On 20 June 2024, Act No. 163/2024 Coll., amending Act No. 240/2013 Coll., on Investment Companies and Investment Funds, as amended, and other related acts (hereinafter referred to as the “Amendment to the Consolidation Package“), which substantially amended the rules introduced by Act No. 349/2023 Coll., amending certain acts in connection with the consolidation of public budgets (hereinafter referred to as the “Consolidation Package“), entered into force.
The consolidation package was supposed to apply new rules for employees working on the basis of labour performance agreements (hereinafter referred to as “LPAs”) from next week, i.e. from 1 July 2024, with the following fundamental changes:
- A limit should have been set for the application of withholding tax for FTEs and the limit for participation in social security and health insurance should have been set at 25% of the average wage in the case of FTEs with one employer. In the case of multiple DPPs with several employers, the limit for participation in pension insurance should have been set at 40 % of the average wage.
- There was to be an obligation to register employees working on a FTE with the CSSA.
The amendment to the consolidation package resulted in substantial last-minute changes, as a consequence of which only the obligation to register employees working on a DPP with the CSSA by 1 July 2024 remained in force, while other changes in the area of Act No. 187/2006 Coll., on Sickness Insurance (hereinafter referred to as “SSA“) and Act No. 589/1992 Coll., on Social Security Contributions and Contributions to State Employment Policy (hereinafter referred to as “PES“), were cancelled.
Until the end of the year, therefore, the current situation will continue to apply, according to which employees working on the basis of a temporary employment contract are covered by sickness and pension insurance only in those calendar months when their countable income exceeds CZK 10,000.
From 1.7.2024 the following changes will apply:
- Section 95(4) of the Labour Code enters into force, according to which the employer is obliged to keep a register of its employees working on the basis of a work performance agreement, which contains the information referred to in Section 95(1) of the Labour Code.
- According to the amendment to the ZSPS, a new section enters into force. § 9a of the ZPSZ, according to which the employer is obliged to submit to the competent territorial social security administration, on a prescribed form, the data on these employees (these data include name and surname) by the twentieth day of the calendar month following the calendar month in which the employer employed employees working on the basis of a PPA, birth number or date and place of birth if no birth number has been assigned, the date of commencement of employment and the date of termination of employment of that employee and the amount of income charged to those employees for the relevant calendar month). In the case of income charged by the employer to those employees after the end of their employment under a work performance agreement, the employer shall also indicate the calendar month in which that employment ended.
We therefore briefly set out a schedule of obligations for employers:
- the registration obligation will apply from 1 July 2024 for every employee on a FTE who joins the employer, regardless of whether or not he/she has been covered;
- reporting will be sent once a month;
- an employer who has so far employed only uninsured employees on a DPP basis must register in the CSSA’s register of employers by 31 July 2024 at the latest .
- from 1 August 2024 , it will be obligatory to send regular reports on the income of all individual employees on the FTE (always by the 20th day of the following month);
- by 20 August 2024 at the latest employees who started their FTE before 1 July 2024 must be registered if they have not yet been registered and their FTE continues in July 2024.
Further changes are planned from 1 January 2025, when there will be a complete change in the insurance of employees working on the basis of a PPA, including a change in the area of social insurance contributions to the so-called “notified agreement” regime.
- The Notified Agreement Scheme will apply to those employees whose employer applies the scheme first (i.e. before any other employer for whom the employee is also working under a FTC). Only one employer can apply the Notified Agreement Scheme to the same employee under the Notified Agreement Scheme in a calendar month.
- The condition for the application of the notified employee scheme under the DPP is the prior notification of the intention to apply the notified agreement scheme to the CSSA in the prescribed form in electronic form to the designated electronic address. Similarly, employers will be required to notify the CSSA of the termination of the application of the notified agreement scheme.
- In the notified agreement scheme, the decisive amount for participation in the insurance will be 25% of the average wage determined in accordance with Section 23b(4) of the PPLA, rounded down to the nearest five hundred crowns (the “Determined Amount“). An employee in the notified agreement scheme will only be insured in those calendar months during the duration of the PPLA in which the employer has credited him with income from the work performance agreement at least equal to the Determined Amount. This applies even if the employee carries out work for the same employer on the basis of a PPA and his or her imputable income reaches the Applicable Amount in aggregate.
- Employers will be able to check with the CSSA through their application whether there is a registered intention to apply the notified agreement scheme to an individual employee.
- Other employment on the basis of a FTE will be considered as regular employment or small-scale employment, depending on the amount of income agreed per calendar month.
- However, we also expect that there will be further clarification of the rules in this area, including the setting of precise limits by the Ministry of Labour and Social Affairs.
This article is for informational purposes only and does not constitute legal advice or guidance for any particular case.
If you would like more information in this regard, please do not hesitate to contact us.