Employee

An employee is a person who is in employment relationship and who performs work that is dependent on an employer and whose nature and scope are subject to the employer’s instructions (dependent work). Employees in the cultural sector are, for instance, actors employed in brick-and-mortar theatres.

Many artists would like to work freely and independently (as freelancers). However, for economic and legal reasons, it may be more advantageous for them to enter into an employment contract.

Since employees participate in the state social security scheme compulsorily, employers are obliged to pay the contributions for them at the rate of 25 percent of the aggregate of their wage assessment base. These contributions consist of sickness insurance contributions (2.3 percent), state pension contributions (21.5 percent) and a contribution to the state employment policy (1.2 percent). At the same time, employers are obliged to deduct contributions from their employees’ wages at the amount of 6.5 percent of employees’ wage assessment bases and to transfer these amounts to the account of the relevant District Social Security Administration, the Prague Social Security Administration or the Brno Municipal Social Security Administration along with the employer’s contributions (for more details see section Social Security in the Czech Republic).

The labour law provides significant rights to employees. The self-employed, on the other hand, have considerably fewer rights. Employees are entitled to the statutory minimum annual leave, the statutory minimum and regular (stable) wage or salary, and a wage or salary compensation in the event of illness, are protected against unjustified dismissal and enjoy many more rights secured by law.

Who is considered an employee? The Labour Code sets out the criteria defining “dependent work”, which is work that has to be performed in an employment relationship. Dependent work means work that a person performs:

within the relationship of the employer’s superiority and the employee’s subordination,
on behalf of the employer,
according to the employer’s instructions,
in person,
for wage, salary or other remuneration for the work done,
at the employer’s expense,
at the employer’s liability,
during working hours,

at the employer’s workplace or some other agreed place

Minimum wage

The minimum wage is the lowest legally admissible wage that a private employer is obliged to pay to an employee for work performed in an employment relationship. The minimum wage applies to private employers only; public employers pay out salaries (not wages), whose amount is determined by relevant tariffs. The minimum wage in the European Union is generally set at half the average wage or about double the living wage.

In the Czech Republic in 2017, the gross minimum wage was CZK 66 (i.e. about EUR 2.5) per hour, or CZK 11,000 (i.e. about EUR 421) per month. As a general rule, the level of wages depends on the market conditions and the economic condition of the particular country in which the work is performed. For comparison, the minimum wage in Germany (EUR 8.84 per hour of work in 2017) is much higher than the minimum wage in the Czech Republic but is lower than in France, where the minimum wage in 2017 reached EUR 9.67 per hour. Current gross minimum wage in the Czech Republic has been CZK 96,40 per hour, or CZK 16 200 per month, since January 2022.

The monthly minimum wage is based on the weekly working time of 40 working hours; if an employee has shorter working hours and is not remunerated by the hours worked, his/her minimum wage is reduced in proportion to the time worked (this is typical for part-time jobs with 20 working hours instead of 40, where the minimum wage is cut by half). In specific cases, lower rates can be applied – for instance for employees on disability pension or underage employees.

What if the wage in a particular calendar month is lower than the stipulated minimum? First, it should be noted that various extra pays (for overtime, holidays, weekends, night work and so on) or compensations for wages (including travel expenses and remuneration for being on call) are not included in the monthly amount. If, therefore, the wage is lower, the employer is obliged to top it up to the statutory minimum.

The minimum wage also applies to foreign employees employed by organisations and companies in the Czech Republic. For further information regarding the minimum wage in the Czech Republic see the website of the Ministry of Labour and Social Affairs of the Czech Republic (in the Czech language, with the option to switch into English in the top right corner).

It is worth noting that not all European countries have the minimum wage set by law. Up-to-date information on this matter can be found, for example, on the website of the EU statistical office Eurostat (in German only) or on Wikipedia (in Czech only).

Employment contract for a definite/indefinite period/ for the duration of a project

An employment contract can be concluded for a definite period, for an indefinite period, or for the duration of a specific project.

Example

An actor concludes a contract with a theatre for one season. It is a contract for a definite period without specifying the fixed period (term) or the date when the contract expires. The contract thus terminates with the end of the theatre season.

The Labour Code stipulates that employment may be negotiated for a definite period if stated so explicitly in the employment contract. It is irrelevant how the duration is defined, whether by setting a particular date (e.g. until 30 December 2020), a number of years or months (e.g. for three years or for 36 months) or by defining an event that is certain to occur in the future (e.g. until the end of a particular cultural project). The important thing is that the agreed moment or event must not occur later than within three years from the date of the commencement of the employment.

The length of such limited employment must not exceed three years (the employer may, of course, offer that the employee work for a shorter period – e.g. for one year). Before the expiry of the agreed period the employer and the employee may agree on extending the contract for an indefinite period. If they do not, the employment for a definite period may be extended, but only for another period not exceeding three years. Such extension may be made twice at the most; this means that employment for a definite period may last for a maximum of three times three years. If the parties wish to collaborate even after twice extending the employment relationship originally agreed for a period of three years (i.e. the employee has worked for a total of nine years), they have to enter into an employment contract for an indefinite period. Under the Labour Code, another employment relationship for a definite period may be negotiated only after the expiry of three years.

If, however, there are serious operational reasons or reasons consisting in the special nature of the work (which entails theatre or similar artistic activities) on the part of the employer owing to which the employer cannot be reasonably required to offer employment for an indefinite period to the employee who is to perform such work, it is possible to negotiate an employment contract for a definite period without any time limitation, provided that such different procedure corresponds to such reasons. The Labour Code also requires either an agreement between the employer and trade unions or the issuance of internal regulations in the event that there is no trade union at the employer’s company.

Part-time work

Example

A production manager has worked at a theatre for three years and has been responsible for advertising and marketing. Now, he would like to take over the production management of a freelance dancer’s project and reduce his working hours at the theatre. A colleague of his is able to increase his working hours and assume further assignments beyond the scope of his current tasks, thanks to which the theatre can meet the production manager’s request.

Health insurance contributions to the relevant health insurance company must always be deducted from the minimum assessment base, which is the minimum wage. If an employee works part time for a monthly wage lower than the minimum wage, health insurance still must be deducted from the minimum wage.

EU Directive 97/81/EC of 15 December 1997 concerning part-time work introduced legal provisions prohibiting discrimination against part-time employees and entitling employees to reduce their working hours. The directive stipulates that employees at companies with more than 15 employees have the right to reduce their working hours at their discretion and to require that their working hours be organised as they prefer, provided that they work with the relevant company for more than six months and the company’s operation makes it possible.

Provisions regarding part-time work of parents give parents the right to work temporarily on a part-time basis in order to be able to harmonise their work and the upbringing of their children. Employees with severe disabilities are entitled to shortened working hours with regard to the nature or severity of their disability.

Marginal employment

One of employment options is marginal employment, which brings certain flexibility with regard to the compulsory contributions to the social security and health insurance schemes both for both employers and employees. Under certain conditions, these contributions are not required in marginal employment at all.

Marginal employment is employment which is performed by an employee in the Czech Republic (or even abroad under certain conditions) and for which no monthly income has been agreed upon or the agreed income is below CZK 2,500. With effect from 1 January 2014, the agreed or actual duration of such employment is irrelevant, since the legal provisions on “short-term employment” were abolished.

If the wage is not agreed upon beforehand, the employee will pay sickness insurance contributions only for the months in which his/her wage equals to or exceeds CZK 2,500. In those months, the employee has to register with the respective social security administration authority. Incomes from multiple marginal employments with the same employer are added together; if, therefore, the sum of incomes in a given calendar month exceeds CZK 2,499, the employee has to pay sickness insurance contributions.

Apart from exceptional cases, neither the employer nor the employee in a marginal employment relationship is obliged to pay the statutory social security (i.e. sickness and pension) contributions. The Public Health Insurance Act does not know the term “marginal employment”. The employer is always obliged to pay contributions for an employee if the respective worker is considered an employee under this act. There are nevertheless exceptions: for example, in respect of agreements to carry out work outside the scope of regular employment the law stipulates that health insurance (as well as social security) contributions do not have to be paid unless the monthly income exceeds certain limits (as described below).

Agreement to complete a job

An agreement to complete a job (abbreviated as DPP in Czech) is the most common and popular type of contractual relationship between an employer and an employee; most likely because it is the simplest kind of a labour contract. Both parties enjoy the advantage of considerable contractual “freedom and liberty”, and not only in terms of the volume of the text and the complexity of the wording. Unlike an employment contract, an agreement to complete a job does not establish a “binding” employment relationship.

An agreement to complete a job is, therefore, suitable for short-term work opportunities (e.g. one-time theatre projects, temporary jobs for students, and other similar forms of collaboration of studying artists, or other forms of earning extra income) where the parties do not plan to establish long-term collaboration. At present, agreements to complete a job are used widely in virtually all spheres of the cultural sector. They are often made not only with actors and other performing artists but also with the technical staff, production managers, accountants, members of sales and marketing departments, students, etc.

In addition, both employers and employees are motivated to choose this type of contract with regard to its low requirements of administrative and financial character in comparison with employment contracts and agreements to perform work, since the duty to pay health insurance and social security contributions arises only when the monthly remuneration exceeds CZK 10,000. No contributions to the health insurance and social security schemes are therefore paid from incomes that are equal to or lower than CZK 10,000 per month. Before paying out the remuneration to the employee, the employer has to deduct a 15percent withholding tax, provided that the employee did not sign the tax declaration form. Under new regulations, the employee may obtain the 15precent withholding tax back (even if he/she did not sign the tax declaration form) or may use the option of not reporting an income of up to CZK 10,000 anywhere (he/she does not therefore have to file a tax return). If, however, the employee signs the tax declaration form, a tax advance at the rate of 15 percent has to be paid and tax credits are applied. If the income exceeds CZK 10,000 per month, the employer always pays the 15-percent tax advance and applies tax credits only if the employee signed the tax declaration form.

The agreement to complete a job must be made in writing, and the employer is obliged to provide the employee with one copy. The agreement to complete a job must specify mandatorily the period for which it is concluded; this does not necessarily have to be one calendar year, which is the frequent practice, but the period may be shorter or longer.

The employer is not obliged to organise the employee’s working hours. Even though the agreement to complete a job is very flexible in terms of possible modifications and amendments, the employee’s protection is secured by law, firstly by setting the maximum scope of working hours at 300 hours per calendar year, which includes hours during which the employee performs work for the employer on the basis of another agreement to complete a job in the same calendar year, and secondly, by setting the guarantee of minimum remuneration for the work done under the agreement to complete a job, as a result of which the employer may not negotiate a remuneration lower than the minimum (whereas the maximum amount of remuneration is not limited).

As regards other matters, the parties to the agreement may agree on virtually anything, provided that the relevant provision will not be directly at variance with law or will not circumvent law. If the agreement to complete a job is made with an author or a performing artist, the economic rights in copyright belonging to the author and/or the economic rights of the performing artist relating to the outcome of artistic activities performed under such agreement will be exercised by the employer automatically by law, in the employer’s own name and on the employer’s own account, unless agreed otherwise. With regard to such broadest possible exercise of rights by the employer, no licensing agreement needs to be made in relation to the outcome of the activities of the employed artists. If a licensing agreement was made, it would exclude the exercise of economic rights by the employer (because it would be “agreed otherwise”).

Agreement to perform work

Compared to the employment contract and the agreement to complete a job, the agreement to perform work (in Czech abbreviated as DPČ) is not used by artists very often. One of the reasons may be the fact that in terms of liberty it represents a “medium” option between an employment contract and an agreement to complete a job, even though the purely legal differences between an agreement to complete a job and an agreement to perform work are minimal. Finances plays probably a considerable role in deciding for an agreement to perform work, since the duty to pay health insurance and social security contributions arises upon reaching monthly remuneration of CZK 2,500 (the limit is therefore the same as in marginal employment). In addition, in the case of an agreement to perform work, the employer must always deduct the advance income tax of 15 percent for the employee before paying out the remuneration, regardless of the actual amount of the remuneration or whether the employee signed the tax declaration form.

The agreement to perform work must specify obligatorily the agreed type of work, the extent of working hours and the period for which the agreement is made. The employee may not, however, work more hours than up to a half of the determined weekly working hours (i.e. up to 20 hours per week on average).

The agreement to perform work may be concluded either for a definite or for an indefinite period. Like the agreement to complete a job, the agreement to perform work must be made in writing, and the employer is obliged to provide the employee with one copy. Unlike the agreement to complete a job, the total amount of working hours is not limited, so it is possible to arrange a larger or smaller extent of work, but in terms of the organisation of the working hours, the condition of a maximum of one half of the weekly working hours (on average) has to be met.

Analogously to the agreement to complete a job, the parties may agree on anything, provided that the relevant provision is not directly at variance with law or does not circumvent law. The guarantee of minimum remuneration (as well as the unlimited maximum amount of remuneration) applies to the agreement to perform work, too.

If this type of contract is used to establish an employment relationship with an artist, the employer should take into account that it is necessary to define the agreed type of work in a sufficiently extensive and accurately formulated manner in order to achieve the broadest possible exercise of economic rights in copyright or economic rights of a performing artist in relation to the outcome of artistic activities of the author or performing artist (a licensing agreement does not therefore have to be made).

Entering into agreements to perform work for a definite period repeatedly is not limited. It is possible to agree on a leave of absence in the agreement, but only under the conditions specified in the Labour Code; if a provision on a leave is not laid down in the agreement, an entitlement to it does not arise automatically. The agreement to perform work can be terminated bilaterally by mutual agreement or unilaterally by either party, either with or without giving a reason, with a 15-day notice period from the delivery of the notice. Moreover, the agreement to perform work may include a provision enabling its “immediate termination”, which, however, applies only to cases where it is possible to terminate the employment relationship immediately.