Bogus Self-Employment 2026: Signs, Penalties and How to Avoid It
Do you work with other self-employed contractors? Or do you yourself work for a single client as an OSVČ? Then you should know exactly where the line falls between legal collaboration and illegal bogus self-employment. Since 2024, a stricter definition of illegal work has been in force; since 2025, a new penalty in the form of a ban on business activities has been added; and inspectors now have new powers, including the ability to make covert recordings. In this article, we break down exactly what bogus self-employment is, what signs labour inspectors look for, what penalties you face — and most importantly, how to structure your contractor arrangements so they are fully legal.
What is bogus self-employment: definition and legal framework
Bogus self-employment is the common term for a situation where work that exhibits the characteristics of dependent employment is performed outside an employment relationship. Instead of receiving a salary, the de facto employee issues invoices as an OSVČ, even though they work under exactly the same conditions as an employee.
Why is it illegal?
Act No. 435/2004 Coll., the Employment Act, defines illegal work in Section 5(e) as, among other things, the performance of dependent work by an individual outside an employment relationship. Dependent work is then defined in Section 2 of the Labour Code (Act No. 262/2006 Coll.).
Definition of dependent work (Section 2 of the Labour Code)
Dependent work is work that is performed:
- In a relationship of employer superiority and employee subordination
- On behalf of the employer
- According to the employer's instructions
- Personally by the employee for the employer
Dependent work must be performed for a wage, salary or remuneration, at the employer's expense and responsibility, during working hours at the employer's workplace or at another agreed location.
Key change from 2024: removal of the continuity requirement
Until the end of 2023, only the ongoing performance of dependent work outside an employment relationship was considered illegal work. An amendment to the Employment Act effective from 1 January 2024 removed this continuity requirement from the definition.
Change from 1 January 2024 — continuity is no longer a condition
Since 2024, even a single instance of work performed outside an employment relationship can be assessed as illegal work if it exhibits the characteristics of dependent work. The duration of such work is no longer decisive. It is sufficient for inspectors to demonstrate that the characteristics of dependent work were present at a single moment during an inspection.
Signs of bogus self-employment: what inspectors focus on
The State Labour Inspection Office (SÚIP) and regional labour inspectorates carry out inspections aimed at detecting illegal work. When assessing whether bogus self-employment is taking place, inspectors examine whether the characteristics of dependent work are present. None of these signs is necessarily decisive on its own — inspectors evaluate the overall picture.
Key signs that inspectors look for
📊Signs of bogus self-employment vs. signs of legitimate collaboration with an OSVČ
Additional warning signs
During an inspection, investigators also look out for the following circumstances:
- The OSVČ has a corporate email address from the client (e.g. jan.novak@company.cz).
- The OSVČ appears in the company's organisational chart.
- The OSVČ attends internal meetings and team-building events alongside employees.
- The OSVČ has a business card bearing the client's logo.
- The OSVČ is subject to the same internal rules (time-tracking systems, dress code).
- The OSVČ cannot refuse assigned work or choose what they work on.
- The client determines when the OSVČ takes leave or time off.
New inspection powers from 2025
From 1 January 2025, labour inspectors may make audio and video recordings without the knowledge of those being inspected during a workplace inspection. Inspectors can therefore document the actual situation on the ground — for example, that an OSVČ works fixed hours, follows instructions from a line manager and is fully integrated into the day-to-day running of the company.
Penalties for bogus self-employment in 2026
Penalties for bogus self-employment have been significantly tightened in recent years. In addition to heavy fines, a ban on business activities has been available since 2025, along with public disclosure of the offence.
Overview of penalties
📊Penalties for bogus self-employment — overview
Minimum fine of CZK 50,000
A minimum fine of CZK 50,000 is set for enabling the performance of illegal work. Inspectors therefore cannot impose a lower fine, even if it is a first offence of minor scope. For repeated or serious cases, penalties increase substantially.
Ban on business activities — new penalty from 2025
From 1 January 2025, the labour inspectorate can impose a ban on business activities of up to 2 years for bogus self-employment. This penalty can be imposed both on the company (employer) that enables the arrangement and on the OSVČ who performs the illegal work.
Public disclosure of the offence
A final decision on an offence relating to illegal work is published on the official notice board of the State Labour Inspection Office for 12 months. This can have a devastating impact on a company's reputation — business partners, clients and prospective employees can easily check whether a company has been sanctioned for bogus self-employment.
Tax consequences
In addition to fines from the labour inspectorate, back-tax assessments are also a risk. The tax authority can retrospectively reclassify the arrangement as dependent employment and assess additional:
- Income tax from employment (15% / 23%).
- Social security contributions (31.9% of gross salary).
- Health insurance contributions (13.5% of gross salary).
- Penalties and interest on arrears.
Example: Financial impact of reclassification
Situation: A company pays an OSVČ CZK 50,000 per month against an invoice. The inspectorate assesses the arrangement as dependent employment.
Additional assessments for 1 year of collaboration:
- Social insurance (employer, 24.8%): CZK 148,800
- Health insurance (employer, 9%): CZK 54,000
- Social insurance (employee, 7.1%): CZK 42,600
- Health insurance (employee, 4.5%): CZK 27,000
- Income tax from employment: variable
Contributions alone for 1 year: approx. CZK 272,400 + penalties
Add to that the minimum fine of CZK 50,000 from the labour inspectorate.
How to structure a legal working arrangement with an OSVČ
Working with self-employed contractors is perfectly legal — as long as the arrangement is set up correctly. The key is ensuring the collaboration does not exhibit the characteristics of dependent work.
Principles for a legal working arrangement
📋How to properly structure collaboration with an external contractor
What to include in the contract
A contract with an external contractor should contain:
| Provision | Why it matters | |-----------|----------------| | Subject matter (specific work/service) | Distinguishes the arrangement from the ongoing performance of duties | | Delivery deadline (not working hours) | Demonstrates the project-based nature of the collaboration | | Price for the work/service (not a monthly fee) | Distinguishes from a salary | | Liability for defects | Demonstrates the contractor's business risk | | Right of substitution | Shows this is not personal performance of work | | Contractor's own resources | Separates the arrangement from an employment relationship | | Right to decline work | The contractor is not a subordinate and can say no |
Caution: formal paperwork alone is not enough
The labour inspectorate assesses the actual situation, not merely what is written in the contract. Even if you have a perfectly drafted contract for work, if in practice the contractor works at your premises every day from 8am to 5pm following your instructions, the inspectorate will assess the arrangement as dependent employment. What matters is that real-world practice matches the contractual setup.
Legitimate models of collaboration with an OSVČ
📊Examples of legitimate vs. problematic collaboration
Specific situations and exceptions
Collaboration with family members
The Labour Code allows a spouse and family members to work for an OSVČ without an employment contract, provided they are themselves OSVČ or if the arrangement constitutes assistance within a family business (Sections 700–707 of the Civil Code). This exception does not, however, apply to persons outside the family.
Directors and shareholders of a limited liability company (s.r.o.)
A director of an s.r.o. may perform their role under a management services agreement (a civil-law relationship) and does not need an employment contract for the performance of their directorial duties. If, however, a director also performs other work for the company (e.g. sales activities), they should have a separate employment contract for that work.
Agency work
Using agency workers is a legal alternative — a licensed employment agency employs the workers and "lends" them to the client company. Since 2024, however, the conditions for employment agencies have also been tightened, so it is essential to work only with properly licensed agencies.
Frequently asked questions (FAQ)
Can inspectors visit an OSVČ who works from home?
Yes. Inspectors can inspect the client's premises and also require cooperation from the OSVČ. In practice, inspections most commonly take place at the client's workplace, where inspectors determine who is working there and on what legal basis.
Can the OSVČ themselves face penalties for working under a bogus self-employment arrangement?
Yes. An OSVČ who performs illegal work commits an offence carrying a fine of up to CZK 100,000, and since 2025 they also face a ban on business activities of up to 2 years.
How do I know whether my arrangement with a client constitutes bogus self-employment?
Ask yourself the following questions: Do I work exclusively for one client? Does the client set my working hours? Am I required to attend their premises? Do they direct my work in detail? Do I use their equipment? Am I unable to send someone in my place? Do I bear no business risk at all? The more questions you answer "yes", the higher the risk that the arrangement constitutes bogus self-employment.
What if I work for one client but genuinely as an independent contractor?
The mere fact that you have one client does not automatically mean bogus self-employment. What matters is the overall picture. If you organise your own work, bear business risk, invoice for specific deliverables and the client does not dictate when and where you work, the arrangement may well be legal. That said, it is advisable to actively seek additional clients to reduce your risk exposure.
Can an employee voluntarily become self-employed?
Even if an employee agrees to transition to self-employed status, this does not automatically make the arrangement legal. The employee's consent is irrelevant — inspectors assess the objective situation. If the work continues to exhibit the characteristics of dependent employment, it constitutes bogus self-employment regardless of both parties' agreement.
What is the statute of limitations for bogus self-employment?
The limitation period for an offence relating to illegal work is 3 years from the date the offence was committed. Inspectors can therefore impose sanctions for bogus self-employment arrangements that took place in the past.
Keep your paperwork and deadlines in order
Properly structuring your contractor arrangements requires careful documentation — solid contracts, invoices that reflect actual deliverables and a clear overview of payments. DokladBot helps you keep your documents in order and stay on top of important deadlines. It's simple — just via WhatsApp. Take a photo of an invoice, DokladBot processes it and reminds you of anything that needs your attention.
Get started at dokladbot.cz — your business admin, finally under control.
Official sources
- Ministry of Labour and Social Affairs — Statement on the new definition of illegal work (bogus self-employment)
- State Labour Inspection Office (SÚIP)
- Act No. 435/2004 Coll., the Employment Act
- Act No. 262/2006 Coll., the Labour Code
- Czech Financial Administration
This article serves as a general information guide and does not constitute legal advice. The information is based on the legal position applicable as of February 2026, including the amendments to the Employment Act effective from 1 January 2024 and 1 January 2025. For an assessment of your specific situation, we recommend consulting a lawyer specialising in employment law.
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