Increased Penalties for Illegal Employment from 2026: What Can Employers Expect in Practice
As of 1 January 2026, legislative changes have entered into force that significantly tighten sanctions for illegal employment. The most notable change is the increase of the minimum fine to EUR 4,000. This represents a major intervention in the field of labour law and occupational health and safety, affecting virtually every employer regardless of company size or sector.
Through this measure, the legislator is responding to the long-standing issue of illegal work and aims to strengthen employee protection as well as ensure a fair business environment. From the employers’ perspective, however, this change requires increased attention and more thorough internal compliance processes.
Illegal employment continues to include, in particular, the performance of dependent work without a properly concluded employment relationship, failure to register an employee with the Social Insurance Agency before the commencement of work, employment of third-country nationals without valid residence or work permits, as well as so-called bogus self-employment (the “Švarc system”). In practice, inspection authorities increasingly assess not the formal designation of a contract, but the actual substance of the relationship and the manner in which work is performed.
The increase of the minimum fine to EUR 4,000 has a substantial practical impact. Administrative authorities will have significantly less discretion to take into account the seriousness or short duration of the infringement. Conduct that might previously have resulted in a milder sanction may now lead to a considerable financial penalty. This is particularly sensitive for smaller employers, for whom such fines may have a serious economic impact.
Closely linked to this development is the growing intensity of inspections. Labour inspectorates are granted extensive powers, including the ability to carry out inspections without prior notice, enter workplaces, examine documentation on site and question workers. In practice, inspections often focus on the use of self-employed contractors, subcontracting arrangements, short-term and seasonal work, as well as the employment of foreign nationals.
For employers, this means the need to carefully review whether their employment relationships are structured in compliance with the law. Particular attention must be paid to registration obligations with the Social Insurance Agency prior to the employee’s first day of work, as well as to the regular verification of permits and documentation of foreign workers. It is also advisable to reassess cooperation with self-employed individuals to ensure that such arrangements do not meet the characteristics of dependent work.
Experience shows that the most common issues do not arise from intentional violations of the law, but rather from underestimated formal obligations or inadequately set internal processes. For this reason, preventive legal audits play a crucial role, as they can identify risks in a timely manner and help avoid sanctions that will be significantly higher under the new rules.
The increase in penalties for illegal employment from 2026 sends a clear signal that the state intends to adopt a stricter approach in this area. For employers, this means a need for higher legal discipline, but also an opportunity to structure employment relationships in a transparent and sustainable way.
