How to Set Up a Working Relationship with a Freelancer in 2026? Contract, NDA, and the “Švarc System”

Are you planning to work with a freelancer and want to avoid problems with unclear terms, invoicing, or liability? We’ll draft a customized collaboration agreement for you or review the one you already have. We’ll also help you identify any potential risks related to the “Švarc system.” Contact our attorneys.

Before Starting the Collaboration

Collaborating with a freelancer offers companies flexibility and the opportunity to utilize the services of experts without having to hire them as employees. However, to ensure the collaboration runs smoothly without unnecessary legal complications, it is important to properly establish the contractual terms, the protection of confidential information, and liability for the results of the work.

Even before the collaboration begins, it is possible to enter into certain agreements that lay the groundwork for the subsequent collaboration. One such agreement is a so-called NDA (non-disclosure agreement). Its key aspects should include:

• Defining the scope of the project: It is necessary to clearly specify which project or activities the agreement covers. The definition should be specific enough so that both parties understand exactly what is covered by the NDA.
• Definition of confidential information: Confidential information should be defined as broadly as possible to minimize the risk of its unauthorized disclosure. It is advisable to specify examples of confidential information, such as technical documents, business strategies, client lists, etc. The scope should cover all relevant information that may be shared within the project.
• Contractual Penalty: Establishing a penalty for breach of contract motivates the other party to maintain confidentiality. Set the penalty at a sufficient amount, taking into account the potential damage caused by a leak of information; if necessary, negotiate potential damages separately. Also consider setting different penalty levels depending on the severity of the breach.
• Identifying Persons to Whom Certain Information May Be Disclosed: It is important to clearly define who has access to confidential information, including employees, subcontractors, and third parties. It is also advisable to define approval processes for sharing information with new project participants.

Even before the project begins, it is advisable to clarify the basic terms of cooperation with external contractors. In addition to protecting confidential information, you should agree on the scope of services provided, methods of communication, the transfer of documents, and liability for any errors. This will help you avoid a situation where each party has different expectations regarding the collaboration.

When entering into a contract, we strongly advise against using contract templates downloaded from the internet. Any flaws in these templates are unlikely to become apparent when the contract is being drafted and signed, but will likely surface only in the event of a breach of the confidentiality agreement or potential legal disputes—by which time it may often be too late.

How to Set Up a Contract with a Freelancer

Several types of contracts can be used to define the scope and content of the collaboration, such as a collaboration agreement, a contract for services, and, under certain circumstances, a license agreement. An employment contract also remains a classic option.

We’d be happy to draft a collaboration agreement, a contract for services, a license agreement, or an employment contract for you. We’ll ensure that the collaboration proceeds legally without any ambiguities, unreasonable risks, or hidden loopholes. We’ll draft a watertight contract for you in as little as 3 days.

Which type of collaboration agreement should you choose?

Be especially careful if you formalize your collaboration with a freelancer through a business contract, but the arrangement is, in reality, a disguised employment relationship. A company or self-employed individual that facilitates illegal work faces a fine ranging from 50,000 to 10 million crowns. A non-business individual who facilitates illegal employment may face a fine of up to 5 million crowns. The worker themselves may face a fine of up to 100,000 crowns. In addition to the fine, the authorities may also impose a suspension of business activities for up to two years or require the publication of the decision on the administrative offense on the official bulletin board of the State Labor Inspection Office for a period of one year.

The “Švarc System”: What Are the Risks of Working with Self-Employed Individuals?

There is an unethical and illegal practice on the labor market known as the “Švarc system,” which is a specific form of illegal employment. This method involves a company “hiring” individuals who are self-employed under a trade license, who then invoice the company for their services as if the company were their client. In reality, however, these individuals work under conditions typical of regular employees, which include various disadvantages typical of employees—such as limited flexibility—but without the usual benefits, such as paid vacation or a notice period.

This method of employment allows the employer to avoid liability for paying health and social insurance, which reduces the company’s costs. A person working under the “Švarc system” is formally a self-employed individual, but in reality does not operate as an independent entrepreneur.

How can you avoid the “Švarc system” when working with a freelancer? The key is to structure the relationship so that the contractor is truly operating independently, rather than performing dependent work under the client’s direction. Pay particular attention to the following indicators of such a relationship:

• The compensation is determined by the employer’s rate, not the contractor’s price list;
• the contractor has only one client,
• the contractor uses the client’s equipment (work phone, computer),
• the client requires the contractor to perform the work in person,
• to third parties, the contractor appears to be an employee,
• the work is typically performed within an employment relationship,
• the pay periods for employees and self-employed individuals coincide,
• the self-employed individual does not contribute any resources to their business activities other than their labor,
• self-employed individuals are provided with benefits similar to those of employees.

However, the presence of just a few of these elements does not automatically mean a “Švarc system.” Typically, multiple factors are present in such cases.

Is your employer trying to switch you to the “Švarc system”? Don’t put up with it! At Dostupný advokát, we’re ready to fight for your rights —we’ll propose a solution that leads to the best possible outcome.

Cooperation Agreement with a Self-Employed Individual: What Must It Include?

The cooperation agreement itself is what is known as an “unnamed contract,” and its specific requirements are not listed in the Civil Code. However, based on the nature of the contract , certain essential components can be identified :

• Identification of the contracting parties: This section is the cornerstone of every contract. It specifies who the parties to the contract are and ensures that they are clearly identifiable. It should include the first and last names of the contracting parties, or the company name and contact information (address, phone number, email).
• Definition of the Subject Matter of the Agreement: This section specifies the main purpose of the contract. It must clearly define what the subject matter of the agreement is, such as the provision of services, the delivery of goods, the exchange of information, etc.
• Basic Terms of Cooperation: This includes important aspects such as the scope of work, timeframe, potential exclusivity, and other specific requirements. For example, the contract may stipulate that the supplier may not provide similar services to competitors.
• Liability: This section must define the liabilities of each party and the circumstances under which they apply. It specifies the extent to which the contractor is responsible for the quality of the services provided and the consequences of any errors or delays.
• Payment Terms: These determine how and when payment for the work is to be made. Payment may be based on hours worked or tasks completed, or it may be divided into installments. A detailed description of the payment terms helps prevent financial disputes.
• Contractual Penalty – This applies in the event that either party fails to fulfill its obligations under the contract. This provision is key to ensuring compliance with the contract and often acts as a deterrent against breaching the terms.
• Methods of Terminating the Contract: Here, it is necessary to specify how the contract may be terminated early, including the conditions for unilateral termination, termination by mutual agreement, or under other specific circumstances. This section should also include information on what happens to outstanding obligations after the contract is terminated.

An Example from Our Law Firm’s Practice

A marketing agency approached us, seeking a long-term collaboration with an external graphic designer for 40,000 CZK per month. However, the agency required the graphic designer to work every day from 9 a.m. to 5 p.m. and not to provide services to other clients. Consequently, the agency was concerned that the collaboration might be considered an illegal “Švarc system.”

First, we assessed the terms of the collaboration and proposed amendments. Under the new arrangement, the graphic designer could organize his own work and accept projects from other clients. The agency assigned him specific tasks rather than setting fixed working hours.

We then drafted a collaboration agreement that addressed compensation, deadlines, liability, confidentiality, and copyright to the created graphics. The result was a signed contract and a collaboration structured to align with the freelancer’s independent business operations and minimize the risk of the “Švarc system.”

License Agreement

A license agreement is typically used for the use of intellectual property (such as music, graphics, etc.). License types include exclusive and non-exclusive licenses. An exclusive license means that the intellectual property owner may not grant a license to a third party, which is generally more advantageous for the client. It is recommended to explicitly negotiate the right to make changes to the work so that the client is not limited to relying solely on the original author of the work.

Contract for Work

Under this contract, the contractor agrees to perform the work for the client at its own expense and risk, and the client agrees to accept the work and pay the price.

Typical features of this contract include:

• independent work,
• the contractor’s independence,
• performance of the work at the contractor’s own expense and risk,
• the result is the completion of the work,
• and payment.

For more detailed information, watch our video

We would like to thank APEK—the Association for Electronic Commerce—for their cooperation.

Summary

Working with a freelancer can be beneficial and flexible for business owners, but only if both parties have clearly defined rules. The foundation is a properly drafted contract that specifies the scope of services, compensation, deadlines, liability, and the terms for terminating the collaboration. If you entrust confidential information to a freelancer, don’t forget to sign an NDA. For graphics, software, or other copyrighted work, be sure to verify the licensing terms.

Also pay close attention to how the collaboration actually unfolds. The freelancer should operate as an independent contractor, not as an employee merely designated as an external contractor for formal purposes. If the relationship meets the criteria for dependent employment, it may constitute an illegal “Schwarz system” subject to severe penalties.

The best protection is a well-drafted contract and a properly structured collaboration from the very beginning. This will help you avoid not only legal risks but also misunderstandings regarding compensation, work results, and the responsibilities of both parties.