New Rules for Hiring Foreign Workers in the Czech Republic

Exciting changes are coming for employers looking to hire foreign workers in the Czech Republic. To employ foreigners, employers will now need to register and obtain verified employer status, along with meeting several other important requirements. The good news is that the state is also ready to offer benefits to foreign investors, as well as to local governments.

In September, the Czech government approved an amendment to the law that will change how foreigners are employed and establish a register of verified employers. According to the Ministry of the Interior, this new verified employer status aims to protect foreign workers from illegal practices. The goal is to reduce illegal labor, exploitation, and hidden mediation in employment, as highlighted in the explanatory note.

While the new Employment Act does not explicitly state that registration is mandatory for employers, the explanatory note makes it clear that hiring foreigners without this registration will not be possible.

The verified employer status will allow businesses to hire foreigners who need a work permit. This means that employers must meet specific conditions to be able to employ foreign workers legally.

These changes reflect a commitment to creating a fairer and more transparent labor market for everyone involved.

Strengthening Public Trust in Government Capabilities

Officials believe that the introduction of the verified employer institution will enhance the management of economic migration. This new tool is expected to bolster public trust in the government’s ability to oversee labor migration effectively. Additionally, it will facilitate the monitoring of migration data and ensure that employers meet their obligations, as outlined in the explanatory note.

The Ministry of the Interior’s proposal is part of a comprehensive package of amendments that will revise 73 existing laws in response to changes in the Foreigners Act. This extensive document spans 273 pages and includes significant updates to the current Employment Act, which will now feature a new Register of Verified Employers.

However, the Office of the Deputy Prime Minister for Digitalization has raised concerns, warning that the proposal has not undergone a thorough interdepartmental discussion. They view it as a problematic amendment that extends beyond its intended scope and content.

These developments highlight both the potential for improved migration management and the importance of careful legislative processes.

The Goal: Reducing Illegal Employment

This proposal aims to combat illegal work, exploitation, and hidden mediation in employment. The explanatory note refers to the verified employer institution as a “new obligation.”

However, registering in the register of verified employers should not create an administrative burden for employers. Thanks to full digitalization, the process is expected to be quick and fully automated.

How the Amendments Will Affect Businesses in the Czech Republic

A company can be included in the register of verified employers if it has no fines or outstanding payments owed to the Financial Administration, Customs Office, Social Security Administration, or insurance companies. Additionally, the company must have at least one employee who has been with them for at least six months.

Moreover, in the two years leading up to the application for registration, the company must not have incurred fines exceeding CZK 100,000 for illegal employment, non-cooperation with labor inspections, or violations of labor laws.

Finally, the employer must not have any assets that are under judicial seizure.

These measures are designed to create a fairer and more transparent labor market while supporting responsible employers.

Startups

According to the registration requirements for the verified employer register, employers who are new to the Czech market, such as startups, often find it challenging to meet these conditions. However, the reasoning behind the proposal suggests that it would be undesirable to exclude them from the register.

The explanatory report notes, “These may include newly established companies that have a legitimate expectation of including foreign nationals in their statutory bodies or in key specialist positions, as well as employers with innovative business concepts.”

This consideration also extends to state-owned enterprises, regional and municipal corporations, and newly formed subsidiaries of employers already listed in the register.

To address these challenges, the proposal includes a comprehensive list of situations where certain conditions can be waived. For instance, companies that cannot demonstrate continuous employment of foreigners for six months will still be able to register if they submit an intention to receive investment incentives to CzechInvest or if they are a subsidiary of a company that has already received such incentives. 

Additionally, startups can qualify for an exception if they are implementing or planning to implement a credible innovative business plan with sufficient funding in the Czech Republic or if they are financially linked to a solvent company.

Public enterprises and corporations established or controlled by a county or municipality that provide public services will be exempt from these conditions without any additional requirements. The explanatory report adds, “An exception will also be introduced for newly established public enterprises or corporations in municipalities or regions (e.g., a regional medical holding company) that may need to employ third-country nationals, particularly highly qualified ones.

Employers in the State Register

The exception is primarily aimed at foreign investors.

According to the Ministry of the Interior, the inability to employ foreigners should not hinder infrastructure development. “For this reason, an exception is being introduced that allows employers to be included in the register of verified employers if it serves the interests of the Czech Republic, which will be confirmed by a competent government member,” stated the minister in the explanatory note.

“This exception is particularly for foreign investors who are starting businesses in the Czech Republic based on investment incentives and whose newly established companies have a legitimate expectation of including foreign nationals in key management or specialist positions, ensuring that their investments can be successfully realized. 

Additionally, exceptions will apply to established investors who have already received benefits or those operating in the Czech Republic without investment incentives but who are supported by CzechInvest. If they create a new subsidiary in the Czech Republic as part of their business operations, that subsidiary should also become a verified employer, just like its parent company,” the report explains. The goal of this exception is to “avoid creating obstacles for future investment projects.”

To foster innovation, this exemption will also apply to newly established startups. All provisions in Section 88 detail the conditions under which a business plan can be implemented and considered trustworthy, feasible, and innovative.

CzechInvest will verify compliance with the conditions for inclusion in the register of verified employers based on these exceptions related to investment incentives, investor subsidiaries, and startups.

Foreign employers will need to submit documentation to CzechInvest proving they have sufficient funds to implement their innovative plans in the Czech Republic and details about their ownership or rights related to properties within the country.

They will also provide agreements regarding capital or collaboration for their business purposes along with a credible and feasible innovative business plan. This plan should include a description of the product being produced or services offered, target customer groups, sales channels, as well as technical and technological solutions for production or delivery methods.

Reach out to the 360WEDO team for help with registering and managing your business in the Czech Republic. We’ll take care of all the organizational processes and can also provide complete outsourced accounting services. With us, you can be confident that your financial processes will always be in good shape.

Source:

Link to the draft law:

https://odok.cz/portal/veklep/material/KORND2FB6RSR