At Intras Consulting, we understand that collaboration with self-employed individuals (freelancers) is an attractive way for many companies to ensure flexibility and optimize costs. However, with the amendment to the Employment Act taking effect on January 1, 2025, penalties for illegal employment through the so-called Švarcsystem have been significantly tightened.
What is the Švarcsystem?
The Švarcsystem refers to a situation where a company cooperates with a self-employed person under conditions that actually correspond to an employment relationship. This includes, for example:
- Fixed working hours
- Performing work at the company’s premises
- Use of company equipment
- Direct supervision by a superior
Such a setup is illegal and may lead to serious legal consequences.
New Sanctions from 2025
The amendment to the Employment Act introduces the following stricter penalties:
- Activity ban for up to 2 years: Companies proven to use the Švarcsystem can face a ban on their activities for up to two years.
- Retroactive assessment of levies: In addition to fines, companies may be required to pay back taxes for the past 3 years, and health and social insurance contributions for up to 5 years retroactively.
- Blacklist of illegal employers: Companies that violate the law may be listed in a public registry of illegal employers, damaging their reputation and ability to obtain contracts.
Risk Factors in Contracts with Freelancers
When working with freelancers, it is crucial to avoid the following risk factors in contracts:
- Fixed working hours
- Work performed at company premises
- Use of company equipment
- Direct management and control by a superior
- Exclusive collaboration without other clients
- Regular monthly payment regardless of results
- Providing employee-like benefits
- Long-term collaboration with no time limit
- Use of company business cards and email
- Inability to refuse assigned work
- Absence of personal business risk
These elements can indicate that the collaboration constitutes dependent (employee-like) work – and therefore illegal.
Duration of Cooperation with Freelancers
Collaboration with a freelancer exceeding 1 year may be considered high-risk, especially if it exhibits signs of dependent work. Long-term exclusive cooperation with a single client may indicate an attempt to circumvent labor laws.
What Inspections Focus On
Inspectors typically focus on the following when detecting a Švarcsystem:
- Working hours and place of work
- Method of task assignment and level of control
- Use of company equipment and space
- Exclusivity of collaboration
- Form of compensation and provision of benefits
These factors may signal illegal employment.
High-Risk and Lower-Risk Activities
Some activities are more prone to being misused via the Švarcsystem, such as:
- IT services
- Marketing and advertising
- Construction
- Consulting
Activities where freelancers serve multiple clients and operate with greater autonomy are considered lower-risk.
Recommendations for Companies
To avoid multi-million fines and other penalties, we recommend:
- Carefully structure contracts with freelancers
Ensure wording does not imply employment – especially regarding working time, place of work, and control mechanisms. If the freelancer has clearly defined assignments, their own tools, and multiple clients, you’re in a better position to justify the cooperation. - Regularly review collaborations
Even if the initial setup was correct, circumstances can change – e.g., increased workload, use of company premises, or actual supervision by internal managers. - Avoid extending collaborations without assessment
Relationships lasting over 12 months and involving exclusivity are red flags for inspections. In such cases, we recommend performing a risk assessment, for example, through a legal or tax analysis. - Educate responsible personnel
Managers, HR staff, and recruiters should understand what constitutes legal external cooperation. Surprisingly often, the Švarcsystem arises unintentionally from good intentions and a lack of awareness.
Conclusion
The 2025 amendment to the Employment Act clearly demonstrates that the state has adopted zero tolerance for illegal employment. Inspections are more frequent, penalties more severe, and “we didn’t know” is no longer a valid excuse.
At Intras Consulting, we ensure that all our internal processes are fully compliant with the law. All our colleagues are employed under regular labor contracts, and we have never taken the risk of engaging in a Švarcsystem – not only because of regulations, but because of our fair and stable approach to every team member.
From experience, we know that legal and meaningful models of external cooperation do exist, but they must always be transparent, fair, and compliant with the law. That’s exactly where we support our clients.
If you’re unsure whether your setup complies with current regulations – get in touch. We’ll gladly go through your specific case and help you find a compliant and functional solution.
Veronika Čapová
Operations Director
📩 veronika.capova@intras.cz
🌐 www.intras.cz