IT Outsourcing Markets Review: the Czech Republic vs. Ukraine
Dear readers, this week our article is devoted to the IT outsourcing market of the Czech Republic. We’d also like to draw your attention to how the country’s IT environment, laws and regulations differ from the ones in Ukraine, as well how the two IT sectors differ.
The Czech IT Market Overview
Czech tech sector is probably the most attractive and developed in the CEE region. This has been constantly approved by the number of large international tech giants like Microsoft, Skype, IBM, SolarWinds, etc. It’s necessary to mention that such world-known products like AVAST and AVG were developed by the companies with Czech origin, therefore, proving the high-level services for the global use. This is also the region, where the capital city is not the main IT hub – Prague is extremely attractive, but Brno is the city where lots of R&D centers, institutions and specialists work. As to others, Ostrava is becoming another popular destination – such tech giant as Tieto has decided on setting its facilities here. One of the peculiarities of the country is that it belongs to those few states where Google is not the main search engine – Seznam.cz is. Local authorities also established the state agency, CzechInvest, which offers full-stack support to potential clients and investors opting for the local businesses. The Agency helps to solve various management tasks, providing necessary information and data on available locations, suppliers, etc.
Czech Republic is also famous for its high-level educational institutions in general, and in IT specifically. The overall number of tech students as of the end of 2016 amounted to over 90K, out of these almost 8K graduated from universities with different degrees in information technologies. Therefore, the local IT industry is constantly being fuelled with young specialists. One of the main priorities of Czech universities lies in an advanced cooperation between the institutions and businesses – in order to supply the labor market with demanded specialists, educational establishments should know what specialities and skills are to be acquired by future specialists to get hired immediately after graduation.
The main institutions of the Czech Republic offering IT education are as follows:
- 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
- University of West Bohemia, Pilsen
The salaries of the Czech IT engineers are comparatively higher than those for the same position in Ukraine. The average salary in the Czech Republic amounts to $980, whilst for the developers according to their positions the salaries are as follows:
- Junior Developer - $750-1200
- Middle Developer - $1900-2900
- Senior Developer - $2800+
- Lead/PM - $3200-5500
Benefits and Taxes
The IT companies in the Czech Republic also offer their engineers a number of additional benefits, however, these vary on grounds of the size of the company. The basic ones include:
- Medical care and insurance are obligatory in the Czech companies;
- English language lessons;
- support in the relocation (assistance in search of an apartment, etc.);
The is also a vast number of activities some companies offer to their staff like outdoor events and meetings, as well as support in relocation if you are a foreigner moving to the Czech Republic.
The taxes in the Czech Republic are amidst the highest in Europe, therefore, Personal Income Tax equals to 15% + Social Tax of 11% for employees, and 34% for employers. For instance, in Ukraine these numbers are Personal Income Tax amounts to 5% for those employed as private entrepreneurs, and 18% for those employed upon Labor Agreements, whereas Social Tax for employees is not being paid and the same for employers is none for private entrepreneurship, and 22% for staff hired upon Labour Agreements.
Hiring, Notice period and Dismissal terms
The applicants to the Czech IT companies prior to being hired have to go through a trial period usually lasting up to 3 months. One of the peculiarities of the Czech IT companies is that very few reduce the probation period, therefore it is very unlikely to stay on it for less than the aforementioned 3 months.
Within the trial period the employment contract may be terminated as of the day of delivery of the notice unless a later date within the trial period is stipulated in the notice. The notice period has to be at least 2 months which is significantly longer than in Ukraine. A longer notice period may be agreed in the employment contract; however, has to be the same for the employer and the employee. The notice period shall start on the first day of the calendar month following the month, in which the notice of termination was given to the employee or provided to the employer by an employee. There are some exemptions to notice period duration, e.g. the notice period does not run during the “protection period” (e.g. maternity leave or sick leave) where the employer has given notice before the beginning of the “protection period”. Yet, the notice period recommences the same moment a person returns to work. In the case of dismissal for serious cause (e.g. an employee’s health state doesn’t allow to perform the job routines required by the employer, etc.), the employment contract may be terminated immediately. In certain situations, this whole process may take up to 6 months for an employee for finally leave the current working place. But, in practice, all the terms are usually discussed, therefore, the procedure takes 2-3 months on average.
The Czech legislation envisages the following types of dismissal depending on the type of position and reason for being dismissed:
- dismissal with notice (also known as an ordinary dismissal) - terminates upon the expiry of the notice period;
- dismissal for serious causes
- dismissal during the trial period (within the period of 3 months, and 6 months for executive staff)
Cost of living, travel expenses, and office rent
Cost of living in the Czech Republic is comparatively high if compared to other European countries. For instance, an average family of four in the Czech Republic needs over $1,900 and $600 will be quite enough for one adult person, excluding the apartment rent which in Prague, for instance, it varies between $495 for 1 bedroom flat outside the city center and $675 for the same flat in the city center, in Brno these prices are $398 and $485, respectively. Monthly public transport pass costs is $24,09, however, if you consider renting a car, the average price for fuel will approximately amount to $1,32/litre. As to the food, average monthly product expenses will reach over $100-190, yet, eating out prices vary from $5,26 to $24 (for the two-people meal) and higher.
Office rent in Prague differs depending on, of course, location and total area of the premises. The prices for office rent in Prague vary between $7,5 and $18 per square meter without furniture, and $9-29 if it’s furnished. The top prices in Brno are practically the same, however, the office rent there starts from $10.
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