The Czech Republic is an Eastern European country that’s part of the European Union (EU). It borders Germany, Slovakia, and Poland, giving companies the opportunity to form business relationships with other European countries. However, planning an expansion also includes considering how to set up your Czech Republic payroll and stay compliant.
That’s why G-P offers an alternative to bypass the hassle of establishing a subsidiary. As an EOR and global employment experts, companies can leverage our entity infrastructure to hire employees and streamline payroll. With us, you won’t have to worry about compliance, establishing a subsidiary, or analyzing your payroll options.
Taxation rules in the Czech Republic
Employees and employers both contribute to different tax funds at varying rates. For example, employers contribute 24.8% of employees’ salaries to the state social security funds. The Czech Republic sets a social security fund cap at 36 times the monthly average wage, currently CZK 2,110,416 CZK in 2024.
The income threshold for applying the 23% tax rate has been reduced to 36 times the average wage on an annual basis (CZK 1,582,812) and 3 times the average wage on a monthly basis (CZK 131,901). A 15% rate continues to apply to income below this threshold.
All taxes get withheld at the source using a pay-as-you-earn (PAYE) system, so employers have to deduct taxes and give employees a net wage.
Companies need to pay a flat corporate tax of 21% as of Jan. 1, 2024.
Czech Republic payroll options for companies
You can choose the Czech Republic payroll option that works best for you out of the following options:
- Internal: Larger companies that want to work in the Czech Republic long-term may want to use an internal payroll. However, you’ll need a large HR team with knowledge of local labor laws.
- Local outsourcing company: A local payroll processing company works for companies that need to outsource their payroll, but this option means you’ll still be responsible for compliance matters.
- G-P: The easiest way to run payroll in the Czech Republic and stay compliant is by partnering with G-P. With us, you can rest assured that all employees will be paid on time, freeing you to focus on other important aspects of your business.
How to set up a payroll in the Czech Republic
Your company will need to spend weeks or months establishing a subsidiary before you can set up your Czech Republic payroll. Fortunately, you won’t have this time-consuming requirement when you work with G-P. You won’t have to set up a subsidiary with us, as we’ll use our existing subsidiary to help your company start working in minutes, not months. We will handle all payroll laws and regulations so you can focus on building your business in the Czech Republic.
Entitlement/termination terms
One of the more challenging aspects of an expansion is learning how to terminate employees. Adding entitlement and termination terms to an employment contract before you choose a Czech Republic payroll option can help you stay compliant.
Employees can get terminated by notice, agreement, immediate termination, or termination within a probationary period. Employees should receive severance pay if they’re terminated for organizational reasons.
Streamline global payroll management with G-P.
G-P streamlines each step of the payroll management process with our market-leading global employment platform. Pay your team with confidence anywhere in the world in 150 currencies with our 99% on-time automated payroll system — all with just a few clicks. Our products also integrate with leading HCM solutions, syncing employee payroll data across platforms automatically to create one reliable, convenient source of truth for HR teams.
Contact us to learn more about how we can support you.