Running Payroll in The Czech Republic: Employment Taxes & Setup

Payroll in The Czech Republic centers on four main obligations: monthly personal income tax withholding, mandatory social security and health insurance contributions, any applicable local levies, and regular reporting to the Financial Administration and the Czech Social Security Administration. You need to align employment contracts, timekeeping, and benefits with these rules so that every payroll run correctly calculates gross pay, taxable base, deductions, and employer contributions.

Non-compliance can trigger penalties, late-payment interest, audits from the tax office or social security authorities, and serious damage to employee trust if net pay is wrong or delayed. This guide walks you through how to calculate Czech payroll taxes, meet filing and payment deadlines, and choose the right setup whether you operate via your own entity or an Employer of Record, noting that some thresholds and obligations vary by income level and company size.

In The Czech Republic, payroll taxes are mainly made up of personal income tax withholding, social security contributions, and public health insurance, each with specific rates, caps, and reporting rules that your team must manage every month.

Personal Income Tax (PIT) Withholding

Personal income tax is withheld by you as the employer from employees’ taxable income and remitted to the Financial Administration of the Czech Republic. As of 2026, employment income is generally taxed at 15% up to the solidary threshold and 23% on income above 48 times the average wage per year, with you responsible for monthly withholding, annual reconciliations, and corrections.

PIT is calculated on the super-gross base adjusted for employee social and health contributions and reduced by applicable tax credits, such as the basic taxpayer credit. Late or incorrect withholding can result in assessments, penalties, and default interest, and the tax office can hold you liable if you under-withhold or fail to remit on time.

Social Security Contributions

Social security contributions fund pensions, sickness, and unemployment benefits and are collected by the Czech Social Security Administration. In 2026, employers typically contribute 24.8% of the employee’s assessment base (21.5% for pension, 2.1% for sickness, 1.2% for unemployment), while employees contribute 6.5%, with the base generally capped at four times the average wage per month for employee contributions.

Both employer and employee social security contributions are reported and paid monthly, usually by the 20th of the following month, using prescribed forms or electronic submissions. Underpayments or late filings can lead to surcharges, interest, and inspections, and repeated non-compliance can escalate to enforced collection.

Public Health Insurance Contributions

Public health insurance is mandatory for most employees and is administered by regional health insurance funds such as VZP. Employers contribute 9% of the employee’s assessment base and employees contribute 4.5%, calculated on gross income with a minimum assessment base for low earners and no standard upper cap for regular employees.

Health insurance contributions must be reported and paid monthly, typically by the 20th of the following month, to each employee’s chosen health insurer. Failure to pay or report correctly can result in penalties, interest, and potential issues for employees accessing healthcare services, so accurate and timely submissions are essential.

Employees in The Czech Republic are most commonly paid by bank transfer in Czech koruna, and you should collect accurate IBAN and bank details during onboarding. While cash payments are not prohibited, they are rare for regular employment and create additional record-keeping and security risks.

Most employers pay monthly, with payday specified in the employment contract and wages typically due no later than the end of the following calendar month. If you do not have a Czech entity, you can use an Employer of Record to hire compliantly or work with a local payroll partner while registering as a foreign employer, and in all cases you must issue payslips showing gross salary, overtime, bonuses, social and health contributions, income tax, and net pay.

• Payment Frequency: Standard practice is monthly payroll with a fixed payday agreed in the employment contract.
• Currency Of Payment: Salaries are usually paid in CZK, even if contracts reference foreign currencies for benchmarking.
• Bank Details: Collect each employee’s IBAN, bank code, and health insurer information before the first payroll run.
• Payslip Content: Payslips should clearly show gross earnings, taxable base, each deduction type, employer contributions, and final net pay.
• No-Entity Hiring: If you lack a Czech entity, use an Employer of Record to handle contracts, payroll, and statutory filings on your behalf.
• Local Employer Route: With a local entity, register with the tax office, Czech Social Security Administration, and health insurers before making any salary payments.
• Cut-Off Dates: Set internal cut-off dates for timesheets and variable pay so you can meet statutory payment and filing deadlines.

Getting payroll set up correctly in The Czech Republic determines whether you can pay employees on time, apply the right tax rates, and avoid penalties from the Financial Administration, the Czech Social Security Administration, and health insurers. Your approach will differ depending on whether you operate through a local legal entity or rely on an Employer of Record for compliant hiring.

With your own entity, you handle registrations, calculations, filings, and payments directly, often supported by local payroll software or an accounting firm. Without an entity, an Employer of Record becomes the legal employer in The Czech Republic, managing contracts, payroll, and statutory contributions while you direct day-to-day work.

• Incorporation Or EOR Decision: Decide whether to establish a Czech entity or use an Employer of Record based on headcount, time horizon, and operational complexity.
• Authority Registrations: Register your entity as an employer with the local tax office, the Czech Social Security Administration, and each relevant health insurance fund.
• Banking And Payments: Open a CZK business bank account or set up a multi-currency solution that supports Czech payroll and local statutory payments.
• HR And Payroll Data: Collect contracts, personal IDs, tax residency declarations, health insurer choices, and bank details for every employee.
• Payroll Software Setup: Configure payroll software or a provider to handle Czech tax brackets, social and health rates, and statutory reporting formats.
• Internal Controls: Define approval workflows for new hires, salary changes, bonuses, and terminations to ensure accurate and authorized payroll changes.
• Documented Policies: Establish written policies on working time, overtime, benefits, and reimbursements aligned with the Czech Labour Code.
• Data Protection: Implement GDPR-compliant processes for storing and transmitting employee payroll data.
• Onboarding With EOR: If using an Employer of Record, align on cut-off dates, benefits design, and who communicates payslip details to employees.

Example Of Salary Tax Calculation

Imagine a full-time employee in Prague with a monthly gross salary of CZK 60,000 in 2026 and no dependants. You would calculate employee social security at 6.5% and health insurance at 4.5%, determine the taxable base, apply the 15% income tax rate within the standard bracket, and then subtract the basic taxpayer credit.

On the employer side, you would add approximately 24.8% for social security and 9% for health insurance on top of the gross salary to estimate your total employment cost. This step-by-step approach ensures you understand both the employee’s net pay and your full statutory burden.

• Step 1 – Determine Gross Pay: Confirm the monthly gross salary, including fixed components and any taxable allowances.
• Step 2 – Calculate Employee Contributions: Apply 6.5% social security and 4.5% health insurance to the assessment base, respecting any caps.
• Step 3 – Compute Taxable Base: Adjust gross pay for employee contributions and apply the relevant 15% or 23% income tax rate.
• Step 4 – Apply Tax Credits: Deduct the basic taxpayer credit and any approved additional credits to arrive at final income tax.
• Step 5 – Derive Net Pay And Employer Cost: Subtract employee contributions and tax from gross to get net pay, then add employer social and health contributions to see total cost.

Submitting Employee Tax In The Czech Republic

In The Czech Republic, you submit payroll taxes and contributions primarily through electronic filings to the Financial Administration, the Czech Social Security Administration, and health insurance funds, followed by bank transfers referencing the correct variable symbols. Before each submission, you need your employer tax ID, social security registration number, health insurer codes, payroll period details, and confirmation that all employee data is up to date.

• Tax Portal Filing: Use the Financial Administration’s online portal to submit monthly withholding summaries and annual reconciliations.
• Social Security E-Submissions: File monthly social security reports electronically via the Czech Social Security Administration’s ePortal.
• Health Insurer Reports: Send monthly contribution overviews to each health insurance fund where your employees are registered.
• Bank Transfers: Pay PIT, social security, and health insurance via bank transfer using the correct account numbers and variable symbols for each authority.
• Payroll Provider Integration: Many employers integrate payroll software or a third-party provider to generate XML files and submit them directly to authorities.
• Record Keeping: Store confirmations of filings and payments for audit purposes, typically for at least 10 years.

Payroll Tax Due Dates In The Czech Republic

Understanding the tax obligations for both employers and employees is crucial when operating in The Czech Republic's business landscape. This section explains how taxes and statutory fees affect payroll and individual earnings in The Czech Republic.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 33%–35% on top of the employee salary in The Czech Republic. These contributions cover social security branches such as pension, sickness, and unemployment insurance, as well as public health insurance, and must be calculated and remitted every month.

Employee Payroll Tax Contributions

In The Czech Republic, the typical estimation for employee payroll contributions cost is around 11%.

Individual Income Tax Contributions

Individual income tax in The Czech Republic is progressive, with a standard 15% rate and a higher 23% rate applied to income above a statutory threshold linked to the average wage. Employers withhold this tax at source through payroll and employees may file annual returns if they have additional income or wish to claim extra deductions.

Pension in The Czech Republic

Pension in The Czech Republic is primarily funded through mandatory social security contributions, with employers paying 21.5% and employees 6.5% of the assessment base into the state system. Employees may also choose voluntary supplementary pension savings, but these do not replace the obligation to contribute to the statutory pension insurance.