With a successful business, the need to find other helping hands to do the work usually comes with time. But hiring employees is not easy. It comes with a lot of responsibilities, paperwork and expenses. After all, the cost of an employee is not just his or her salary, but also insurance, equipment and a host of other regular and irregular expenses. You can find out what all you have to pay for your employee in the following lines.
As an employer, you are obliged to pay social security, health insurance, income taxes and, if applicable, withholding taxes on behalf of your employees every month.
Social insurance is calculated as the product of the assessment base and a percentage rate, and a certain amount is then paid each month based on this. You have to make the calculation yourself – the employee’s assessment base is the sum of his/her earnings and the employer’s assessment base is the sum of the assessment earnings of all employees who are covered by sickness insurance (therefore not valid for example for employees on an agreement up to a certain earnings level). The percentage rates for 2024 are set at 24.8% for employers and 6.5% for employees. The insurance must be paid monthly into the relevant account of the District Social Security Administration. In addition, a statement of the amount of the assessment base and the amount of the insurance premium must also be sent to the Social Security Office.
For some of your employees, you may be able to apply a 5% discount on your premiums each month. These include employees over 55, under 21 or employees who are studying. You can find out more about who this applies to and how the discount works on the Czech Social Security Administration website.
In addition, there is a maximum assessment base. It is 48 times the average wage and in 2024 it amounts to CZK 2,110,416. It is calculated as the sum of all the employee’s assessment bases for one calendar year. If this sum exceeds the maximum assessment base, then no social insurance is payable on the excess. However, this applies only if the employee was employed by only one employer.
Tip: Read our article on social insurance. Find out who has to pay social insurance, where and how much. In addition, we’ll also tell you where all the money actually goes.
You have to pay health insurance on behalf of the employee, which is calculated as 13.5% of the assessment base. One third of this amount is deducted from the employee’s wages and you are liable for the remaining two thirds. It is again paid each month into your employees’ health insurance accounts.
Tip: What is health insurance for, what is covered, how and how much do you have to pay, and what happens if you don’t pay? Find out in our next article.
Income tax needs to be deducted directly from your employees’ wages each month. It is set at 15%. For employees whose income is more than four times the national average wage, it is 23%. This is 43,967 crowns for 2024. Employees are often entitled to various tax breaks, which they would certainly like to claim. In addition to the classic taxpayer’s allowance, this may include, for example, a spouse’s allowance, a student’s allowance or school fees.
It’s not easy to hire someone. Employment law can be complex and sometimes a small deviation from it can cause big problems later. We can help you navigate them and set up employment documents in accordance with the law.
For some employees, you may also encounter enforcement deductions. In this case, you will be served with an enforcement order which you must comply with or you could be in trouble. Find out more about how these enforcement deductions from wages work in our next article.
The biggest item you’ll have to pay for an employee is their wages. Its amount and conditions are regulated by the Labour Code. First and foremost, it is important that you cannot pay your employee a wage that is less than the minimum wage. This is set at CZK 18,900 per month for 2024, i.e. CZK 112.50 per hour. But in addition to this, employees are also legally entitled to various allowances:
Tip: Is your employee not following work procedures? Has he or she caused you damage and refuses to take responsibility for it? Or does he or she want to sue you wrongfully? We will assess your chances of success and take care of the best course of action.
In addition to the levies and salary, you have to pay other expenses on behalf of the employee:
Tip: Read what the law says about protective equipment and work clothing and footwear.
The cost of the employee must also be taken into account if you decide to dismiss the employee. The process of dismissal itself can be quite complicated. It is easy to dismiss an employee at the end of a fixed-term contract, during a probationary period or if you mutually agree to end the employment relationship.
In other cases, the situation is more complicated and you must have a legal reason for the dismissal (e.g. organisational reasons) and pay the employee a severance payment. The only exceptions are if the employee would be in breach of his/her job duties or has been convicted of a deliberate criminal offence.
The amount of severance pay is determined on the basis of the length of service:
If the employment relationship is terminated due to occupational disease or accident, the employee is entitled to a severance payment of at least 12 times the average earnings.
Tip: Are you planning to lay off employees? It’s not just any job, and it pays to have the help of an experienced attorney. With us, you can be sure that the notice you are about to give to an employee will comply with the Labour Code. We will inform you in advance of the consequences of doing so and protect your rights as an employer. We will assess the risks and the objective of the dismissal. We will then prepare the notice or immediate termination of employment and give it to you for comments.
You can take advantage of various subsidies and allowances to reduce your staff costs. These include:
It’s not easy to hire someone. Employment law can be complex and sometimes a small deviation from it can cause big problems later. We can help you navigate them and set up employment documents in accordance with the law.
Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.
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