Hire Contractors in the Czech Republic

Over the years, the Czech Republic's government has taken numerous measures to support foreign investment and the influx of highly skilled workers from countries outside the European Union. 

For example, workers from a few selected countries, such as South Korea, Japan, Australia, and the US, among others, no longer need employment cards or work permits in Czechia. 

This move by the Czech Republic government has reduced the significant load on employers, allowing them to hire talent without lengthy and complex paperwork.

Furthermore, abolishing the ‘labor market test’ has expedited the hiring process since employers no longer have to prove that they could not find a Czech citizen first. 

Businesses can hire the best contractor for a project without worrying about their nationality. 

In this article, we will provide a detailed guide on how to hire contractors in the Czech Republic efficiently, ensure a smooth contractor onboarding process, and, most importantly, stay compliant with the laws of this country.

How to Hire Contractors in the Czech Republic

You can hire contractors in the Czech Republic by following any of these two methods,

• Direct Hiring: One of the most traditional approaches to hiring contractors globally.
  • This involves various critical tasks from understanding the project requirements, sourcing candidates, to onboarding them compliantly, and paying them accurately. 
  • Additionally, in the absence of a proper legal team, you run the risk of worker misclassification. Therefore, this method is only suitable for short-term projects.

• Hiring with contractor management software/AOR: By allocating the various administrative operations to contractor management software or an AOR, you not only save a lot of wasted time but also avoid potential risks from a legal perspective.
  • An AOR will draft agreements for the contractors, onboard them smoothly, and ensure timely payment on your behalf at a fixed price. 

Hiring Contractors through Skuad AOR

• Skuad AOR is an all-inclusive platform that streamlines the international hiring process by simplifying contract management for independent contractors.
• Skuad makes it easy to manage multiple administrative burdens, such as drafting compliant contracts, independent contractor agreements, making accurate payments, and handling expenses. 
• Its built IP system protects your company’s IP under the laws of the Czech Republic.
• Additionally, our comprehensive platform makes it seamless to switch your contractors to employees if you ever wish to. 

How to Pay Contractors in the Czech Republic

You can pay contractors in the Czech Republic using either one of the following methods. 

• Direct Payment: You can pay your contractor through a paper check or money order, bank transfer or direct deposit, and even digital platforms such as PayPal or Wise.
  • However, please note that the process usually involves a lot of paperwork and can get quite complicated if you do not possess the necessary knowledge about currency exchange rates or international payments. 

• Through Skuad AOR: An efficient alternative to direct payment is by partnering with contractor management software or an AOR such as Skuad.
  • Skuad features various capabilities, such as multi-currency payroll, streamlined payroll data consolidation, and guaranteed accurate and timely payments. 
  • Additionally, with this platform, you can stay up-to-date with the latest changes in the tax legislation of the Czech Republic, thereby avoiding the risk of non-compliance.

Hiring Contractors Directly vs Hiring Contractors with Skuad

Here, we have curated a detailed comparison between the two main ways of hiring contractors, taking into account multiple factors. Let’s take a look.

Cost of Hiring Contractors in the Czech Republic

The cost of hiring contractors in the Czech Republic usually differs based on multiple factors. 

For example, if you are looking to hire contractors for a project that demands specialized skills and knowledge, it is likely to cost you a lot more than generic tasks.

Additionally, the rate of contractors varies based on the industry in which they operate. 

An individual in the healthcare sector can charge you an average of  CZK 396 per hour. On the other hand, a contractor who specializes in the marketing domain can ask for CZK 615 per hour.

How to Convert a Contractor into an Employee in the Czech Republic

Here is a step-by-step guide on switching from Form 1099 to W2 compliantly and efficiently. 

• Research the various provisions laid down by the labor laws in the Czech Republic. For example, every employee in this country is entitled to a minimum of 20 days of paid annual leave. 
• Communicate to the contractor about this switch and negotiate the salary, benefits, roles, and responsibilities.
• Draft a written employment contract that outlines all working conditions, such as working hours, location, leave policies, and probation period.
• Once the contract has been signed, begin the onboarding process. Follow the steps you would for any new employee and addd them to your existing payroll. 

Challenges of Hiring Contractors in the Czech Republic

Here are some of the common obstacles that you are likely to encounter during  hiring contractors in the Czech Republic.

1. Understanding the Czech Civil Code

Unlike an employment relationship, a contractual agreement is governed by the Czech Civil Code. 

Understanding the various provisions and guidelines this law sets while maintaining compliance can be extremely difficult for businesses, especially if they do not have a proper legal team. 

For example, under the Czech Civil Code, an independent contractor is bound by a ‘contract for work,’ defined as a contract for monetary consideration. 

One of the critical aspects of this agreement is the amount(s) payable. It can either be setting out the total or a method for determining what is payable. 

Additionally, the contractor must perform the work independently and is bound by the employer’s instructions only if expressly agreed upon. 

However, these are only a few examples of some of the basic provisions of Czech labor laws. 

To avoid the risk of misclassification of workers and establish a clear distinction between employees and contractors, you need to be able to grasp other similar and sometimes complicated regulations. 

To complicate matters further, the Czech Republic imposes hefty penalties on misclassified contractors or individuals who are ‘falsely employed.’ 

The amount can range from 250,000 Czech crowns to 10,000,000 Czech crowns.  

2. Tax Requirements for Contractors in the Czech Republic

Unlike employees, independent contractors in the Czech Republic need to declare and file their own taxes once a year. 

This increases your burden as an employer since you need to ensure that all such obligations are met and that you are free from any potential legal disputes. 

One of the most common taxation models utilized by most freelancers in this country is the 60/40 method.  

Under this technique, an allowance of 60% of the gross income is granted and referred to as ‘business income.’ The remaining 40% is the ‘clean income’ and is taxable.  

The freelancer income tax rate is currently set at 15%. So it becomes 15% of the ‘clean income’ + any tax discounts (if applicable).

While this process may seem simple and straightforward, it has several limitations. For example, this method is only applicable to gross income that does not exceed 2 million CZK. 

Additionally, independent contractors in the Czech Republic must make social security payments, including health insurance, pension, and unemployment insurance.

Understanding these various methods and their complexities to guarantee a compliant international contractors’ payment process is not always easy. 

This becomes even more difficult when hiring multiple contractors at a time. Therefore, most companies switch to contractor management software or automated payroll solutions. 

However, both of these can be extremely costly to implement and often difficult for small businesses.

3. Work Permit in the Czech Republic

Getting a work permit in the Czech Republic can be an extremely complicated and lengthy process, often taking several weeks or months. 

It encompasses various steps such as submitting qualifications and work experience, a criminal record certificate, health insurance, and other critical documents. 

This can prove to be quite a hurdle for businesses that wish to hire contractors in the Czech Republic. 

It can not only cause a potential delay in the contractor's start date but also have a direct impact on the project timelines, disrupting deadlines and deliverables.

Hire Contractors in the Czech Republic with Skuad

Boasting expertise in 160+ countries, Skuad has been the go-to solution for numerous clients regarding international hiring. 

It is a comprehensive platform that simplifies even the most complicated hiring tasks abroad. 

With Skuad, you can always stay on par with all the latest changes in labor legislation in the Czech Republic, maintain compliance, and guarantee a smooth hiring process. 

Additionally, the platform features bullet-proof privacy and data security, such as ironclad IP agreements and custom permissions, to ensure a safe and secure hiring journey.

‍Connect with us today and experience the Skuad difference first-hand!

FAQs

Q1: Can I hire an independent contractor in the Czech Republic?

Ans: Yes, you can hire an independent contractor in the Czech Republic, either directly or through contractor management software/AOR. Depending on your business's needs and budget, you can select any one of these options.

Q2: How do I pay an independent contractor in the Czech Republic?

Ans: One of the best ways of paying independent contractors in the Czech Republic is through contractor management software or an AOR. These companies handle all the payment intricacies, including compliance with the country's tax laws, so you no longer have to face legal disputes. 

Q3: How does Skuad help hire, pay, and manage independent contractors in the Czech Republic?

Ans: Skuad is the ultimate hiring solution for numerous clients worldwide. It is a unified platform power-packed with amazing capabilities, such as multi-currency payroll, guaranteed compliance, bullet-proof data security and privacy, automated invoicing, and more. 

Q4: What is the best way to hire independent contractors in the Czech Republic?

Ans: The best way to hire an independent contractor in the Czech Republic is to partner with an agency of record or AOR like Skuad. It takes care of all the administrative tasks, such as drafting legal agreements, making accurate monetary transactions, and, most importantly, establishing compliance with the labor regulations of the country. 

Q5: How do I convert an independent contractor in the Czech Republic into an employee?

Ans: Converting an independent contractor into an employee encompasses several crucial steps. From understanding the country's labor laws to drafting compliant employment contracts and adjusting the payroll accordingly, you need to fulfill all these tasks compliantly.