The Czech Republic

The Czech Republic is the country in Central Europe and is one of the most popular and largest IT outsourcing destinations. The country has a population about 11 mln people. Grant programs, state support for R&D projects contribute to the development of IT entrepreneurship in the Czech Republic. Financing is carried out from budgetary funds and EU funds. Grants can cover from 40% to 100% of the total cost of the project. In 2016, the Ministry of Industry and Trade of the Czech Republic launched the Business Support Program. The main objective of the program is to provide small and medium-sized enterprises with access to venture capital at the initial stages of their development.

The taxes in the Czech Republic are amidst the highest in Europe.

Personal Income Tax rate, according othe Czech legislation, is 15%. However, an employee may pay another 7% in two cases:

• in case of employment, if the total income exceeds $63,924
• in case of self-employment, tax base exceeds $63,924

Corporate Income Tax general rate is 19%.

Basic investment fund is also subject to 5% tax, whereas pension fund are not subject to any taxation.

Social Security contributions comprise of pension insurance, sickness insurance, unemployment insurance, and health insurance.

For employees, the Social Tax amounts to a total of 11%:

• pension insurance – 6.5%
• health insurance – 4.5%

For employers, the Social Tax amounts to a total of 34%:

• pension insurance – 21.5%
• sickness insurance – 2.3%
• unemployment insurance – 1.2%
• health insurance – 9%

For sole entrepreneurs, the Social Tax amounts to a total of 44.1%:

• pension insurance – 28%
• sickness insurance – 1.4% (voluntary contribution)
• unemployment insurance – 1.2%
• health insurance – 13.5%

The Czech legislation envisages the notice period to start on the first day of the calendar month following the month when the notice was provided to the employee by an employer or vice versa.

However, the following exemptions are applicable towards the duration of the notice period:

• the notice period is not valid during the so-called “protection period” – maternity leave, sick leave; the moment an employee return to work, the notice period recommences;
• dismissal for a serious cause – a health state of an employee prevents him/her from duly performance of the job duties – in such case, the employment agreement may be terminated immediately;

In some cases, the process of dismissal may take up to 6 months for an employee for finally leave the current working place. Of course, all the terms are usually discussed, therefore, the procedure takes 2-3 months on average.

There are three types of dismissal, according to the Czech legislation:

• termination with notice
• dismissal for serious causes
• termination during the trial period (within the period of 3 months, and 6 months for executive staff)

The reasons for a legal dismissal of the employee by the employer may be as follows:

• closure of the position;
• relocation of a separate department or the whole business;
• redundancy or downsizing approved by the competent organs;
• an employee cannot perform his job duties due to medical reasons as a result of these duties, e.g. injuries, harmful exposures, etc. - - medical certificate shall be provided;
• long-term loss of working capability - medical certificate shall be provided;
• an employee fails to perfom the duties as envisaged by the contract or corporate regulations;
• an employee is sentenced to 1+ year of imprisonment during the performance of the job duties;

Office rent in Prague differs depending on, of course, location and the total area of the premises. The prices for office rent in Prague vary between $7.5/m² and $18/m² without furniture, and $9-29/m² if it’s furnished. The top prices in Brno are practically the same, however, the office rent there starts from $10/m².

A large IT talent pool exceeding 155K engineers (and this number is constantly growing) makes local IT market attractive to foreign companies and specialists from all over the world. The trend has been constantly approved by the number of large international tech giants like Microsoft, Skype, IBM, SolarWinds, etc. Such world-known products like AVAST and AVG were developed by companies with Czech origin, therefore, proving the high-level services for global use. Brno is the main IT hub of the Czech Republic. This is the city with lots of R&D centers, institutions, and engineers. As to other destinations, Ostrava is a popular city that house among others a tech giant Tieto that decided on setting its facilities here.

Czech Republic is also famous for its high-level educational institutions in general, and in IT specifically. Annually over 8 thousand students obtain TI-related education to fuel the existing talent pool on the country. One of the key priorities of Czech universities is an advanced and well-established cooperation between the educational institutions and local companies, therefore, the studying programs are based on the most required technologies, languages, etc., hence, after graduation, young talents do not have much difficulty in being employed.

The following institutions offer the best IT education in the country:

• Charles University, Prague
• Czech Technical University in Prague
• Masaryk University, Brno
• Brno University of Technology
• University of Economics, Prague
• University of Hradec Kralove
• University of Pardubice
• Technical University of Liberec
• VSB – Technical University of Ostrava
• Tomas Bata University in Zlin
• The University of West Bohemia, Pilsen

The average salary in the Czech Republic amounts to $1100, whilst for the engineers, according to their positions and experience, the salaries are as follows:

• Junior Software Engineer – $1000
• Middle Software Engineer – $2200
• Senior Software Engineer – $2800
• Technical Lead – $3000