French vs. Czech Employment Contracts:

Expanding your business from France to the Czech Republic brings significant opportunities, but navigating Czech employment law can be complex. This guide provides a clear comparison of French and Czech employment contracts, termination rules, and daily operational duties, helping you avoid costly legal mistakes. As a leading Czech law firm in Prague, EU, with extensive experience assisting foreign clients, ARROWS provides the expert guidance you need.

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 Ground Rules: Why Czech Law Governs Your Prague-Based Team

The first and most critical rule for any French company hiring in Prague is that Czech law will govern the employment relationship. While it may seem efficient to use your existing French contracts, this approach creates significant legal and financial risk. For any employee performing their work in the Czech Republic, the protective provisions of the Czech Labour Code are mandatory and cannot be waived by a contract, even if it specifies French law as the governing jurisdiction.

This isn't a theoretical legal principle; it has been firmly established by the Czech Supreme Court. In a landmark case involving the U.S.-based broadcaster Radio Free Europe/Radio Liberty (RFE/RL), which operates from Prague, the court ruled that the company could not rely on the more lenient U.S. termination laws stated in its employment contract. Because the work was performed in the Czech Republic, the court mandated the application of the stricter Czech Labour Code.

The implications of this ruling are profound for a French employer. Your standard approach to employment, shaped by the French legal environment, could be systematically invalid in the Czech Republic. 

Actions that are perfectly compliant under French law, such as terminating an employee for a reason that doesn't fit into the Czech Republic's narrow, exhaustive list, could expose your company to successful wrongful termination lawsuits, orders for employee reinstatement, and significant financial penalties. This creates a hidden liability across your entire Czech workforce, turning everyday management decisions into potential legal minefields.

Crafting the Agreement: A Practical Comparison of Employment Contracts

Understanding the available contract types is the foundation of compliant hiring. While some concepts are similar to the French system, the details and restrictions differ significantly. All Czech employment contracts must be in written form. While a failure to do so can be rectified, it exposes the employer to fines and allows the employee to challenge the terms before they begin work.

Similar to the French Contrat à Durée Indéterminée (CDI), the indefinite term contract is the standard in the Czech Republic. Unless a specific duration is expressly agreed upon, an employment relationship is automatically presumed to be for an indefinite period.

For fixed-term employment, comparable to the French Contrat à Durée Déterminée (CDD), Czech law imposes strict limits. A fixed-term contract can be concluded for a maximum of three years and may only be renewed twice. This means the total duration of a fixed-term relationship with the same employee cannot exceed nine years.

Beyond these standard contracts, the Czech Labour Code allows for two types of agreements for work performed outside a traditional employment relationship: the Agreement to Complete a Job (DPP) and the Agreement to Perform Work (DPČ). 

The DPP is strictly limited to 300 hours per calendar year for a single employer, while the DPČ cannot exceed an average of 20 hours per week. It is crucial to avoid using these agreements to disguise what is, in reality, a full-time employment relationship.

FAQ – Legal tips about Czech Employment Contracts

• What language should the contract be in?

While it can be bilingual, Czech law requires that the employee fully understands its content. Providing a Czech version is best practice to avoid disputes. ARROWS can draft fully compliant bilingual contracts for you. Need help? Contact us at office@arws.cz.

• What are the mandatory clauses?

A Czech contract must specify the type of work, place of work, and start date. To be fully compliant, it should also include salary, working hours, and notice periods. For a comprehensive contract review, email our experts at office@arws.cz.

• Can I change the contract terms later?

No. Unlike in some jurisdictions, an employer cannot unilaterally change the core terms of a Czech employment contract. Any modification requires a new written agreement with the employee. To ensure changes are made legally, get in touch at office@arws.cz.

The Critical First Months: Probationary Periods in France vs. Czechia

The probationary period is your most valuable tool for assessing a new hire's suitability, and the rules in the Czech Republic are distinct from those in France. In France, trial periods are typically set at two months for office workers and four months for executives. The Czech system has recently become more flexible, offering a distinct advantage to employers who are aware of the changes.

A recent "Flexible Amendment" to the Czech Labour Code extended the maximum permissible probationary periods. For regular employees, the maximum trial period is now four months (previously three), and for managerial positions, it is eight months (previously six). This provides a substantial window during which either the employer or the employee can terminate the relationship for any reason, or no reason at all, without the need for a notice period.

Given the significant difficulties and strict legal requirements for terminating an employee after the probationary period ends, maximizing this initial phase is a critical risk management strategy. It is the only time an employer has this level of flexibility. However, the probationary period must be agreed upon in writing and cannot be longer than half the duration of a fixed-term contract.

Risks and Penalties	How ARROWS Helps
Invalid Probation Period: An incorrectly worded or extended probation clause (e.g., longer than half the fixed-term contract length) is void. You lose the right to easily terminate an underperforming employee.	Compliant Contract Drafting: We draft contracts with legally sound probationary periods that maximize your evaluation time under the new laws. Do you need a contract prepared? Contact us at office@arws.cz.
Vague Job Description: A poorly defined "type of work" can lead to disputes over duties and make performance management difficult. The employee can refuse tasks they claim are outside the contract.	Precise Legal Definitions: Our lawyers define job roles and responsibilities clearly to prevent ambiguity and strengthen your management position. Get tailored legal solutions by writing to office@arws.cz.
Oral Agreements are Unenforceable: Relying on verbal promises about salary, bonuses, or job scope creates massive risk. Without a written contract, you face fines and the employee can challenge the entire relationship.	Comprehensive Written Contracts: We ensure all terms are documented in a legally binding written agreement, protecting you from future claims and regulatory penalties. For immediate assistance, write to us at office@arws.cz.

Managing Your Team: Key Differences in Daily Operations

Day-to-day management requires adapting to Czech standards for working time, leave, and, most importantly, social contributions. These differences have direct financial and operational consequences.

Working Hours: The standard workweek in the Czech Republic is 40 hours, typically spread over five days.This is a notable increase from the French standard of 35 hours per week. Overtime in Czechia is permitted but regulated, with a default limit of 8 hours per week and 150 hours per year. Any overtime work must be compensated with a minimum premium of 25% of the employee's average earnings or with compensatory time off.

Annual Leave: The statutory minimum annual leave in the Czech Republic is four weeks (20 days). This is less than the French minimum of five weeks (25 days). However, it is important to note that offering five weeks of leave has become the market standard in the Czech Republic to attract and retain talent. Both countries also observe numerous public holidays, which must be factored into workforce planning.

Social Security Contributions: A significant financial difference lies in social security costs. In the Czech Republic, the employer's total contribution amounts to 33.8% of the employee's gross salary (24.8% for social security and 9% for health insurance). This is considerably lower than in France, where the employer's share averages around 45%. This difference represents a substantial cost advantage for companies operating in the Czech Republic.

Risks and Penalties	How ARROWS Helps
Incorrect Overtime Payments: Failure to pay the minimum 25% premium for overtime can result in back-pay claims and fines from the Labour Inspectorate.	Internal Policy Drafting: We prepare clear internal policies on working hours and overtime that comply with the Czech Labour Code, preventing costly calculation errors. Need legal help? Contact us at office@arws.cz.
Failure to Register Employees: You must register new employees with the Social Security Administration and a health insurance provider within 8 days of their start date. Failure results in penalties.	Compliance & Registration Support: We guide you through all mandatory registration processes to ensure your company is fully compliant from day one. Our lawyers are ready to assist you – email us at office@arws.cz.
Payroll Contribution Errors: Miscalculating the 33.8% employer contribution or employee withholdings leads to fines and requires complex corrections with tax authorities.	Legal Consultations: We provide expert legal consultations on payroll obligations to prevent inspection penalties and ensure accurate financial management. Want to understand your legal options? Email us at office@arws.cz.

Navigating Departures: Termination Rules You Cannot Ignore

The process of terminating an employment contract is perhaps the most significant area of divergence between French and Czech law. The Czech system is far more rigid and offers stronger protection to employees, making procedural correctness paramount for employers.

The fundamental difference lies in the grounds for dismissal. In France, an employer can terminate a CDI for a cause réelle et sérieuse (a real and serious cause), a standard that, while protective, allows for some degree of interpretation based on the specifics of the case. 

In stark contrast, the Czech Labour Code provides an exhaustive and strictly interpreted list of reasons for which an employer can dismiss an employee. If a situation does not fit perfectly into one of these legally defined categories, the termination is invalid.

This rigidity creates a major strategic challenge. A French manager accustomed to building a case for dismissal based on a pattern of poor performance or a bad cultural fit will find that such reasons may not be legally sufficient in the Czech Republic. 

A hiring mistake made in Czechia is far more difficult and costly to correct after the probationary period has expired. This elevates the importance of the extended probationary periods and makes expert legal advice on performance management and evidence collection essential before a termination is ever considered.

Key procedural differences include:

• Notice Period: The statutory notice period in the Czech Republic is a strict two months for both employer and employee, beginning on the first day of the calendar month following the delivery of the notice. The recent "Flexible Amendment" shortens this to one month in specific cases of misconduct.
• Severance Pay: In Czechia, severance pay is primarily mandated for terminations due to "organizational reasons" (redundancy). The amount is based on seniority: one month's salary for employment under one year, two months' salary for one to two years, and three months' salary for over two years of service.
• Protected Employees: Czech law provides absolute protection against dismissal for certain employees during specific periods, such as pregnancy, maternity or parental leave, and certified sick leave.

The €400,000 Mistake: Avoiding Employee Misclassification

One of the most significant financial risks for any foreign company in the Czech Republic is the illegal practice of employee misclassification, known locally as the "Švarc System". This refers to treating an individual as a self-employed contractor or freelancer when their working relationship legally constitutes one of dependent work. Companies engage in this practice to avoid paying social security contributions, taxes, and providing statutory employee benefits.

Czech authorities have intensified their enforcement in this area, and the criteria for what constitutes dependent work are clear. A relationship is considered dependent work if it involves:

• A hierarchy of employer superiority and employee subordination.
• Work performed personally by the employee on behalf of the employer.
• Work carried out according to the employer's instructions.
• Remuneration in the form of a wage or salary.
• The use of the employer's tools, materials, and resources at the employer's expense and responsibility.

The penalties for violating these rules are severe. A company found to be operating a "Švarc System" can face fines of up to CZK 10,000,000 (approximately €400,000). Furthermore, a recent Czech Supreme Court ruling confirmed that individual managers and even in-house legal counsel can be held personally liable for damages resulting from the implementation of such illegal schemes, capping liability for negligence at 4.5 times their average monthly earnings. This means that ignorance of the law is not a defense and can lead to personal financial consequences.

Risks and Penalties	How ARROWS Helps
Catastrophic Fines: Being found guilty of operating a "Švarc System" can lead to fines of up to €400,000 for the company and personal liability for managers.	Legal Analysis & Structuring: We analyze your proposed working relationships to determine the correct legal status and structure them to be fully compliant. Do not hesitate to contact our firm – office@arws.cz.
Back-Payment of Contributions: In addition to fines, you will be forced to pay all retroactive social security and health insurance contributions (33.8%) for the entire period of misclassification.	Representation Before Authorities: If you are facing an inspection, our lawyers provide expert representation before the Labour Inspectorate to defend your position and mitigate penalties. Need legal representation? Write to office@arws.cz.
Reputational Damage: A public finding of illegal employment practices can severely damage your company's brand and reputation in a new market.	Preventative Legal Audits: We conduct audits of your existing contractor relationships to identify and correct misclassification risks before they become a legal problem. For a confidential audit, email us at office@arws.cz.

Your Partner in Prague: How ARROWS Ensures a Smooth Entry

Navigating the complexities of Czech employment law requires a knowledgeable local partner. The risks of non-compliance—from wrongful termination claims to catastrophic fines for misclassification—are too significant to manage from a distance. For over 10 years, ARROWS has been the trusted legal advisor for foreign companies establishing their presence in the Czech market. From our headquarters in Prague, European Union, we provide a safe European harbour for your business operations.

Our expertise is not limited to local law. Through the ARROWS International network, built over a decade, we have trusted partners in over 90 countries. This global reach ensures we understand the cross-border context of your business while providing the deep local knowledge necessary for success in the Czech Republic. We don't just provide legal opinions; we draft all necessary documentation, from employment contracts to internal policies, to prevent fines and litigation.

Our team can represent you in court or before public authorities and provide professional training for your management team on the nuances of Czech labour law. We handle everything from contract reviews to obtaining necessary licenses and regulatory approvals. We support over 150 joint-stock companies and 250 limited liability companies, leveraging our reputation for speed and high quality.

Don't let legal complexity hinder your expansion. Let our team of experts at a leading Czech law firm in Prague, EU, provide the certainty and security you need. For a consultation on how we can help your French business thrive in the Czech Republic, contact us today at office@arws.cz.

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

1. What is the biggest mistake French companies make when hiring in Czechia?

The most dangerous mistake is assuming their French employment practices will be valid. This often leads to using non-compliant contracts and, most critically, misclassifying employees as freelancers (the "Švarc System"), which carries fines up to €400,000. To avoid this, seek expert local advice by contacting us at office@arws.cz.

2. How difficult is it to terminate an employee after the probationary period?

It is significantly more difficult than in France. You must have a legally valid reason from a short, exhaustive list in the Labour Code. Performance-based dismissals require extensive documentation and a high burden of proof. For guidance on managing this process correctly, email our legal team at office@arws.cz.

3. Are non-compete clauses enforceable in the Czech Republic?

Yes, but they are strictly regulated. A non-compete agreement must be in writing, limited in duration (maximum one year), and the employer must provide the former employee with financial compensation of at least 50% of their average monthly earnings for each month the clause is in effect. To draft an enforceable non-compete clause, write to us at

office@arws.cz.

4. Do I need a local Czech entity to hire employees?

Yes, a foreign company generally needs to establish a formal presence, such as a branch or a Czech business company (e.g., an s.r.o.), to conduct business and hire employees in the Czech Republic. This involves registration in the Commercial Register. We can guide you through the entire process. Get started by contacting office@arws.cz.

5. What are the mandatory employee benefits?

Beyond salary, you are required to contribute to social security (24.8%) and health insurance (9%). Employees are entitled to a minimum of four weeks of paid leave, sick pay, and paid time off for specific personal events like weddings or funerals. To ensure your benefits package is fully compliant, consult our experts at office@arws.cz.

6. How does ARROWS' international network help my French company?

Our ARROWS International network, built over 10 years, means we have trusted partners in over 90 countries. This allows us to provide seamless, integrated legal support for all your cross-border needs, understanding both the Czech legal landscape and the international context of your business. To learn more, get in touch at office@arws.cz.

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