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The proper management of payroll in the Czech Republic is crucial for companies operating there, due to complex legislation and extensive regulatory requirements. All changes in social insurance and tax regulations, regular updates of legal regulations, required companies are always in line with current legislation. Properly managed payroll reduces the risk of penalties and strengthens employees’ trust in the company.
The Czech business environment has a significant impact on payroll practices. Payroll practices influence the combination of regulatory, economic and cultural factors. Among these factors are strict Labor Laws, frequent legislative updates, social security and health insurance contributions and taxation, growing demand for payroll transparency and employee self-service, influence of European Union Regulations, influence of digital transformation.
Companies must ensure that all processes for payroll in the Czech Republic are carried out accurately and in accordance with the law, which can lead to increased administrative costs.
In this article, you will learn:
The main regulations which have effect on payroll in the Czech Republic are the Labor Code, the Income Tax Act, Social and Health insurance Law. These laws define employers’ obligations related to deductions, contributions and other wage components, as well as employees’ rights. The laws are governed by the Ministry of Labour and Social Affairs of the Czech Republic.
The significant changes in payroll in the Czech Republic arised both in 2024 and 2025. One of the significant changes was related to social security insurance and abolishing tax credits in 2024. Some changes occur regularly every year, for example increased minimum wage, and changes in income tax rates.
Regarding social security insurance, there has been a change of rate. Now employees contribute an additional 0,6 % of their income to sickness insurance. It is different against previous years their contribution which increase to 7,1 %. The employer’s contribution 24,8 % of gross salary remain without changes.
From 1 January 2025, working pensioners (employees and self-employed persons) are entitled to a discount on social insurance. They can save 6,5 % of their assessment base on insurance premiums (the discount corresponds to pension contributions). Newly, an employed pensioner does not have to pay 7,1 % in social insurance, but only 0,6 %.
From 2024 the credits for students and preschool childcare have been abolished. The tax credit for a dependent spouse is now limited to a spouse caring for children under three years old.
From 2025 the higher 23% tax rate applies to annual income above 1.676.052 CZK. Income below this amount is taxed at 15%.
In 2025 the minimum wage increased from 18.900 CZK (the amount in 2024) to 20.800 CZK. This has impact on the minimum assessment base for health insurance and eligibility for child tax bonuses.
Understanding the structure of payroll in the Czech Republic is essential for businesses to manage employee salaries effectively and remain compliant with local regulations. Payroll in Slovakia typically consists of a base salary, additional components and mandatory deductions.
In the Czech Republic, gross salary is the total compensation an employee earns before deductions (tax, social security and health contributions, other deductions). The gross salary typically consists of a base salary, overtime payment, bonuses and other components such as night shift or weekend work. The calculation also includes wage compensation for vacation and sickness payment. All these components are visible on the payslip.
Employers are required to make contributions for social security and health insurance, as well as withhold personal income tax. These contributions are mandatory, and they are determined in percentage.
| Social security contributions | Health Insurance Contributions | Personal Income Tax Withholding |
Employer’s contributions | 24,8% of gross salary | 9% of gross salary | x |
Employee’s contributions | 7,1% of gross salary | 4,5% of gross salary | 15% for income up to 1.676.052 CZK annually 23% for income exceeding limit 1.676.052 CZK annually |
Managing payroll in in the Czech Republic requires adherence to specific legal obligations, timelines, and reporting requirements to ensure compliance.
The typical pay schedule is monthly. Most employers pay salaries once a month. The Labor Code determines that employees are entitled to receive their salary no later than the end of the following month after the work has been performed. In some cases, employees may receive advances in their salary. This is not legally required, only if it is specified in the employment contract.
The first legal obligation is the definition of payment date. The payment date is defined in the employment contract or company policies. Delays in payments are a violation of Czech Labor law. Second obligation is written determination of the payment date. Determination of the method of payment is third obligation. Salaries are paid in the bank account.
If employer do not pay salaries on time, may face penalties from the Czech Labor Inspectorate and employees can claim interest on delayed payments.
In the Czech Republic, the employee’s payslip must include following details:
Employee details: name of employee, employee’s identification number or tax identification number
Employer details: name of the employer, employer’s identification number and address
Information about pay period covered by the payslip
Gross salary components: basic salary, bonuses/allowances (e.g. overtime, vacation payment)
Deductions: social security contributions (7,1% of gross salary), health insurance contributions (4,5% of gross salary), income tax deductions
Net salary: the amount paid to the employee after deductions
Other details: working hours/days, any additional benefits/reimbursements (travel allowance or meal allowance), any voluntary deductions (multisports, etc.)
Companies have several key filing and reporting obligations to comply with Labor, tax and social security laws. Employers must register with the Tax Office for payroll tax obligations. The same applies to health and social security insurance. When an employee starts or leaves employment, the employer sends the registration/deregistration to the social security insurance and health insurance.
On the monthly basis employers have to deduct personal income tax (PIT) advances, the employee’s portion of social contributions and the health insurance contributions and remit along with employer’s portion to the Tax office, the social security insurance and the health insurance company by the 20th of the following month. The employer is obligated to submit along with payments also overviews of income to the social security insurance and relevant health insurance companies. There is the same deadline – 20th of the following month.
Additionally, employers must submit annual summaries and income tax statements for personal income tax. Compliance with these obligations is necessary to ensure legal conformity and to avoid penalties.
In payroll processing, there is a strong emphasis on the protection of employees’ personal data. The employers must ensure that personal and payroll information is securely stored and accessible only to authorized personnel. Only data strictly necessary for payroll processing (e.g. salaries, bank details, personal identification numbers) should be collected and stored. Payroll data should only be shared with authorized parties, such as tax authorities, social security offices, and health insurance companies, as required by law. Payroll records must be retained for specific periods as mandated by Czech Labor and tax laws but should not be kept longer than necessary.
Outsourcing payroll in the Czech Republic offers businesses a strategic solution to simplify operations, save costs, and ensure compliance with complex local regulations.
Outsourcing payroll in the Czech Republic offers companies several benefits. External providers ensure that all processes comply with current legislation, minimizing the risk of errors and penalties. Another benefits is reducing costs related to in-house staff and IT infrastructure.
The payroll provider specializing in Czech payroll laws has in-depth knowledge of local regulations and stays current with all legislative updates, ensuring that businesses remain compliant. Therefore, foreign companies can more easily comply with all legal requirements and minimize the risk of errors caused by ignorance of local regulations. Another benefit for foreign companies is that the outsourcing payroll provider ensures that employee salaries, tax deductions, and benefits are calculated correctly and paid on time, avoiding penalties for late or incorrect payments.
Finally benefit, the payroll provider saves time and costs related to hiring in-house payroll specialists.
The companies should consider several factors, such as the provider’s experience with Czech payroll laws, security of IT systems, data protection, etc. Nowadays, the technology used, and the automated approach are important factors. Automation reduces manual errors and improves efficiency. Another important factor is flexibility, how is the provider able to accommodate business growth and offer customized support for payroll processing to fit unique company needs.
The major challenges for foreign companies are the complexity of Czech payroll laws, language barriers, and local administrative processes. Czech authorities require electronic payroll reporting, therefore foreign companies must register with tax offices, social security insurance, and health insurance companies. Another challenge is monitoring frequent changes in regulations (tax, social security, health insurance, etc.). These factors can lead to an increased risk of errors, and this can have financial implications (penalties).
The most common risks are incorrect deductions for taxes (missed deadlines or incorrect calculations), social security (underpayment, late submissions), and health insurance (as well as social security). Other serious errors are incorrect salary payments, minimum wage violations, failure to provide statutory benefits, non-compliance with Employment contracts and Working Time Regulations, failure to secure payroll data.
The penalties for non-compliance with payroll regulations in the Czech Republic can be significant. The severity of penalties depends on the type of violation. But it can reach millions of CZK, for example, failure to follow Czech labor law – penalties fines up to CZK 1 million.
Having a strong understanding of Czech payroll laws is essential for companies because it ensures legal compliance, financial stability, and smooth business operations. Companies that understand local payroll regulations can better manage employees and maintain their satisfaction. This has an impact on the company’s good reputation on the market.
From our perspective, we recommend regularly training staff in legislation, using modern payroll systems, and providing payroll audits. If the company doesn’t have a dedicated payroll team, the best way is to choose a provider that offers full payroll management, tax filings, compliance monitoring, and bilingual support.
The local payroll expert or payroll provider has an in-depth understanding of Czech legislation and stays compliant with Czech tax and Labor laws. The payroll provider reduces administrative workload and errors. Other benefits are mitigating risks, avoiding penalties, and saving costs.
Choosing a proactive and knowledgeable payroll partner, such as Accace, for payroll outsourcing in the Czech Republic ensures not only compliance but also a proactive approach to payroll management that can adapt to the country’s dynamic regulatory landscape. Get in touch with us to see how we can support your business!
About Accace
Accace is a proactive consultancy and outsourcing partner who bridges the gap between needs and solutions. Combining smart and streamlined technology with a holistic approach, we provide an all-round care to clients and consider their matters as our own. With over 800 experts and approximately 2,000 customers, we have vast experience with facilitating the smooth operation and growth of small to large-scale, global businesses.
About Accace Circle
Accace operates internationally as Accace Circle, a co-created business community of like-minded BPO providers and advisors who deliver outstanding services with elevated customer experience and erase the borders of service delivery. Covering over 60 jurisdictions with more than 7,000 professionals, we support over 80,000 customers, mostly mid-size and international Fortune 500 companies from various sectors, and process at least 800,000 pay slips globally.
