What you need to know before hiring in the Czech Republic: A guide to terminations

When making your first Czech hire, termination policies might be far from your mind. But if you don't know the basics about terminations in the Czech Republic (Czechia), you'll be sailing into a storm when you eventually part ways with a Czech employee.

Employees in the Czech Republic have strong protections against hasty or unwarranted dismissals. These regulations apply to citizens and to those with a work permit for the territory of the Czech Republic. If you don’t adhere to minimum notice or remuneration requirements, all while failing to prove a just cause for involuntary termination, you could be subject to wrongful dismissal claims from Czech courts.

Read on to learn everything you need to know before hiring Czech employees—and how hiring through an Employer of Record (EOR) can spare you from bungling any local dismissal requirements.

5 essential things to know before hiring in the Czech Republic

• You must establish terms of dismissal in a mutual agreement covering the employment. Your offer letter is a rights and obligations document that covers areas like working hours, working conditions, job roles, whether the job is fixed-term or indefinite employment, time off, expectations, and benefits (social security, health insurance, sick leave, unemployment benefits and protection periods). The offer letter to your Czech employee must include a termination clause. This clause spells out terms of termination, notice periods, conditions that may lead to unilateral termination, and severance requirements. You must make sure that you’re complying with minimum statutory requirements for the agreement to be enforceable.
• Czech laws don’t recognize at-will employment. You can only immediately terminate employees for just cause.
• You cannot dismiss without cause. While an employee is free to resign without giving a reason, an employer is only authorized to terminate an employee based on the specific grounds listed in the Labour Code.
• Immediate dismissal is possible under two conditions: An employer may terminate an employee's contract if the employee has committed a particularly severe breach of a legal obligation, or if the employee has been lawfully convicted of intentionally committing a crime that results in a prison sentence of at least one year (or six months if the crime is related to their employment).
• Terminated employees can choose where and how to pursue wrongful dismissal claims. In the Czech Republic, an employee can file a claim with the court within two months of the termination.

Termination rules in the Czech Republic: What are acceptable grounds for firing an employee?

Czech employees can leave their job voluntarily for any reason, so long as they give the employer advance notice (usually two months). Here are the reasons an employee can be terminated involuntarily in the Czech Republic:

• Termination during the probationary period. The probationary period of time needs to be defined in the contract of employment. They typically last between two and three months (six months for managerial workers). They allow employers to evaluate a new hire’s suitability for a new job. Employers can terminate the employee during their probation period without providing any notice so long as the termination of the employment is in good faith.
• Termination for cause. Regular termination with cause and notice is possible, but it is tightly regulated by the Czech Labour Code. The employer must give notice and ensure delivery of the notice. Minimum statutory severance pay is determined by either the reason for dismissal or the length of employment, or both. The following are grounds for dismissal:
  • The employee is part of a layoff.
  • The business is insolvent or closes down.
  • The business moves.
  • The employee’s health (occupational disease, work accident, incapacity); a medical certificate is required.
  • The employee cannot meet the requirements of the position.
  • Severe breaches of company policies occur.
• Immediate termination of the employment without notice is possible, but the employer must prove just cause. There are only two situations where this is possible:
  • Gross breach of duty
  • A criminal conviction resulting in imprisonment of one year or more (six months or less if the crime was committed within their job). This does not apply to a female employee who is pregnant or employees on parental or maternity leave.

The Czech Republic's termination requirements might differ from those in other countries where you hire, and it’s crucial to keep your global hiring compliant with local laws.

Only an employee is able to give notice of termination without cause. At-will employment does not exist in the Czech Republic (more on that below).

What are the mandatory notice periods and termination pay for Czech employees?

The Czech Labour Code sets dismissal requirements. These legal regulations state that the notice period is a minimum of two months and that the notice period begins on the first day of the month following the termination. A longer period can be negotiated.

Severance pay is based on length of employment or if the termination is because of health reasons. Payment ranges from one to 12 times average monthly earnings.

Pay in lieu of notice is not allowed in the Czech Republic, however "garden leave" may be used instead. This means that during the notice period, employers grant employees a release from their obligation to work.

The easiest way to comply with Czech termination requirements

Managing termination requirements can be complex when dealing with a global workforce. Employers must navigate conflicting just-cause considerations, probationary and trial periods, notice periods, and varying severance pay laws across different countries, making it challenging to keep track without assistance.

An alternative is to hire through an EOR, which can monitor termination requirements for you.

Frequently asked questions about terminating employees in the Czech Republic

Do you need a reason to terminate an employee in the Czech Republic?

You can involuntarily dismiss an employee in the Czech Republic, but the cause must be one of those listed in the Czech Labour Code (see below).

What is considered just cause for terminating an employee in the Czech Republic?

In the Czech Republic, reasons for termination with just cause are specified in the Czech Labour Code as follows (notice is required):

• The employee is part of a redundancy.
• The business closes down or insolvency.
• The business relocates.
• The employee’s health (medical certificate required).
• The employee no longer meets the requirements of the position.
• Severe breaches of company policies occur.

There are two scenarios where an employee can be terminated immediately:

• The employee has committed a serious violation of their work-related obligations (work performance).
• The employee is convicted of a crime and sentenced to one year in prison (six months if the conviction is related to the employee’s occupation).
• These scenarios do not apply to those who are pregnant or on maternity leave or parental leave.

Poor performance or incompetence can be just cause for termination, but Czech laws and norms encourage employers to consider other disciplinary proceedings first. Most workplaces try to correct less severe misconduct with verbal and written warnings before firing an employee outright.

In general, just cause can be hard to prove in the Czech Republic. Employers should ensure they have strong evidence of any serious breach of conduct before terminating an employee.

What qualifies as wrongful dismissal in the Czech Republic?

In the Czech Republic, wrongful dismissal is when an employee is terminated without one of the proper causes as listed in Czech labour law. This includes a dismissal based on discrimination (gender, ethnic background, sexual orientation, age, religion or union membership).

The employee has the option to file a claim with the court within two months of the alleged termination of employment. If the court finds that the termination was improper, it may declare it invalid and reinstate the employment relationship.

What is always required when an employer terminates an employee in the Czech Republic?

• The employer must provide the termination agreement or notice documentation.
• Confirmation of employment.
• Verification of taxable income earned from dependent work and benefits, as well as pre-payments on taxes and tax benefits.
• Work assessment (upon request).
• Output sheet (výstupní list) which confirms the return of company property, settlement of obligations, and outlines any future resolution of other rights and/or obligations related to the employee and their employment relationship.
• Payment of salary owed and severance pay.

Failure to do so could invite legal sanctions from the courts and labour office.

What is the law for dismissing a contractor in the Czech Republic?

The termination process for independent contractors in the Czech Republic can vary depending on the terms of the employment contract.

Typically, either party may terminate by providing notice as specified in the contract. If the contract does not specify a notice period, the reasonable notice period will depend on the length of the contract and the type of work performed. However, contractors are not entitled to severance pay or notice.

If an independent contractor is found to be misclassified, they may be entitled to employment standards legislation protections and notice or termination pay.

What are layoffs in the Czech Republic?

In the Czech Republic, layoffs and company reorganization due to a poor business climate or other issues are accepted reasons for termination. The same labor regulations covering just cause apply. In most cases, the employee is entitled to compensatory wage or average monthly salary.

Mass layoffs and those involving trade union members are much more complex. These involve the union and compliance with additional Labour Code regulations.

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Rippling and its affiliates do not provide tax, accounting or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any related activities or transactions.