employer under Section 217 of the Labour Code, while taking into account the legitimate interests of the employee. The employer is obliged to schedule vacation so that the employee exhausts it within the given calendar year.

The employment contract as a foundation: What happens if it is poorly drafted

An employment contract is not just a formal document, but a legally binding foundation of the relationship. Many employers use outdated templates that do not respect current amendments, such as the obligation to provide information on the content of the employment relationship pursuant to Section 37 of the Czech Labour Code. If a dispute reaches a Czech court, every word in the contract will play a role.

The Czech Labour Code sets out the essential elements of an employment contract, which are the type of work, the place of work, and the start date pursuant to Section 34 of the Labour Code. Without these, the contract is not valid, and a common mistake is defining the place of work too broadly or, conversely, too narrowly.

For example, writing only "Czech Republic" for a sales representative means they will likely become entitled to travel allowances as soon as they leave their residence. Conversely, an overly narrow definition to a specific office address will tie your hands when moving the company, as you cannot transfer the employee to a new address without their consent under Czech legislation.

Risk of de facto employment and invalidity

If an employee starts work without a written contract and you begin assigning work and paying a wage, a so-called "de facto employment relationship" is created. In this case, if performance has already begun, the invalidity of the contract for failure to maintain written form cannot be invoked pursuant to Section 20 of the Czech Labour Code if it would be to the detriment of the employee.

This puts you in a disadvantageous position where you have no agreed probationary period, nor are non-compete clauses or confidentiality protected. In this case, the employee has all legal rights, but you lack the contractual tools to manage the relationship.

Our attorneys in Prague at ARROWS law firm prepare and review employment contracts to ensure they are legally watertight. They can help you incorporate new elements, such as consent to electronic communication or remote work, thereby protecting the employer's interests in the Czech Republic.

New rules for entering into and terminating employment (The "Flexi-amendment")

The flexible amendment to the Czech Labour Code, effective primarily from June 1, 2025, changed established rules for termination notices and probationary periods with the aim of accelerating the labor market. These changes impact all employers and employees and require adjustments to document templates and internal processes.

Notice period: For termination notices given by both the employer and the employee, the notice period begins on the day the notice is delivered, not on the first day of the following month, and its standard minimum length remains 2 months pursuant to Section 51 of the Labour Code. The law allows for a shorter notice period only in exhaustively defined cases (e.g., for agreements); therefore, it cannot generally be shortened to one month based solely on a breach of duties.

Probationary period: The maximum length of the probationary period for new employment relationships concluded after June 1, 2025, has been extended to up to 4 months for standard employees and up to 8 months for managerial employees, while maintaining the limit of half the agreed duration of the employment relationship. It is also now possible to extend the probationary period during its course based on a written agreement between the parties, which the law did not previously explicitly allow in the Czech Republic.

These changes require an update of templates and processes because now, if you give notice on, for example, the 25th of the month, the notice period runs immediately from the day of delivery, which can significantly speed up the entire process.

Termination and common mistakes: Where employers get burned

A termination notice is a unilateral act that must be formally perfect. The most common mistake is incorrect delivery; if an employee refuses to accept the notice, you must have a witness or record the event. Sending a notice via ordinary email without a recognized electronic signature means the termination is invalid under Czech law.

Employers also make mistakes by not respecting the "protection period." If you give notice due to redundancy to a pregnant employee or an employee on sick leave, the notice is invalid. If the employee sues for invalidity, a Czech court will generally uphold it, and you will have to pay back wages for the entire duration of the dispute.

The Czech legal team at ARROWS law firm provides legal supervision over dismissals to ensure they are formally flawless. Contact us at office@arws.cz if you are planning to give notice and want to eliminate the risk of litigation in Czech courts.

Wages and benefits: Tax traps and payroll rules

In the area of remuneration, stricter rules for the taxation of benefits have applied in the Czech Republic since 2024. Benefits provided to employees are tax-exempt only up to an annual limit – anything above this limit is subject to taxation and social security contributions just like a standard wage.

The minimum wage is also increasing, and a valorization mechanism linked to the average wage has been introduced. Employers must monitor not only the minimum wage but also the "guaranteed wage" levels, and it remains the case that you may not pay less than the established minimum under Czech law.

Wages in practice: Watch out for deductions and compensation

Employers often make mistakes in calculating average earnings for compensation, such as for vacation or obstacles to work. This is not calculated from the gross wage in the employment contract, but from the actual income earned in the previous quarter. If you pay annual bonuses, these are factored into the average gradually.

The attorneys at ARROWS, a law firm in Prague, have extensive experience with payroll audits and setting up bonus schemes to ensure they are motivational and legally enforceable under Czech law. Send us information about your salary structure to office@arws.cz and we can discuss it with you.

Frequently Asked Questions Regarding Common Payroll Issues in the Czech Republic

1. How is average earnings calculated?
It is calculated from the gross wage accounted for in the relevant period, which is the previous calendar quarter, and the time worked. Be careful with overtime and bonuses, which increase the average.

2. Can I deduct a fine from an employee for an error?
No, the Czech Labour Code prohibits imposing monetary penalties on employees. However, you can reduce their personal performance bonus or demand compensation for damages caused by a culpable breach of duties.

3. Are benefits included in the wage for the calculation of the average?
Monetary payments such as bonuses are included. Non-monetary benefits, such as MultiSport cards or meal vouchers, generally do not enter into the calculation of average earnings under Czech legislation.

Potential Risks and How to Address Them

Risks and Sanctions	How ARROWS (office@arws.cz) Assists
Invalid Termination: An employee challenges the termination in court. If they succeed, you must reinstate them and pay back wages for the entire duration of the dispute.	Preparation of Termination and Representation: Our attorneys in Prague will ensure the formal correctness of the termination and its delivery. In the event of a dispute, we will represent you in Czech courts and minimize the impact.
"Švarcsystém" (Illegal Employment): If the Czech Labour Inspection Authority evaluates cooperation with a freelancer (OSVČ) as disguised employment, a fine of up to CZK 10,000,000 may be imposed, along with back-taxing and social security contributions; this is the upper limit for illegal employment under the Labour Inspection Act.	Audit of Contractor Agreements: We will review your contracts with freelancers and set up cooperation terms in compliance with Czech law.
Workplace Injuries and OHS: An employee is injured and your Occupational Health and Safety (OHS) documentation is not in order. There is a risk of health damage compensation, loss of earnings, and criminal liability for the statutory representative.	Legal OHS Solutions: We will help set up liability relationships, revise documentation, and represent you in dealings with the Labour Inspectorate or the Czech Police in the event of an injury.
Incorrect Working Time Records: You do not keep "from-to" records, only attendance. The Inspectorate may discover this and impose a fine of up to CZK 400,000 depending on the specific facts; furthermore, employees may retroactively claim overtime pay.	Revision of Internal Regulations: Our Czech legal team will set rules for recording working hours, home office, and flexible working hours so that they comply with the law and protect you from retroactive claims.
Failure to Comply with Information Obligations: An employee claims they were not informed of the specific working conditions and seeks sanctions. The amount of the fine varies under the Labour Inspection Act, in common cases reaching up to CZK 200,000–300,000.	Template Information Documents: We will prepare a complete set of documents for you to automatically provide to every new hire, fulfilling your legal obligation in the Czech Republic.

HR Digitization and Reporting of Agreements (DPP)

One of the largest administrative changes currently is the registration of all Agreements to Complete a Job (DPP). Since July 1, 2024, employers in the Czech Republic must report all DPP employees to the Czech Social Security Administration (ČSSZ), even those who do not earn enough to reach the insurance limit under Section 239b of Act No. 187/2006 Coll., on Sickness Insurance. The state's goal is to gain an overview of the accumulation of agreements for a single employee.

If you neglect this obligation and do not send the VPDPP report on time (by the 20th day of the following month), you face a fine of up to CZK 50,000 from the ČSSZ and the risk of back-payment of insurance premiums and penalties if it is retroactively found that the employee exceeded the limits for insurance participation.

The originally intended regime of "notified agreement workers," which was supposed to allow for more favorable contribution limits for only one employer, was subsequently cancelled and did not pass in that form.

Employee Registration and Digitization

Modern HR is moving towards digitization, and an amendment to the Czech Labour Code has made it possible to conclude contracts electronically under Section 21 of the Labour Code. However, practice often clashes with strict delivery rules – employers often send documents only within the company system, which is insufficient.

Who can advise you on this issue?

Mgr. Jakub Oliva, LL.M., MSc.

associate, partner

oliva@arws.cz

JUDr. Barbora Kořenářová

associate

korenarova@arws.cz

The attorneys at ARROWS law firm in Prague can provide a legal audit of your digital processes, check the setup of consents for data processing and electronic communication, and propose solutions that will stand up to inspection. Contact us at office@arws.cz.

Contributions for High-Risk Professions and Pension Reform

As part of the pension reform in the Czech Republic, an obligation for employers to pay higher social insurance for employees in demanding professions is being gradually introduced. This applies to all positions in the 4th risk category and selected positions in the 3rd category.

The contribution is intended to increase gradually, and its purpose is to fund the earlier retirement of these workers without a reduction in pension. Specific rates and effective dates are set by amendments to Act No. 589/1992 Coll., on Social Security Contributions; employers must monitor when the new obligation applies to them.

The most common mistake made by employers is not having the categorization of work correctly performed. They often rely on old hygiene measurements and do not know who the new obligation applies to, exposing themselves to the risk of back-payment of insurance premiums and penalties from the ČSSZ.

The attorneys at ARROWS law firm in Prague, in cooperation with OHS and occupational hygiene experts, will help you identify high-risk positions and set up contributions correctly. Write to us at office@arws.cz.

Occupational Health and Safety: Employer Liability in the Czech Republic

An employer is obliged to ensure occupational health and safety for all its employees. This obligation cannot be fully transferred to an external company or an "OHS officer," and in practice, this means that when an employee suffers a workplace injury, the employer bears so-called strict liability.

The only way to be released from liability is to prove that the employee violated safety regulations with which they were properly acquainted. You must prove that you monitored compliance with the regulations or that the employee acted recklessly.

In practice, this means you must have documented all training, workplace inspections, and the provision of protective equipment. Without the paperwork, it is as if the training never happened under Czech law.

Communication with Employees: How to Prevent Conflicts

A large proportion of labor law disputes in the Czech Republic arise simply because both parties had different expectations. The employee thought the bonuses were mandatory, while the employer viewed them as a discretionary bonus. The solution is a high-quality set of work rules or internal regulations.

Internal regulations protect the company because if you have a clear rule on how to proceed during illness or how vacation is approved, you have a legal basis for your decisions. The employee must be demonstrably acquainted with these regulations.

Our Prague-based attorneys at ARROWS can prepare or review your internal work rules and policies to ensure they comply with Czech law and provide you with support in critical situations. Contact us at office@arws.cz.

Conclusion

Employment law in the Czech Republic is constantly evolving, and recent periods have brought changes for which you must be prepared. More flexible termination notices, stricter record-keeping for work agreements (DPP/DPČ), and new levies for high-risk professions require a revision of your HR documentation.

Without a clear employment contract, up-to-date internal regulations, and correctly set processes, you risk conflicts, fines, and expensive litigation in Czech courts. Conversely, properly drafted documents provide you with certainty and peace of mind for your business.

Our Czech legal team at ARROWS handles these issues daily and has extensive experience in drafting contracts, resolving disputes, and negotiating with the Labor Inspection Authority. Professional liability insurance for ARROWS law firm in Prague reaches up to hundreds of millions of CZK, ensuring your absolute security.

If you want to properly adjust your HR processes to be safe and legal under Czech legislation, write to us at office@arws.cz. We will conduct a risk audit and propose a solution tailored to your company.

FAQ – Frequently Asked Legal Questions on Czech Employment Law and HR Practice

1. Is an employment contract concluded via e-mail valid?
Yes, the Czech Labor Code allows for the electronic conclusion of employment contracts. However, to be valid and enforceable, it must be signed and, crucially, delivered to the employee's private e-mail address, for which they have provided prior written consent.

2. How long must I keep payroll records?
Under Czech law, payroll sheets and data required for pension insurance must be kept for 30 years. It is advisable to keep employment contracts and agreements for the entire duration of the relationship and at least 3–5 years after termination due to statutes of limitations.

3. What are the risks if I fail to report "agreement workers" to the Czech Social Security Administration (ČSSZ)?
If you do not submit the monthly report on income for workers on agreements (VPDPP) on time, you face a fine of up to CZK 50,000. Additionally, you risk insurance premium debts and penalties if it is retroactively discovered that the employee exceeded the limits for insurance participation.

4. What are the most common mistakes in termination notices?
Failure to use written form, incorrect delivery, and insufficiently defined grounds for termination, which must be specific according to Section 50 of the Czech Labor Code. Issuing a notice during a protected period (e.g., sick leave) is also a frequent issue.

5. Can I change the salary when the minimum wage increases?
If an employee earns less than the new Czech minimum or guaranteed wage, you must pay the difference. You do not necessarily have to change the contract—a top-up on the payslip is sufficient—but it is cleaner to issue a new wage statement or an amendment to the contract with the new amount.

6. When is an employee entitled to severance pay?
Entitlement arises upon termination by the employer for organizational reasons under Section 67 of the Czech Labor Code. The amount is generally 1 to 3 times the average monthly earnings depending on the duration of employment. In the case of termination for health reasons, severance pay is at least twelve times the average earnings.

Disclaimer: The information contained in this article is for general informative purposes only and serves as a basic guide to the issue. Although we ensure maximum accuracy of the content, legal regulations and their interpretation evolve over time. To verify the current wording of regulations and their application to your specific situation, it is essential to contact ARROWS law firm in Prague directly (office@arws.cz). We bear no responsibility for any damages or complications arising from the independent use of information from this article without our prior individual legal consultation. Every case requires a tailor-made solution.

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