Czech Republic: HR/Employment law update

In brief

As of 1 January 2024, a number of legal changes in the area of labor law came into force in relation to amendments to the Labour Code, the Employment Act, public finance reform measures and other legislation. Below is a selection of the key changes.

Minimum wage

The minimum wage has been increased to CZK 18,900 per month, or CZK 112.50 per hour. It applies to all employees in an employment relationship, as well as to employees working under an agreement on performance of work and an agreement on work activity.

Travel cost reimbursement

Travel allowances are divided into two categories - travel allowances for business trips abroad and local travel allowances.

Travel allowances for business trips abroad are as follows:

  • Employees are entitled to a meal allowance in foreign currency during a business trip abroad.
  • The meal allowance for business trips to 22 countries (e.g., Estonia, Hungary, Spain) has been increased. The average increase is 10% (e.g., in Estonia, from EUR 40 to EUR 45).

Local travel allowances are as follows:

  • Employees are entitled to following allowances during a local business trip: meal allowance and travel allowance, which consists of a basic compensation per one kilometer of travel and a fuel allowance.
  • The rate of meal allowance has been increased. For each calendar day of the business trip, it now amounts to at least CZK 140 if the business trip lasts between five and 12 hours, CZK 212 if the business trip lasts longer than 12 hours but no longer than 18 hours, and CZK 333 if the business trip lasts longer than 18 hours.
  • The rate of basic compensation per one kilometer of travel, applicable if the employee uses a motor vehicle not provided by the employer at the employer's request, has been increased to CZK 1.50 for single-track vehicles and tricycles and CZK 5.60 for passenger road motor vehicles.
  • The rate of fuel allowance has been changed. The average price of fuel, applicable if the employee uses a motor vehicle not provided by the employer at the employer's request, is now CZK 38.20 per liter of 95 octane petrol, CZK 42.60 per liter of 98 octane petrol, CZK 38.70 per liter of diesel fuel and CZK 7.70 per kilowatt hour of electricity.

Tax changes for employers

On 1 January 2024, the first part of the austerity measures in the area of public finance came into force. These include, among others, the following employment-related tax changes:

  • Reduction of the limit for the application of the 23% tax rate
    • The tax rate of 23% is now applied to the portion of an employee's tax basis exceeding 36 times the average wages (compared to the previous 48 times).
  • Advantageous use of emission-free company cars
    • The use of emission-free company cars by employees for private purposes is given preferential treatment. When an employee uses an emission-free vehicle for private purposes, an amount equal to 0.25% of the initial price of the vehicle is considered as in-kind income for the employee. The conditions for low emission vehicles and other vehicles remain unchanged (0.5 % and 1 %).
  • Employee benefits
    • There are now stricter exemption conditions for meal allowances - employee income in the form of an in-kind meal allowance (meal vouchers), which was previously fully exempt from individual income tax, is now only exempt up to 70% of the upper limit of the meal allowance. Thus, the conditions are the same as for the flat-rate meal allowance.
    • A limit for some employee benefits has been introduced - the amount of some in-kind benefits provided to employees, which were previously fully exempt from tax, has been reduced. The total amount of specific in-kind benefits is now only exempt up to one half of the average wages for a taxable period (i.e., CZK 21,983 for 2024). These are benefits such as the following:
      • Purchase of goods or services of a health nature (e.g., vitamins)
      • Use of recreational or educational facilities (e.g., educational courses)
      • Use of facilities for pre-school children
      • Contributions to cultural and sporting events (e.g., the MultiSport cards)
      • Contributions to printed books

The limit does not apply to sporting or cultural events organized by the employer for a limited number of participants, provided that, given its nature, the organization of such an event is customary for the employer and its form and scope are appropriate (typically Christmas parties and team building events).

  • No tax advantage for management apartments
    • The possibility of providing employees with real estate (lease or sale) under advantageous terms has been abolished. The difference between the market price and the advantageous price paid for the real estate by an employee is considered as taxable income of the employee.
    • The abolition of this benefit does not apply to persons who had their residence address at the respective apartment before 1 January 2024.
  • Tax allowances
    • New condition for spouse allowance: employees are now only able to claim the spouse allowance if the spouse takes care of a child under the age of three years and their income does not exceed CZK 68,000 for the taxable period.
    • Abolition of student and kindergarten allowances: the allowance for students and the allowance for children attending kindergarten (kindergarten fee) have been completely abolished as of 1 January 2024.
  • Sickness insurance paid by employees
    • Employees now contribute to sickness insurance from their wages at the rate of 0.6% of the assessment basis. Thus the total employee social security premium (deducted by the employer from an employee's wages) is 7.1%.

Vacation for employees working under an agreement on performance of work and agreement on work activity

Employees working on the basis of agreements on work performed outside an employment relationship (Agreement on Performance of Work or Agreement on Working Activity) are now entitled to vacation. This vacation is not included in the maximum scope of work under the agreement on performance of work. For an employee working under an agreement on performance of work or an agreement on work activity, the weekly working time for vacation purposes is 20 hours per week.

  • The employment relationship must continue without interruption for at least four weeks.
  • An employee must work at least four times the notional working time (4*20 = 80 hours).

The fulfillment of the conditions shall be assessed separately for each agreement. However, if these agreements directly follow one another, they shall be considered as continuous for the purposes of the vacation.

This change increases administrative and financial costs for employers, so the new regulation needs to be considered when deciding on the setting of the conditions of the agreements (duration, number of hours worked, etc).

Uninterrupted rest during the week

An employer shall provide an employee over 18 years of age with at least 24 hours of uninterrupted rest within a week, together with the uninterrupted daily rest of 11 hours, which shall immediately follow. The total duration of these rest periods shall be 35 hours of uninterrupted rest per week. It is not sufficient for the employer to simply schedule the working time in this way; uninterrupted rest must actually be provided.

Employment agencies

Changes are also taking place in the area of the legal regulation of employment agencies. These are now administered by the Ministry of Labour and Social Affairs ("Ministry"; previously it was part of the Labour Office's agenda). Changes are being made in the following areas:

  • The scope of information provided
    • The information that the employment agencies are obliged to communicate to the Ministry in annual reports has been expanded; there is a new obligation to provide data on the number of employees assigned to each entity and the sector (industry) in which their work is carried out.
  • The professional competence of an authorized representative
    • The professional experience of a natural person who acts as the authorized representative for the purpose of carrying out the activities of the employment agency is now defined as the continuous personal performance of activities in the field of employment agency or in the field for which the employment agency is to be authorized, for a minimum of 20 hours per week. The professional experience must have been acquired in the 10 years immediately preceding the application for an employment agency permit.
  • Requirement for certain persons to meet conditions
    • The scope of persons required to meet certain conditions has been expanded by adding a natural person who is a member of the statutory body or a representative of the legal person in such body, who wants to obtain an employment agency permit.
    • The conditions for obtaining the employment agency permit are as follows:
      • Legal capacity
      • Reaching the age of 18 years
      • Residence in the Czech Republic
      • The fact that the natural person has not acted as a responsible representative of a legal person, statutory body or body of a legal person whose employment agency permit has been suspended in the last three years.
  • The condition of good character (integrity)
    • This condition has been extended to the natural person who is a member of a statutory body or a representative of a legal person in such a body (typically an executive director) of the legal person who wants to obtain an employment agency permit.
  • Debt-free status
    • The employment agencies must be debt-free. The absence of arrears with the Financial Administration Customs Administration, Health Insurance Companies and the Czech Social Security Administration is required.
    • This requirement must not only be met at the time of the application, but also throughout the period for which the permit has been issued.
    • The Ministry verifies the debt-free status on an ongoing basis, at least once every six months.
    • This requirement also applies to the existing employment agencies.
  • Increase of the mandatory deposit
    • The amount of mandatory deposit was increased from CZK 500,000 to CZK 1 million. The provision of the deposit is a condition for obtaining the employment agency permit and for carrying out the employment agency permit.
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