Entrepreneurship in the Czech Republic: Why More People Are Starting a Side Business

In the Czech Republic, the number of individuals engaged in entrepreneurship alongside their primary employment has reached a record high. But does this trend reflect genuine entrepreneurship?

The number of sole traders – individuals for whom business activity is a secondary rather than a primary source of income – has hit an all-time high, approaching 475,000 people. According to experts, this surge may be linked to the widespread use of the Schwarz system, as well as ongoing changes and confusion surrounding contracts for work performance. As a result, the growth in entrepreneurial activity may be somewhat illusory.

The Number of Self-Employed Persons Has Increased

According to data from the Social Insurance Institution, as of the end of March this year, there were 679,785 self-employed individuals in the Czech Republic for whom entrepreneurship is their main activity. This represents an increase of 12,000 compared to the same time last year. Although this is a larger year-over-year increase than the previous period, between 2020 and 2023, the number of full-time self-employed persons grew by over 20,000 annually.

As of March 31, there were 474,155 sole traders for whom entrepreneurship serves as an additional source of income. Compared to the end of March last year, this is an increase of more than 13,000. This marks the highest number of secondary entrepreneurs ever recorded in the country.

In total, as of the end of March 2025, the Czech Republic had 1,553,940 self-employed individuals, combining both main and secondary entrepreneurs, 25,000 more than a year earlier.

Self-Employment and Additional Income

According to experts, the rise in the number of self-employed individuals is largely attributed to the so-called Schwarz system. In recent years, specialists have pointed out that due to high labor costs, traditional employment relationships are often replaced with contracts between a client and a service provider.

The Schwarz system is seen as a natural response to excessive labor taxation and the increasing bureaucracy, regulation, and obligations that employers face when hiring staff. “This system is widespread in sectors like IT, construction, transport, logistics, and even in areas such as media and, paradoxically, public administration,” says Miroslav Diro, a representative of the Chamber of Commerce and Industry of the Czech Republic.

The growing number of self-employed people may also be influenced by recent changes and confusion surrounding contracts for work performance. Over the past year, these contracts have become more expensive (e.g., requiring the payment of holiday allowances) and administratively complex (e.g., mandatory registration of all contracts with the authorities). Additional legislative changes – originally planned for 2025 – were expected to worsen contract terms even further. Although the government withdrew these amendments at the last minute, many entrepreneurs had already stopped using such contracts.

A survey conducted by the Chamber of Commerce and Industry of the Czech Republic in the spring of last year among 457 companies revealed that most employers had already reduced their use of work contracts. They either reassigned the work to other employees, contracted self-employed individuals, or converted roles to part-time or full-time employment. The largest reductions occurred in large companies with more than 250 employees. Businesses in the personal services sector were the most reactive – only one in five made no changes to their use of contracts, whereas in other industries, the proportion of companies that kept contract employment unchanged was significantly higher.

Data Show the Impact of Changes to Work Performance Contracts

Additional data confirm that recent changes to work performance contracts have contributed to the rise in entrepreneurship. The increase is primarily driven by self-employed individuals, a group frequently engaged under such contracts.

According to data from CRIF – Czech Credit Bureau, 23,106 people started a business in the Czech Republic during the first three months of this year, while 12,779 people ended their business activities. This means the total number of entrepreneurs grew by 10,327, which is eight times more than in the same period last year.

A shift is also visible in the age structure of entrepreneurs closing their businesses. In 2023, only 2% of those ending their business activities were aged 18 to 30. Last year, that share rose to 7%, and in the first quarter of this year, they accounted for 12%. There was also a significant increase in the number of entrepreneurs who had been active for less than five years – this group now represents more than one-fifth of all individuals who have exited entrepreneurship this year.

This suggests that many of these cases involve former contract workers who registered as self-employed only temporarily, often for part-time work, and then closed their business once the engagement ended.

📌 Not sure if registering as a self-employed person is right for you? Struggling with contract changes or legal obligations?

At 360WEDO, we provide expert consulting and accounting services in the Czech Republic to help you navigate complex regulations, choose the right business model, and stay compliant, whether you’re starting or optimizing your existing setup.

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