Employees Working Mainly Abroad and Paying Wages in a Foreign Currency

Agreeing the place of work, one of the mandatory elements of an employment contract, is meant to express where the employer may require the employee to work. How that place is defined, and how broadly, is a matter for agreement between employee and employer. The parties are constrained only by the requirement that the term be certain; they are not constrained as to the extent of the place agreed. Act No. 262/2006 Coll., the Labour Code, places no limit on contractual freedom here.

Where the place of work is the Czech Republic

If the parties agree the Czech Republic as the place of work, Section 142(1) of the Labour Code obliges the employer to pay the wage or salary in legal tender. Legal tender, within the meaning of Section 16(1) of Act No. 6/1993 Coll., on the Czech National Bank, means valid banknotes and coins issued by the CNB — Czech crowns.

A distinction must be drawn between agreeing a wage and paying it. While an employer must pay an employee whose place of work is in the Czech Republic in Czech crowns, the law attaches no such condition to agreeing the wage. That opens the argument that what the law does not forbid is permitted. Professional opinion on whether the wage may be agreed in a foreign currency is not uniform, and there is no relevant case-law, so agreeing a wage in euros cannot be recommended without reservation. The approach could conflict with the principle of equal treatment of employees and with equal pay.

A broader place of work

One possible solution is to agree the place of work more broadly — for example, the European Union. Where the nature of the work performed is inherently tied to a wider territory — managers, sales representatives and the like — a place of work agreed in that way is, in our view, entirely consistent with the law.

Payment in a foreign currency

Sections 143(2) and (3) of the Labour Code create an exception for employees whose place of work is abroad: with their consent, the wage or part of it may be provided — that is, paid — in an agreed foreign currency. The two subsections must be read together. Under subsection (3), the exchange rate announced by the Czech National Bank and valid on the day the employer buys the foreign currency for the purpose of paying the wage or salary is used for the conversion. Where the wage or salary is paid from the employer's foreign-currency account, the rate valid on the day of the transfer at the relevant bank applies.

The regular workplace

It is also advisable to agree in the employment contract a regular workplace for the purposes of travel allowances. The law understands the regular workplace to be the place agreed with the employee. Where no such place is agreed, the regular workplace is taken to be the place where the employee's journeys most often begin.