Estonian vs. Czech employment contracts: What Estonian companies should watch out for when hiring in the Czech Republic

Mgr. Vojtěch Sucharda
Mgr. Vojtěch Sucharda
15.4.2026 | ARROWS law firm

If you run an Estonian company and plan to hire employees in the Czech Republic, you must understand that local employment law differs significantly. The Czech Labour Code imposes stricter contract requirements, worker protections, and administrative obligations than the Estonian system. Overlooking these differences can lead to invalid contracts and fines. This article guides you through key distinctions to ensure your hiring practices are legally sound.

Image depicts a specialist discussing cross-border employment compliance.

Quick summary 

Contracts must be written, contain mandatory elements, and strictly follow the Labour Code, as there is no "at-will" employment in the Czech Republic. Employers must be precise in drafting job descriptions and places of work.

Fixed-term contracts are strictly limited to a maximum of three years per contract and can be repeated only twice. The minimum wage for 2025 is CZK 20,800, which serves as the absolute floor for compensation.

Overtime and night work carry mandatory surcharges that cannot be ignored. Additionally, the administration of occupational health and safety, including doctors and training, is mandatory for every employee.

Employers must strictly avoid false self-employment, as penalties for this practice can reach up to CZK 10,000,000. Strict reporting of foreign workers to the Labour Office and formal termination procedures are also required.

Understanding the fundamental differences between Estonian and Czech employment law

The Czech Republic and Estonia are both EU member states with modern labour standards, yet their employment legal frameworks differ substantially in their approach. While Estonia's Employment Contracts Act takes a principles-based approach with freedom to agree on terms, the Czech Labour Code is significantly more prescriptive. This distinction creates real-world challenges for Estonian companies expanding their operations into the Czech market.

The Czech Labour Code contains detailed mandatory provisions that cannot be waived by agreement and establishes strict procedural requirements for employers. It imposes extensive obligations regarding working conditions, compensation, and worker protection. Estonian companies accustomed to the flexibility of their home jurisdiction often underestimate this rigidity, leading to costly errors in contract drafting and implementation.

ARROWS Law Firm regularly advises Estonian clients who are expanding into the Czech market, and our experience shows that most compliance problems arise from simple misunderstandings. These issues often surface only when labour inspectors conduct workplace audits or when employees raise complaints. By that time, the violations have already accumulated, and the financial consequences can be severe.

Employment contract requirements: the written form and mandatory content

In the Czech Republic, the employment contract must always be concluded in writing, and this requirement is absolute and non-negotiable. Unlike Estonia, where employment relationships can sometimes be established less formally, the Czech system demands formal documentation before the employee commences work. Failure to have a written contract invalidates specific terms, though the employment itself may still be deemed to exist factually.

The contract must clearly define the type of work, the place where the work will be performed, and the date of commencement of employment. Without these three essential elements, the contract is legally deficient. Beyond these core requirements, Czech law imposes strict mandatory disclosure obligations regarding vacation entitlements, notice periods, and working hours.

The employer must provide the employee with detailed information about wages, payment methods, and collective bargaining agreements within 7 days from the commencement of employment. It is best practice to include this information directly in the employment contract or in a separate written notification provided on the first day to ensure full compliance.

If there is any ambiguity about the content, Czech courts will interpret the contract in favour of the employee, which is a fundamental principle of Czech labour law. The contract must be drafted in a language that the employee understands, typically Czech or English for foreign workers. Some employers draft bilingual contracts to avoid disputes about comprehension.

1. Must our employment contract be in Czech only?
No. The contract must be in a language the employee understands. Many Czech employers use bilingual Czech-English contracts with foreign workers. However, for dealings with Czech authorities, a Czech version is required.

2. Can we provide the job description in a separate document rather than in the contract itself?
Yes. Czech law allows mandatory information to be provided either directly in the employment contract or through separate written policies or notices. However, the core definition of the "type of work" must be in the contract. Detailed duties can be in a job description.

Fixed-term vs. indefinite employment contracts: the three-year rule

The Czech Republic imposes strict limits on fixed-term employment contracts. Understanding these restrictions is critical because many Estonian companies attempt to use fixed-term contracts more flexibly than Czech law permits, leading to automatic reclassification of contracts into indefinite ones.

In Czech law, a fixed-term employment contract may be concluded for a maximum duration of three years and can be repeated or extended twice. This leads to the "3x3 rule": a maximum of three consecutive fixed-term contracts, with a total combined duration not exceeding nine years. Once you have exhausted these options, any subsequent employment relationship between the same parties must be indefinite.

If an employer violates these rules by concluding a fourth consecutive fixed-term contract, the employee can notify the employer that they consider the employment to be indefinite. In such a case, the law automatically treats the contract as an indefinite one, granting the employee full protection against termination.

Exceptions exist for the replacement of an employee on maternity leave or if serious operational reasons are defined in a written agreement with a trade union. However, relying on these exceptions requires careful legal drafting and justification. Estonian companies sometimes use multiple fixed-term contracts in rapid succession without carefully tracking the repetition limits.

When a labour inspection occurs, the authorities conduct a "chain analysis" by examining all consecutive contracts to find violations. If violations are found, the employer faces fines, and the affected employees gain indefinite status.

1. If we hire someone on a one-year fixed-term contract and then renew it twice (three one-year contracts total), can we sign another fixed-term contract?
Generally, no. You have used up the two allowed repetitions (total of 3 contracts). The next contract must be indefinite, even though you haven't reached the 9-year total limit.

2. Does the "chaining" rule apply if the employee has gaps between contracts?
Yes. A contract is considered "consecutive" if the gap between the end of one and the start of the next does not exceed six months.

Probationary periods: strict statutory limits

The Czech probationary period rules are rigid and differ from the more flexible approaches found in some other jurisdictions. The probationary period serves as a trial during which either party can terminate employment immediately without giving a reason.

Under the current Czech Labour Code, the maximum probationary period is three months for regular employees and six months for managerial employees. This period must be agreed upon in writing before the employment commences, typically in the contract. It cannot be extended by agreement later.

If you agree to a shorter period, such as one month, you cannot later extend it to the statutory maximum. However, the probationary period is automatically extended by law in specific cases if the employee is unable to work due to illness or takes other leave during the probation.

The probationary period is automatically extended by the number of working days missed due to illness or other leave. For fixed-term employment contracts, the probationary period is further limited and cannot exceed half of the agreed contract duration.

There is also a protective rule regarding illness that prevents termination during the early stages of sick leave. This applies even during the probationary period, which surprises many foreign employers.

During the first 14 calendar days of a temporary incapacity for work, the employer may not terminate the employment relationship. This protection is absolute, and any notice given during this time is invalid.

ARROWS Law Firm regularly advises Estonian clients on probationary period design to avoid invalid clauses where employers attempt to agree on longer probation. Such clauses are void, and the employee gains full protection from day one after the valid part of the probation expires.

Minimum wage and salary requirements

The Czech Republic regularly adjusts its statutory minimum wage, usually effective from January 1st of each year. Understanding minimum wage requirements is essential for Estonian companies because violations can result in fines and retroactive wage claims.

As of January 1, 2025, the monthly minimum wage is set at CZK 20,800 (approx. €830), or the corresponding hourly rate. This amount applies to a standard 40-hour work week. A significant change effective from 2025 is the abolition of the "Guaranteed Wage" system for the private sector.

Private employers are bound primarily by the single statutory minimum wage unless a collective agreement states otherwise. However, for positions requiring higher qualifications, market rates are significantly higher than the minimum.

The minimum wage requirement is non-negotiable, and an employer cannot pay below the legal minimum even if the employee agrees. If an inspection reveals underpayment, the employer must pay the difference retroactively, plus mandatory social security and health insurance contributions.

For foreign workers, special salary thresholds often apply to qualify for an Employee Card or Blue Card. Authorities strictly scrutinize sustainability, and the salary often must meet specific criteria such as 1.5 times the average gross annual salary for Blue Cards.

Risks and sanctions

How ARROWS (office@arws.cz) helps

Underpayment below minimum wage: Paying below CZK 20,800 (2025 rate) results in fines up to CZK 2,000,000, retroactive wage claims, and interest.

Salary audit: ARROWS reviews employment contracts against current minimum wage requirements and ensures compensation structures meet legal thresholds.

Failed foreign worker visa applications: If the salary in the contract does not meet the criteria for specific immigration programmes, the application will be rejected.

Immigration coordination: ARROWS coordinates with authorities to ensure salary offers comply with both employment law and immigration programme requirements.

Retroactive wage liability: Employers must pay unpaid wages plus statutory default interest.

Compliance correction: ARROWS handles negotiations with labour authorities and employees regarding retroactive payments.

The notice period requirement: the two-month default

The Czech Republic requires a two-month notice period for employment termination by notice, which is longer than in many other jurisdictions. This period is mandatory unless the employee and employer agree to a mutual termination agreement with a different date.

The statutory two-month notice period begins on the first day of the calendar month following the delivery of the notice. For example, if you deliver a termination notice on March 15, the notice period begins on April 1 and ends on May 31. This rule applies to both employer and employee-initiated notices.

There are limited exceptions where termination can be immediate, such as during the probationary period or for gross misconduct. Gross misconduct is strictly defined as serious breaches like theft or physical attack, and cannot be used for general performance issues.

A termination notice by the employer must be based on specific statutory grounds such as redundancy, health reasons, or serious breach of duties. For performance issues, a prior written warning is typically required before a valid notice can be issued.

Furthermore, there are protective periods during which an employer cannot give notice, such as during sick leave, pregnancy, or maternity leave. A notice given during these periods is generally void.

Working hours, overtime, and remote work regulations

The standard working week in the Czech Republic is 40 hours, and the Labour Code mandates how these hours are structured. Requirements include breaks after a maximum of six hours and strict rest periods between shifts.

Overtime can be ordered by the employer only for serious operational reasons and is capped at 150 hours per calendar year. Total overtime, including agreed overtime, cannot exceed roughly 416 hours per year on average. Overtime must be compensated with a premium or compensatory time off.

Remote work, or "Home Office," generally requires a written agreement following recent amendments. Employers must cover costs associated with remote work, either through reimbursement of actual costs or a flat-rate lump sum.

Importantly, the employer remains responsible for Occupational Health and Safety (OSH) even when the employee works from home. This includes ensuring the workspace is safe and suitable, which adds a layer of liability for the employer.

False self-employment (the "Švarcsystém"): a serious compliance risk

One of the biggest risks for foreign companies is the "Švarcsystém," which is disguised employment where a person is hired as an independent contractor but works like an employee. Czech authorities actively target this practice.

Fines for this practice can reach up to CZK 10,000,000 (approx. €400,000) for the company and CZK 100,000 for the individual. Additionally, authorities will assess retroactive taxes and social security contributions, which can be financially devastating.

Key indicators of illegal "Švarcsystém" include the contractor following the employer's instructions, working in the employer's name, and using the employer's tools. The relationship is often long-term and exclusive, mimicking a standard job.

If the nature of the work is dependent, it must be performed under an employment contract, not a trade license. Foreign companies must be vigilant to ensure their contractor relationships are genuine B2B arrangements.

Annual leave and sick leave

The statutory minimum for annual leave is 4 weeks (20 days) per calendar year, calculated in hours based on the employee's shift schedule. Many employers voluntarily offer 5 weeks. The employer technically determines when leave is taken, though it is usually by agreement.

During the first 14 days of sick leave, the employer pays wage compensation, while the state pays benefits from the 15th day onwards. The employer's portion is usually 60% of reduced average earnings for working days missed.

Employees are also entitled to other leaves, such as maternity leave (28 weeks), parental leave (up to age 3 of the child), and paternity leave. These entitlements are statutory and cannot be reduced by the contract.

Occupational Health and Safety obligations

Czech OSH regulations are strict, and every employer must categorize jobs based on health risks (Categories 1–4). Employers must contract an Occupational Health Service provider to conduct preventative medical exams.

Every employer must provide OSH training upon hiring and regularly thereafter to ensure compliance with safety standards. Additionally, employers must keep an injury log book and report serious injuries to authorities.

Failure to comply results in fines up to CZK 2,000,000, or more in cases of safety breaches causing harm. Since 2023, initial medical exams for low-risk office work are less strict, but general obligations remain.

Foreign worker notification and immigration requirements

Estonian companies must comply with strict notification duties when hiring any non-Czech national, including Estonians or other EU citizens. This is a bureaucratic step that is easily missed by foreign entities.

The employer must notify the regional Labour Office of the start of employment of any foreign national on the day of commencement of work. Failure to report on time can lead to fines up to CZK 100,000.

Hiring non-EU nationals requires a work permit, such as an Employee Card or Blue Card, and typically involves a labour market test. The employer must ensure valid residence and work permits are held throughout the employment.

Conclusion of the article

Czech employment law presents a more prescriptive and protective framework than Estonian labour standards. For Estonian companies, the differences create significant compliance challenges regarding contract requirements, leave entitlements, and termination procedures.

The consequences of non-compliance include heavy fines, retroactive liability, and invalid contracts that jeopardize business operations. These risks accumulate over time and often surface only during inspections or disputes.

ARROWS Law Firm specializes in employment law compliance for international companies and advises Estonian clients on contract design and inspection defense. Contact the team at ARROWS Law Firm to discuss your Czech employment law requirements. 

1. Can we use the same employment contract template for our Czech employees that we use in Estonia?
No. Czech law has specific mandatory content requirements (e.g., definition of place of work, probationary period rules, notice periods) that differ from Estonia. Using a foreign template often results in invalid clauses.

2. What is the maximum duration for a fixed-term contract?
A single fixed-term contract can be up to 3 years. It can be repeated twice (3 contracts total). The absolute maximum duration of a continuous fixed-term relationship is 9 years.

3. What happens if we classify someone as a contractor but authorities say they are an employee?
You face fines up to CZK 10,000,000, plus retroactive assessment of unpaid payroll taxes and social security contributions (approx. 34% of the amounts paid) plus penalty interest.

4. Can we terminate an employee immediately for poor performance?
No. Immediate termination is only for criminal-level misconduct. For poor performance, you must give a notice of termination (2 months), and you must typically have given a written warning in the preceding 12 months.

5. Do we need to pay minimum wage?
Yes. As of 2025, the minimum wage is CZK 20,800. You cannot pay less, even by agreement.

6. Do we need to notify authorities when hiring an Estonian citizen in Czechia?
Yes. Even for EU citizens, you must submit an information card to the Czech Labour Office on the day they start work.

Disclaimer: The information contained in this article is for general informational purposes only and serves as a basic guide to the issue as of 2026. Although we strive for maximum accuracy, laws and their interpretation evolve over time. We are ARROWS Law Firm, a member of the Czech Bar Association (our supervisory authority), and for the maximum security of our clients, we are insured for professional liability with a limit of CZK 400,000,000. To verify the current wording of the regulations and their application to your specific situation, it is necessary to contact ARROWS Law Firm directly (office@arws.cz). We are not liable for any damages arising from the independent use of the information in this article without prior individual legal consultation.

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