Is It Possible to Pay Salary in Foreign Currency?

28.1.2019

At the present time when the so-called free movement of manpower within as well as outside the European Union dominates more than ever, employees require more frequently salary, or at least its part, is paid in foreign currency (usually in euros).

 

This requirement is absolutely logical by employees because mainly foreigners from the third countries stay in our territory usually only for a limited period and take earned money “home”. In such case the best possible solution for the given employees is, of course, if the employer pays a part of salary in Czech crowns (to cover the necessary expenses in the Czech Republic) and the rest of salary in currency of their home country. Affected employees are not forced to exchange their salary which is for them more favourable from the viewpoint of time as well as economy.  

With respect to the Act No. 262/2006 Coll., Labour Code, as amended (hereinafter referred to as the “Labour Code”), the situation is not as simple as it may seem. In accordance with Section 142 (1) of the Labour Code, it applies that the employer is obliged to pay wage or salary to the employee in legal tender. Legal tender is, in compliance with Section 16 (1) of the Act on the Czech National Bank, valid banknotes and coins issued by the Czech National Bank. A monetary unit in the Czech Republic is only Czech crown (CZK), in compliance with Section 13 of the Act on the Czech National Bank. 

A diverted provision concerning currency in which wage or salary is to be paid is not possible because the provision of Section 142 (1) of the Labour Code is of a so-called peremptory nature (the employer is obliged to pay wage in legal tender, see Section 4a of the Labour Code). The Labour Code allows payment of wage or salary in different currency only in case of employees with a place of work performance abroad, under the terms stipulated in Section 143 (2).[1]

Wage, salary, or their part, may be paid in foreign currency only to those employees who perform work abroad. It is subject to the employee´s consent and to an agreement on currency in which wage or salary is to be paid. Such an agreement may be already included in a concluded Employment Contract if the place of work performance (or one of such places) is agreed abroad. 

In case of foreign currency it must be always currency for which the Czech National Bank declares an exchange rate to be able to assess correct satisfaction of the employee´s wage or salary rights and meeting of the obligations imposed by special legal regulations (e.g. in the field of taxes, premium and wage deductions). If the exchange rate of the Czech crown against currency of a country where the employee performs work is not declared, it is necessary for the employee and for the employer to agree upon another currency for which the exchange rate is declared.[2]

If the employer paid the employee his/her wage in foreign currency and (i) it was an employee not working abroad, or (ii) without a consent of an employee working abroad, there is a question what consequences such employer´s acting would have.

With respect to the language interpretation of Section 56 (1) (b) of the Labour Code, I do not assume any immediate termination of employment by the employee would come into question, even considering the meaning and purpose of this provision, which is, without doubts, protection of the employee against unpaid work.  

An economic purpose of concluding an employment relationship by the employee is, without doubts, ensuring of finances. If this purpose is not fulfilled, the employee is entitled to terminate employment immediately without staying unsure whether the employer will meet its financial liabilities towards him/her in the future.[3]

As the provision of Section 56 (1) (b) of the Labour Code deals with non-payment of wage, i.e. with a situation when the employee performed work but simply did not receive money, a situation when the employee really receives his/her wage (only in “wrong” currency) may not be, in my point of view, subject to this provision.[4]

From the viewpoint of any possible connections, it may be however pointed out that if the employer pays wage in foreign currency, in conflict with Section 142 and Section 143 of the Labour Code, the employer exposes itself to a risk of sanction by the State Labour Inspection Authority. An offence or administrative offence in such case is that the employer provided the employee with wage or its part in a manner not permitted by the legal regulations. It is possible to impose a penalty up to CZK 1,000,000 for such acting, in accordance with the Act on Labour Inspection.

 

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[1] ROTHOVÁ, Eva. § 142 [Způsob a místo výplaty; zaokrouhlování]. In: BĚLINA, Miroslav, DRÁPAL, Ljubomír, BĚLINA, Tomáš, BOGNÁROVÁ, Věra, DOLEŽÍLEK, Jiří, NOVOTNÝ, Zdeněk, PICHRT, Jan, PUTNA, Mojmír, ROTHOVÁ, Eva, STÁDNÍK, Jaroslav, ŠTEFKO, Martin. Zákoník práce. 2nd edition. Praha: Nakladatelství C. H. Beck, 2015, p. 742.

[2] Identical source, p. 745.

[3] Identical source, p. 371. 

[4] It is not possible to exchange the terms such as “payment” and “payment method”.  

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Mgr. Jakub Oliva

Mgr. Jakub Oliva

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- Labor Law
- Agency Employment
- Employment of Foreigners
- Trade Unions, Collective Bargaining
- Rewarding Managers, Concurrence of functions
- Labor Inspection and Fines Defense
- Employment Contracts, Internal Regulations
- Defense in Case of Illegal Employment (“Švarcsystém”)