Employer of record vs a Czech entity: which route fits?

The difference is which company signs the employment contract, and almost everything else follows from that. On the entity route you found a Czech společnost s ručením omezeným, an s.r.o., and that company becomes the employer: it appears in the pracovní smlouva, it registers with ČSSZ and with each employee’s health insurer, it files monthly and it carries the statutory employer duties. On the employer of record route our Czech company does all of that, and your company keeps the work.

What does not differ is Czech employment law. The person is employed under the zákoník práce either way, on the same contract terms, with the same four weeks of dovolená, the same notice regime and the same employer contributions. Choosing between the routes is not a choice between two legal standards. It is a choice about who carries the administration, who carries the statutory duties, and how much fixed structure you want to own before the first person starts.

The decision is therefore usually about scale and permanence rather than about law. A company placing one or two people in the Czech Republic and wanting them working next month is answering a different question from a company opening a Czech office it intends to grow to thirty people, hold assets and sign Czech customer contracts.

The rest of this post takes the two routes in turn: what founding an s.r.o. actually involves, what running it costs after it exists, what the employer of record route puts in its place, and what costs exactly the same whichever you pick.

It starts with a notary and it cannot be done privately. The founding document, a zakladatelská listina for a single member or a společenská smlouva for several, has to be executed before a notary as a notářský zápis. Before that you check and reserve the company name against the obchodní rejstřík, and secure a sídlo, a registered office, with the owner’s written consent to its use as the company’s seat.

The minimum share capital is 1 CZK. That is the minimum vklad of a single member under § 142 zákona č. 90/2012 Sb., o obchodních korporacích, and it is true, and on its own it is misleading. Banks, landlords and counterparties look at the registered capital, Czech notaries routinely advise a more substantial figure, and the founding document may set a higher one. A company capitalised at one koruna is legally formed and commercially awkward.

Next comes the trade authorisation. Every business activity needs a živnostenské oprávnění under zákon č. 455/1991 Sb., and for a legal person the ohlášení is made on the Jednotný registrační formulář with proof of the right to use the premises and proof the fee is paid. The administrative fee for the first ohlášení is 1,000 CZK (approximately €41 at 24.350 CZK to the euro, ČNB fixing for 21 September 2026), and where the conditions are met the office enters the authorisation in the register and issues the výpis ze živnostenského rejstříku within 5 working days of delivery. The register is searchable at rzp.gov.cz.

Then the company is registered. First registration of an s.r.o. through the registry court costs 6,000 CZK (approximately €246), or 2,700 CZK (approximately €111) through direct entry by the notary at the time the deed is signed; where the founding deed contains only the statutorily required elements and the contribution is paid in cash, that first registration is exempt from the fee. The application is filed without undue delay within 15 days of the relevant fact, or within six months of formation, and the company comes into existence on registration in the obchodní rejstřík. Those are the official fees, and for a foreign founder they are the small part: legal advice, translations and apostilles dominate the real cost.

The company exists, and now it has to behave like an employer. It registers in the evidence zaměstnavatelů with Česká správa sociálního zabezpečení within 8 days of the first employee starting work, and enters each employee in the evidence zaměstnanců within 8 days, before the start date where the employee is a foreign national. It reports each start and each departure to the employee’s own health insurer within 8 days. None of these filings is optional and none is on paper.

Statutory accident insurance arrives without an application. Every employer with at least one employee is insured by operation of law against its liability for occupational injury and disease from the day the first employment relationship starts, with Kooperativa, and premiums are paid quarterly by 31 January, 30 April, 31 July and 31 October, with late payment increasing the debt by 10% for each month started.

Filing is electronic only. ČSSZ takes its registrations through e-podání, and since 1 January 2026 the health insurers accept their employer reports electronically only as well, so in practice an employer needs a Czech datová schránka. One monthly employer report has stood in for several separate filings since 1 April 2026, and it goes to ČSSZ between the 1st and the 20th of the following month.

On top of that sit the ordinary obligations of owning a Czech company: statutory accounts, corporate income tax, a jednatel with directors’ duties, and someone competent to run Czech payroll every month. The point is not that any one of these is hard. It is that all of them exist at one employee and at thirty, so the overhead per head is at its worst exactly when the headcount is smallest.

Our Czech company employs your hire on a Czech employment contract under the zákoník práce, and you never found a company at all. It already exists, already sits in the ČSSZ employer registry, already carries statutory accident cover and already files every month, so the sequence that starts with a notary on the entity route starts with a contract draft here. Our Czech company holds a povolení ke zprostředkování zaměstnání, an employment agency licence issued by MPSV.

The commercial shape is a single monthly line. Our fee is €499 per employee per month (approximately 12,151 CZK at 24.350 CZK to the euro, ČNB fixing for 21 September 2026), charged on top of the employee’s gross pay and the statutory employer contributions. What the service covers is set out under EOR services, and the sequence from first conversation to first payslip is in how the EOR process works in the Czech Republic.

Two conditions come with the Czech regime and belong in the comparison rather than in the small print. Under § 309 odst. 5 zákoníku práce an assigned employee’s working and pay conditions must be no worse than those of a comparable employee of the user company. And under § 309 odst. 6 the same employee may not be assigned to the same user for longer than 12 consecutive calendar months, subject to exceptions. Neither applies to a person employed directly by your own Czech company, and that is a genuine point in the entity route’s favour.

The employer contributions are identical, and they are the largest number in the comparison. For 2026 an employer pays 33.8% of gross pay in statutory contributions, being 24.8% social security to ČSSZ and 9% health insurance to the employee’s own insurer, whichever company employs the person. Compulsory accident insurance sits on top, rated by activity between 2.8 and 50.4 per thousand of the assessment base, which takes the employer overhead to roughly 34.1% to 34.8%.

Take a single worked example, with every assumption stated. Calendar year 2026, one employer throughout, a gross salary of 60,000 CZK a month paid in twelve equal instalments, a standard 40-hour week, no overtime and no bonuses, and a salary far below both the social security cap and the 23% tax threshold so that neither bites. Employer social security is 14,880 CZK a month and employer health insurance is 5,400 CZK, giving statutory contributions of 20,280 CZK and a total monthly employer cost of 80,280 CZK (approximately €3,297 at 24.350 CZK to the euro, ČNB fixing for 21 September 2026), before accident insurance.

That figure is the same on both routes. So is the minimální mzda floor of 22,400 CZK a month and 134.40 CZK an hour for 2026, so is the four-week statutory dovolená, so are the 13 public holiday dates in the 2026 calendar, and so is the employer’s obligation to pay the first 14 calendar days of sickness. The full build-up, including the employee’s side, is in the cost of hiring in the Czech Republic.

What differs is the fixed layer underneath. On the entity route that layer is the notary, the registrations, the accountant, the payroll function and the annual accounts, and it is charged to you whether you employ one person or twenty. On the employer of record route it is a per-employee fee that scales with headcount and stops when the headcount does.

The employer of record route fits where the headcount is small, the timing is short or the commitment is not yet settled. One hire, a handful of hires, a first year in the market, a project with an end date, or a team you want working before a corporate decision about a Czech office has been made. It also fits where the cost of getting Czech payroll wrong is larger than the fee, which at one or two employees it usually is.

Your own Czech entity fits where the company needs to exist for reasons beyond employment. Holding assets or a lease in the Czech Republic. Signing Czech customer contracts in your own name. Holding a Czech regulatory permission. Employing people indefinitely without reference to the 12-month assignment cap. Or simply reaching the headcount at which a fixed cost stops being the expensive option.

Doing both is ordinary rather than exotic. Plenty of companies start people on an employer of record arrangement, found the s.r.o. once the Czech team has a shape, and move the employment across. The move is a change of employer and needs planning around notice, continuity of service and the timing of the transfer, so it is worth deciding in advance rather than discovering later. The practical steps on the entity side are in how to hire an employee in the Czech Republic.

The one answer that is wrong on both routes is to leave the person on an IČO as a contractor because the decision is hard. Engaging someone through a trade licence where the relationship has the hallmarks of závislá práce may raise švarcsystém questions, and those questions get harder the longer the arrangement runs. If you want the employment relationship without the company, that is what Employer of Record Czech Republic exists to provide.