Professional Employer Organization (PEO) in Czech Republic

Professional Employer Organization (PEO) in Czech Republic

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What is a Professional Employer Organization (PEO)?

For all companies, big and small, managing a growing workforce can get out of control. This is more so if a business is operating in multiple locations and hiring remote, high-skilled workers.

To overcome this challenge, many employers outsource part or all of their HR functions, including staffing.

In a Professional Employer Organization (PEO) arrangement, businesses co-employ and co-manage the workforce by handling — jointly — a wide range of staffing functions including but not limited to:

  • Onboarding employees and independent contractors
  • Managing payroll offerings
  • Staying compliant by providing mandated, statutory benefits according to in-country labor laws and regulations

Unlike alternative staffing options, using a PEO distributes risk, variably, between PEO providers and employers. As such, liabilities — such as classification, payroll taxes, and social insurance withholdings — are co-shared.

Doing business in the Czech Republic, a country showing an impressive economic transformation from a centralized to an open market economy, is apt to reward many employers looking for highly skilled remote workers.  

Moreover, business in the Czech Republic is shown to be accelerated by a local workforce that enhances economic development by increasing the competitiveness and flow of Foreign Direct Investment (FDI).  

Complicated payroll considerations aside — such as income tax in Czech Republic — hiring and paying employees and independent contractors can be particularly challenging to employers not versed in the country's labor laws.

Here is where PEO services in Czech Republic come in. Only an established PEO can handle end-to-end staffing challenges that an international employer may encounter when hiring and paying employees and independent contractors in the Czech Republic.

What are the benefits of using a PEO in Czech Republic?

If you're hiring a PEO in Czech Republic, you as an international employer are arranging to not only manage remote, globally distributed teams effectively but also stay compliant with in-country labor and tax laws.

Here is how.  

Ensuring compliance with employment laws

A professional employer organization in Czech Republic can enable you as an international employer to stay compliant with in-country employment laws and regulations, including the Czech Republic's Labor Code of 1965 (amended frequently since going into effect).

This is an important first step in a long journey of maintaining a steady stream of skilled remote workers.

Awareness of and compliance with in-country employment laws is essential to be able to go into granular details of managing payroll, designing benefits, and managing employment costs.  

Payroll processing and tax filing

This is not necessarily a second step after getting to know in-depth employment laws in the Czech Republic.  

Still, in whatever order, understanding payroll processing and tax filing as an international employer is crucial to managing the payroll process end-to-end effectively, compliantly, and smoothly.

One component in payroll processing and tax filing is understanding the tax rate in Czech Republic for individual workers. A second, complementary piece of tax information is the corporate tax rate in Czech Republic for business entities.  

An exhaustive list of all payroll processing and tax filing requirements would be quite long and complex. PEOs allow businesses to stay compliant with everything tax and beyond when hiring and paying independent contractors in the Czech Republic.    

Risk mitigation

The risk of employment is not a one-time event but a process.

That is, while one major and common risk employers encounter when hiring and paying independent contractors is misclassification, misclassification alone is not the only risk you as an international employer are exposed to. The associated risks include tax risks, employee disputes, and more.

Having (at least) a risk mitigation strategy by co-sharing risk with an established PEO better positions you as an international employer not only to mitigate your risks but also to keep risk at bay long before anything bad happens while maintaining a cost-effective strategy.

Provision of competitive benefits

Likewise, partnering with an established PEO not only helps you figure out how to craft your benefits package, which is an increasingly important hiring component, more so for high-skilled workers.

For example, only an established PEO can help customize a benefits package for each employee and independent contractor in the Czech Republic, such as health insurance benefits, which are now increasingly required by independent contractors.

Employment cost mitigation

In starting employment arrangements, employers often focus on what's at hand, and, in doing so, employment costs keep creeping in. For uninitiated employers, employment costs could add up until a prohibitive bill comes in.

This is something that established PEOs keep tabs on.

With an expert in everything employment, you as an international employer can slash out employment costs — and while doing so get unmatched advice on crafting a cost-effective employment strategy.  

Using Skuad as your trusted PEO in the Czech Republic lets you focus on your core business operations while knowing compliance is being addressed.

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What are the differences between an EOR and a PEO?

Outsourced employment management comes in different forms.

One such form is a PEO. A second common form is an employer of record (EOR).

Despite being similar in many aspects, PEO and EOR have differences that make each a distinct service offering. The table below compares the two.

An EOR is the legal employer for any hired workers — not its client. PEOs and their clients are co-employers, flexibly splitting and sharing liabilities and responsibilities between them.
As the sole legal employer, EORs handle all the HR processes and functions required for ongoing engagement with hired workers from onboarding to payroll. PEOs can flexibly extend what HR functions and processes they handle as they essentially share these with their clients. In effect, clients can dictate a PEO’s involvement in HR management.
EORs hire on behalf of their clients, so the clients themselves do not need to register a local entity for HR purposes. PEOs are co-employer, so clients need to establish a local legal entity that can legally hire employees.
Performs all contract and agreement drafting on behalf of their clients. Clients perform contract and agreement drafting with assistance, where required.

Hiring in Czech Republic with a PEO

The Czech Republic is facilitating creation of an expanding base of skilled workers.

The Highly Qualified Worker Program, which vets non-native workers who wish to work in the Czech Republic, is providing international employers that plan to, or have already started to, hire and pay in-country skilled workers with a skill base to build on to enhance their business's competitiveness.

That said, building an integrated network of remote skilled workers is a lot of work. While having a skill base to hire from is a good start, doing so is not straightforward.

In addition to layers upon layers of hiring complexities surfacing as employers wade through hiring and onboarding processes, compliance is always playing in the background, and employment costs keep adding up.  

Here is where an established PEO comes in.

Hiring an established PEO such as Skuad not only lifts hiring hassles off your burden but also embeds compliance into every phase of your existing or planned employment process.

At Skuad, a leading PEO, the employment process is managed end-to-end, covering contract drafting, compensation, and payroll management — and all along, having compliance front and center.

Payroll in Czech Republic is challenging. It’s easy when you use a PEO.

Payroll management is a complex process involving a wide range of regulatory requirements, administrative skills, tax compliance challenges, and multiple components.

The issue of payroll components has particular importance.

Because payroll components involve sorting different taxable portions of employee income (salary or wage), it's not enough to scan in-country social and health insurance, statutory withholdings, and deductibles.

In addition to basic statutory rights, employers need to account for taxable and non-taxable compensation components.

To do so, employers must have full knowledge of in-country tax laws and regulations, which requires, ultimately, taxation and legal expertise well beyond many employers.

In the Czech Republic, any international employer should keep track of new developments in tax laws, including but not limited to:

  • Marginal rate of 23% for income over CZK (Czech koruna) 1.8 million annually
  • Increasing the basic annual personal tax deduction by CZK 3,000 annually
  • Abolishing the 7% solidarity surcharge for high-income earners
  • Reintroducing the progressive taxation with two tax brackets

This is a lot of work to handle for an employer.

Instead, reach out to us at Skuad to help you navigate a web of legal and labor complexities that you don't even have to think about when we're handling it.

What a PEO in Czech Republic can and cannot do for you

As an international employer, you must be fully aware of what a PEO service can do for you.

A PEO can

  • Manage your payroll process end-to-end compliantly
  • Support hiring and onboarding your skill base
  • Advise you on employment cost reduction
  • Mitigate risks associated with compliance-related matters of labor laws in the Czech Republic

A PEO cannot

  • Be exclusively responsible, and hence fully liable, for your employment activities
  • Take full control of your HR functions (or more) at your organization
  • Control your employees or hiring process

Businesses big and small can find value in partnering with a PEO in Czech Republic.  

Legal matters, despite not being everything in the employment process, are indispensable in getting you started hiring and paying employees and independent contractors, especially in a jurisdiction you're not familiar with.

Handling a wide range of complex employment matters such as payroll management, taxable and non-taxable compensation components, and compliance are well beyond the resources, energy, or expertise of many employers.

So let Skuad, an established PEO with a unified employment management platform, streamline all your employment needs in Czech Republic.

Touch base and leave all your employment concerns in Czech Republic behind.

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