What's the Difference Between Zivno and a Work Contract?

The short answer: these are two completely different ways of working, and mixing them up can get both you and your employer into serious legal trouble.

Let's start with a simple example. Imagine you work at a hotel reception. You show up when the hotel tells you to, you follow their check-in procedures, you use their computer systems, and if a guest complains about something, it's ultimately the hotel's problem to fix. You are not working independently - you are following instructions, working in someone else's name, and taking on zero risk yourself. That is employment, and it requires a standard work contract.

Now imagine you are a freelance web developer. You take on projects from multiple clients, set your own hours, work from wherever you want, and invoice each client separately when the job is done. You choose how the work gets done, and if something goes wrong, it's your problem to fix. That is genuine self-employment - and that is what zivno is for.

So why does the difference matter so much?

In the Czech Republic, employees and self-employed persons are treated very differently by the tax and social security system. Employees have their contributions paid largely by their employer. Self-employed persons handle their own taxes, health insurance, and social security - and get to claim flat-rate expenses, which can significantly reduce their tax bill. This means that hiring someone "on zivno" instead of giving them a proper work contract can save a company a lot of money.

And that is exactly where things get dangerous.

The Švarc System: when "freelancing" is actually illegal

As Jan Kalina, Managing Partner of Move To Prague and Czech immigration expert, explains in his video about the Švarc system, the line between legitimate freelancing and illegal fake employment is often much thinner than people realize - and crossing it can have serious consequences for both the company and the freelancer.

The so-called "Švarc system" - named after Czech entrepreneur Miroslav Švarc who popularized the practice in the 1990s - refers to a situation where someone is officially working on a zivno, but in practice functions exactly like an employee. They show up at set hours, follow the company's instructions day-to-day, use company equipment, have a company email address, and invoice the same amount every month. Legally, this is not freelancing - it is disguised employment, and it has been illegal in the Czech Republic since 1992.

In 2025, the Czech government significantly tightened the rules. Companies caught running the Švarc system can now face fines of up to CZK 10,000,000, a ban on business activities for up to two years, and public blacklisting. And since 2025, the freelancer themselves can also be fined up to CZK 100,000 - so it is no longer just the company's problem.

How to tell which one applies to you

Ask yourself these four questions:

1. Do you work under someone's direct supervision and follow their daily instructions?
2. Do you work in their name, using their tools and their systems?
3. Can you not refuse tasks or decide how the work gets done?
4. Do you work exclusively for one client, month after month?

If the answer to most of these is yes, what you have looks a lot more like employment than freelancing - regardless of what it says on the contract.

The bottom line: zivno is for people who genuinely work as independent contractors. If the reality of your day-to-day work looks like a job, it probably needs a work contract to match.

The trade-off: security vs. freedom

One more important difference worth understanding before you decide which path is right for you. As an employee with a work contract, Czech labor law gives you a solid safety net. You are entitled to a minimum of four weeks of paid vacation per year, paid sick leave, and if your employer wants to let you go, they generally have to give you at least two months' notice - and in some cases, pay you a severance package on top of that. If something goes wrong, the law is largely on your side. As a zivno holder, none of that applies. Your client can stop working with you tomorrow with zero notice and zero compensation. You do not get paid when you are sick, and vacation is simply time you choose not to work - and therefore not to earn. That is not necessarily a bad thing; many freelancers happily trade the safety net for the flexibility and the tax advantages. But it is something you need to go into with your eyes open.

If you are not sure which one applies to you or you know and want to get the trade license, reach out to us, we'll be happy to help! 

Move To Prague - Amazing Experience. Every Time.