Czech Republic: use of external contractors restricted

On 27 May, 2005, a new law came into force clarifying the conditions under which employers may hire external contractors.

As a general rule, employers are still obliged to use employees to carry on business activities. They are now expressly prohibited from entering into commercial relationships with external consultants (typically done using a mandate agreement) where the sole purpose of doing so is to avoid paying taxes and other legal charges which would otherwise be payable if the consultant were hired as an employee.

Law: Act on Employment no. 202/2005

For more information, please contact Květa Vojtová at kveta.vojtova@cms-cmck.com or on +420 221 098 847.