What Severance Pay Rules Must Employers Follow in The Czech Republic?

Which Employees Qualify for Severance Pay?

• Employees whose employment is terminated by notice or agreement for organizational reasons (redundancy, closure, relocation) initiated by the employer.
• Employees whose employment ends because they can no longer perform their work due to an occupational accident, occupational disease, or risk of such disease.
• Employees who are declared medically unfit for their current role due to a work-related injury or illness, as confirmed by an occupational health provider.
• Employees on indefinite or fixed-term contracts, provided they meet the statutory grounds for severance under the Labour Code.
• Employees whose termination is formalized in writing and clearly states a severance-triggering reason under Czech law.
• Employees who do not qualify for severance if they resign voluntarily or are dismissed for serious or gross misconduct under the Labour Code.

What Are the Legal Timelines for Paying Severance?

Under the Czech Labour Code, severance pay is usually due together with the employee’s final wage payment for the last pay period. In practice, your company should pay severance no later than the regular payday following the end of employment. Many employers choose to pay severance on the last working day to avoid disputes and demonstrate good faith. Always document the amount, payment date, and legal basis in the termination agreement or notice. If you agree on installments, make sure this is clearly written and that the schedule still respects statutory protections.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay severance correctly in the Czech Republic, you risk inspections and sanctions from the Labour Inspectorate, as well as civil claims from former employees. Non-compliance can quickly become more expensive than paying the correct severance from the start, especially if courts award interest and legal costs.

• The Labour Inspectorate may impose administrative fines for breaches of the Labour Code.
• Employees can sue for unpaid severance, interest on late payment, and legal expenses.
• Courts may invalidate an unlawful termination, exposing you to back pay and reinstatement claims.
• Repeated or serious breaches can damage your reputation with unions and regulators.
• Poorly handled terminations can also trigger audits of your wider HR and payroll practices.

Does Outsourcing Employment via an EOR Change Severance Liability?

Using an Employer of Record (EOR) such as https://www.playroll.com/employer-of-record does not remove the need to follow Czech severance rules, but it can shift day-to-day compliance work. In a typical EOR model, the EOR is the legal employer in the Czech Republic and is responsible for calculating and paying statutory severance. Your company, as the client, still bears commercial and reputational risk if terminations are mishandled or appear unfair. Contract terms between you and the EOR will define who funds severance, who approves terminations, and how disputes are managed. A well-structured EOR relationship helps ensure that local legal requirements are met while you retain control over business decisions.

Be 100 Percent Compliant in Offering Severance with Playroll

Managing severance in the Czech Republic means aligning your internal policies with the Labour Code, collective agreements, and any company-level benefits you offer. Playroll helps your team translate those legal rules into clear, repeatable processes for each Czech hire, so you know exactly when severance is triggered and how much to budget. With centralized records and local expertise, you reduce the risk of inconsistent treatment and costly disputes.

Playroll’s platform and EOR network support compliant hiring, payroll, and terminations across borders, including Czech-specific severance obligations. Your HR and finance teams get real-time visibility into termination costs, timelines, and documentation, while Playroll handles the local calculations and payments. That way, you can restructure or downsize when needed, confident that your Czech exits are fair, timely, and fully compliant.