Employment or Your Own Business in the Czech Republic: What to Choose

Holders of temporary protection in the Czech Republic may both work as employees and start a business activity without separate permits — both paths are legally open. Employment provides a stable income and a minimum of paperwork, while running your own business offers higher earning potential, but also full responsibility for taxes and contributions.

International Law Firm "Zahist" advises Ukrainians in the Czech Republic every day, and in our practice the choice between employment and business is most often made on a single criterion — the amount received “in hand.” That is a mistake: you also need to compare insurance, non-standard risks, the impact on status, and the path to a long-term permit.

In this article we compare both options in terms of rights, taxes, liability, and impact on a long-term residence permit (ZDP), and we also show who each option suits.

Can a holder of temporary protection work and run a business

Temporary protection in the Czech Republic grants free access to the labour market: a separate work permit is not required, and the employer only notifies the authorities of hiring the employee. The same applies to entrepreneurship, because the law does not impose restrictions on registering a business activity for this category.

What both paths have in common is a valid status: before starting work or filing an application for a trade licence, make sure that temporary protection has been extended and that the stamp is valid. Loss of status stops any activity, regardless of whether you are an employee or a self-employed person.

Employment: main options and rights

In the Czech Republic, an employee may be engaged under an employment contract or under agreements on the performance of work — they differ in the guarantees they provide.

For the long term, the best option is an employment contract: it builds length of service, gives the right to leave and sick pay, and makes it easier to prove income. Work agreements are suitable as a side job or as a first step toward a permanent position.

Taxes and contributions of an employee

The most attractive feature of employment is that the employer withholds taxes: the employee receives a salary from which income tax and social and health insurance contributions have already been paid. The employee usually does not need to file a return with the tax office.

The employee’s share of contributions is approximately 11–12% of gross salary, and the employer additionally pays more than 30% of it, so the real cost of labour for the employer is substantially higher than the amount you receive. This matters in negotiations: compare the full cost of labour, not only the “net” rate.

Own business: forms and registration

The simplest path is to become a self-employed natural person (OSVČ) on the basis of a trade licence, which is issued by the trade licensing office. For a larger business, you may establish a limited liability company (s.r.o.), but it is more complex in terms of accounting.

1. Choose the type of activity and check whether a qualification is required for a free or regulated trade
2. File an application for a trade licence with the trade licensing office and pay the fee
3. Register with the tax office, the social security administration, and the health insurance company
4. Set up records of income and expenses and choose a tax regime

For an ordinary activity, a few documents and a small fee are enough, and registration itself usually takes only a few days. For regulated types of activity, additional proof of qualification is required.

Self-employed taxes and the flat-rate tax

A self-employed person pays personal income tax at a rate of 15% (a higher rate applies to very large incomes), as well as social and health insurance contributions. Unlike employment, you must report to the tax office and the insurance authorities yourself.

If income is modest, you may choose the flat-rate tax (paušální daň) — a single monthly payment that replaces tax and contributions. In 2026 it amounts to CZK 9,984 in the first band, CZK 16,745 in the second, and CZK 27,139 in the third.

Minimum advance payments for self-employed persons increased in 2026, and sources differ on the amount for social insurance, so before making calculations check the current figures on the website of the social security administration. The minimum advance payment for health insurance is CZK 3,306 per month.

Comparison: employment or your own business

The table shows that employment is stronger on predictability, while entrepreneurship is stronger on flexibility and the upper limit of income. Do not choose on a single indicator, but taking into account risk, a financial cushion, and plans for the coming years.

Insurance, sick pay, and protection

In the event of illness, an employee receives sick-pay benefits from the employer and the social security administration, and after dismissal has a guaranteed notice period.

A self-employed person has no automatic payments in the event of illness unless they have taken out voluntary non-standard insurance. In addition, they are liable for obligations with all of their assets, so it is important to assess the risks before starting.

A self-employed person pays health insurance contributions themselves, even if state insurance previously covered them as a person with temporary protection. The exact conditions depend on your situation, so clarify them with the health insurance company.

Impact of the choice on a long-term residence permit and permanent residence

To switch to a long-term residence permit (ZDP), a confirmed annual income of at least CZK 440,000 is required for a family, as well as continuous insurance without debts. An employee proves income with certificates from the employer, while a self-employed person needs a tax return and payment of all contributions.

Debts on a self-employed person’s contributions may deprive them of a chance of a long-term residence permit, so payment discipline is critical for an OSVČ. If you plan to stay in the Czech Republic, build a transparent income history in advance, regardless of the model you choose.

How to compare real income under the two models

Our experience shows that Ukrainians who compare only the hourly rate and the amount in the account usually underestimate the risks of entrepreneurship. The right approach is to reduce both options to annual net income after all mandatory payments.

For employment, take into account salary after deductions, bonuses, and paid leave. For a self-employed person, subtract expenses, tax, contributions, and months without orders from revenue, and divide the remainder by twelve.

1. Calculate annual gross income under each model
2. Subtract taxes and mandatory contributions
3. Add the value of insurance and sick pay that a self-employed person does not have automatically
4. Allow for months of downtime for your own business
5. Compare the remainder for the year, not for a single best month

This calculation dispels the illusion that an entrepreneur always earns more. In our practice, the benefit of running one’s own business appears when there is a steady supply of clients, not after a single large order.

Typical life scenarios of Ukrainians in the Czech Republic

The same model suits different people differently, so the table below shows which option is usually considered depending on the situation.

These scenarios are a guide, not a ready-made answer: the final choice depends on language skills, profession, family obligations, and available savings.

How to combine employment and entrepreneurship

This combination is called a secondary activity: you work under a contract, and you obtain a trade licence for additional income. Insurance and social contributions are then allocated differently, so minimum payments should be calculated in advance.

In practice, this format makes it possible to test demand without putting primary income at risk. Once there are enough clients, the transition to a primary activity takes place gradually and without a sharp drop in income.

Who each option suits

Employment usually suits those who have recently arrived, are still learning the language, and need stable income and social guarantees. It is also a sensible choice for families with children, where predictability matters.

One’s own business suits those who have an in-demand skill or clients, are prepared to keep accounts, and can maintain a financial cushion for several months. A combination often works: employment plus side work under a trade licence, with a gradual transition.

Typical mistakes when choosing

Below are the mistakes we most often see among clients when choosing a model.

1. Comparing only the “net” amount without taking insurance and contributions into account
2. Starting an activity without calculating the minimum payments, which are due even with no income
3. Failing to keep records and missing tax return filing deadlines
4. Working without a written contract, or under an agreement that does not match the actual nature of the work
5. Not checking how the choice will affect the ZDP and proof of income

Most of these mistakes can be avoided by consulting a lawyer and an accountant before starting work or registering an activity.

Legal assistance in the Czech Republic

The choice between employment and one’s own business affects taxes, insurance, and ZDP prospects, and correcting mistakes later is more expensive.

Lawyers at International Law Firm "Zahist" help review an employment contract, choose the form of activity, obtain a trade licence, and prepare for proof of income.

If you are facing this choice and want to assess the risks, contact International Law Firm "Zahist" — we will review your situation in a consultation.