After several months of discussions, the changes to the regulation of employment contracts, registration of contractors, taxation and payment of insurance premiums have finally been approved and are one step closer to being implemented.
The two most important dates are:
In addition to the monthly statement, there is also an obligation to report the commencement and termination of the FTE. All information will be reported electronically to the CSSA by the 20th day of the following month on a prescribed form.
This obligation brings increased administration and workload for your HR and payroll processors. We recommend preparing your payroll team and software for the upcoming change early and ensuring all information is in place for a smooth transition from 1 July 2024.
The modification approved by the MPs introduces two modes of work performance agreement, which can be referred to as main (notified agreement) and secondary (non-notified agreement). The first regime will apply to those work performance agreements that are reported by the employer to the CSSA register. The existing rules will apply to these agreements, and the employer will have to pay the insurance premium if the monthly earnings of the employee on a DPP exceed a quarter of the average wage, currently CZK 10,500. It will also be possible to apply withholding tax in this case.
However, stricter rules will already apply to all other agreements an employee may have with other companies. Insurance premiums will have to be paid for all those with a monthly income above CZK 4,000.
It will therefore depend on which of the employers registers its contractor first. The aim of the change is to prevent the chaining of work performance agreements. Under the old conditions, a person could have several work performance agreements with different employers, and if all of them individually fell within the CZK 10,000 earnings limit, he or she could avoid paying insurance premiums even with a regular income of several thousand crowns, which burdened the state coffers.
Employers objected to the originally proposed conditions for the payment of insurance premiums under the DPP from the second half of last year, arguing that the obligations were not very clear and that they would not be able to plan how much employing people on the DPP would actually cost them. The newly approved regulation simplifies and clarifies the conditions compared to the originally proposed regulation. Nevertheless, the regulation is more complex than it was before. The administrative burden will increase significantly in connection with the obligation to report individual agreements when they are implemented. The increase in administrative burden for performance agreements
The amendment to the Labour Code from last year, which introduces information obligations, leave and other regulation of work performance agreements, as we have already informed you in previous issues of the newsletter, has also contributed to this.
MPs approved the amendment to the Investment Companies Act, to which changes for the DPP were added as an amendment by Labour and Social Affairs Minister Marian Jurečka. The amendment still needs to be approved by senators and the president, but no complications are expected in the further legislative process, so companies should already start to take it into account.
Author: Jan Tuček
The two most important dates are:
- 1 July 2024 from when agreements on work performance will be registered and reported to the CSSA
- 1. 1. 2025 from when the change in the limits and conditions of taxation and levies will be introduced
Records of agreements on the performance of work
As of 1 July 2024, employers are obliged to register all employees who have concluded an agreement to perform work with the Czech Social Security Administration (CSSA). The employer will be obliged to send a monthly list of employees on a DPP through the form "DPP Statements" published by the CSSA. The deadline for submitting the statement is the 20th day of the following month, i.e. for the first time for July by 20 August 2024.In addition to the monthly statement, there is also an obligation to report the commencement and termination of the FTE. All information will be reported electronically to the CSSA by the 20th day of the following month on a prescribed form.
This obligation brings increased administration and workload for your HR and payroll processors. We recommend preparing your payroll team and software for the upcoming change early and ensuring all information is in place for a smooth transition from 1 July 2024.
Tax and insurance premiums for concurrent work performance agreements
On Wednesday, 17 April 2024, the Chamber of Deputies approved a modification of the conditions for payment of insurance premiums for contingent workers, specifically for those employed under an agreement to perform work. The tightening of the conditions for payment of social and health insurance was originally supposed to take place from July this year, but the deputies decided otherwise. The changes to the levy and taxation of PPAs will only come into effect from January 2025, under the new conditions. As a result, companies will continue to benefit from employing people on VPAs, but only those who have only one work performance agreement in total, or those who are the first to be registered with the Czech Social Security Administration (ČSSZ) before other employers where the employee also has a signed VPA.The modification approved by the MPs introduces two modes of work performance agreement, which can be referred to as main (notified agreement) and secondary (non-notified agreement). The first regime will apply to those work performance agreements that are reported by the employer to the CSSA register. The existing rules will apply to these agreements, and the employer will have to pay the insurance premium if the monthly earnings of the employee on a DPP exceed a quarter of the average wage, currently CZK 10,500. It will also be possible to apply withholding tax in this case.
However, stricter rules will already apply to all other agreements an employee may have with other companies. Insurance premiums will have to be paid for all those with a monthly income above CZK 4,000.
It will therefore depend on which of the employers registers its contractor first. The aim of the change is to prevent the chaining of work performance agreements. Under the old conditions, a person could have several work performance agreements with different employers, and if all of them individually fell within the CZK 10,000 earnings limit, he or she could avoid paying insurance premiums even with a regular income of several thousand crowns, which burdened the state coffers.
Employers objected to the originally proposed conditions for the payment of insurance premiums under the DPP from the second half of last year, arguing that the obligations were not very clear and that they would not be able to plan how much employing people on the DPP would actually cost them. The newly approved regulation simplifies and clarifies the conditions compared to the originally proposed regulation. Nevertheless, the regulation is more complex than it was before. The administrative burden will increase significantly in connection with the obligation to report individual agreements when they are implemented. The increase in administrative burden for performance agreements
The amendment to the Labour Code from last year, which introduces information obligations, leave and other regulation of work performance agreements, as we have already informed you in previous issues of the newsletter, has also contributed to this.
MPs approved the amendment to the Investment Companies Act, to which changes for the DPP were added as an amendment by Labour and Social Affairs Minister Marian Jurečka. The amendment still needs to be approved by senators and the president, but no complications are expected in the further legislative process, so companies should already start to take it into account.
Author: Jan Tuček