Agreement to perform work 2024 - levies

Author of the article: Mgr. Jakub Oliva, LL.M., MSc., ARROWS

In this article, we will look in detail at the changes to the performance of work agreement (PWA). There will be many changes in 2024 and also from 1 January 2025, especially in the area of levies, which need to be well understood. What all will change this year and the binding rules for 2025 can be found in the article below.

Records of agreements on the performance of work

From 1 July 2024, all agreements on the performance of work in the Czech Republic will be registered. In practice, the employer will be obliged to notify the date on which the employee started working on a TPL.
and the termination of that employment, in each individual case. The deadline for notification is set at the 20th day of the month following the date of commencement of employment.

The employer will also be obliged to send the CSSA information on the income of each employee working on a FTE every calendar month (again by the 20th day of the following month). All of the above (i.e. notification of the commencement and termination of employment of an employee on a FTE and notification of the amount of his/her income) will have to be done electronically by the employer on a newly prescribed form (FTE statement). If the employer is not currently registered in the register of employers because it only employs uninsured employees on a FTE, it will have to register in the register of employers by 30 July 2024 at the latest.

Practical examples:

1. An employee will start on a temporary employment contract with the employer on 1 August 2024. The employer must report such an employee to the CSSA no later than 20 September 2024, by which date the employer must state the employee's income for the month of August 2024 on the prescribed form (the DPP statement). The employee must then, for each calendar month, always by the 20th day of the following month, until the end of the employee's employment, which he/she shall also notify to the CSSA.
2. The employee has already started on the FTE before 1 July 2024 and his employment continues in July 2024. The employer shall notify the CSSA of this employee by 20 August 2024 at the latest, together with his income for the month of July 2024.

Social security and health insurance contributions for FTEs from 1 January 2025

From 1 January 2025, employers and employees will see an even more significant change in the case of performance contracts. From the beginning of 2025, the so-called notified and unnotified agreement regime will be introduced, which will affect the limits for compulsory social and health insurance contributions.

The advantage of the notified agreement scheme will be that the employee's monthly income limit for the payment of social security and health insurance premiums will be set at 25% of the average wage rounded down to CZK 500 (in 2024 this amount is CZK 10,500, in 2025 this amount will very likely increase). In order for a particular FTA to fall under the notified agreement regime, the employer will have to notify the CSSA electronically on a prescribed form of its intention to apply the notified agreement regime. Upon notification by the employer, the CSSA will automatically check whether the employee is already registered under this scheme with another employer. Should the CSSA already have such an agreement registered, it will reject the employer's intention to apply the notified agreement scheme. In the case of a FTA that will be active on 1 January 2025, it is therefore necessary not to delay too long and to report the agreement as a notified agreement as soon as possible. The employer is also subject to reduced levy obligations, so a notified agreement will be less costly for the employer as a result.

Practical example:

An employee starts work on the basis of a work performance agreement. The employer notifies the CSSA electronically on a form of the intention to apply the notified agreement scheme, including the start of employment. If the intention is not registered with another employer, the CSSA will not refuse to register the intention. Contributions on behalf of the employee do not have to be paid if the employee does not reach the monthly income limit of 25% of the average wage rounded down to CZK 500.

"Bookings" for the notified agreement scheme will have to be made no later than the 20th day of the following month from which the employer wishes to use the notified agreement scheme. It should be noted that only one employer will be able to apply the notified agreement scheme in any one month, even if the FTEs do not overlap in time. The termination of the 'reservation' of the notified agreement scheme will then be effected by the employer's notification of the termination of the notified agreement scheme, by the employer's notification of the termination of the PPA, or at the request of the employee who proves that the PPA has already been terminated.

As is clear, in an agreement where the notified agreement regime does not apply, the conditions for the payment of premiums will be different. In fact, under the non-notified agreement regime, the terms and conditions of the negotiated agreement will apply as for other employment relationships. The relevant question is therefore whether or not the FTC under the non-notified agreement scheme will fall within the scope of the so-called small-scale employment. At present, small-scale employment is defined as employment in which the agreed amount of the countable monthly income from that employment is lower than the qualifying income for participation in sickness insurance or the countable income has not been agreed at all. In 2024, this amount is set at CZK 4,000, and it is expected to be CZK 4,500 in 2025.

Practical examples:

1. The concluded PPA is a small-scale employment and the notified agreement regime does not apply.
   The employee's income in the month of January is CZK 3,000. In this case, no insurance premiums are deducted.
2. The concluded FTC is a small-scale employment and the notified agreement regime does not apply.
   The employee's income is CZK 5,000 in January. In this case, the insurance premium is paid.
3. The concluded PPA is not a small-scale employment and the notified agreement regime does not apply. The employee's income is CZK 1,000 in January. In this case, the insurance premium is paid because the employee
   is covered by sickness insurance for the entire period of employment, regardless of the amount of income.
4. The notified agreement regime does not apply to the concluded FTA. According to the contract, a remuneration of 200 CZK/hour is agreed, the employee will work according to the actual need. The FTE is thus a small-scale employment, as no countable income has been agreed at all (we do not know how many hours the employee will work). Assume that the qualifying income for participation in the NP is to be CZK 4,500 in 2025. In January 2025
   the employee's income was:

1. 1. CZK 6,000 - the employee participates in NP, the insurance premium is paid
   2. CZK 3,000 - the employee is not participating in the NP, no premium is deducted
   3. CZK 3,000 from the DPP and CZK 2,000 from the FTE (also small-scale). The total is CZK 5,000, the employee is participating in the NP from both jobs, the insurance premium is paid on both CZK 3,000 and CZK 2,000.
      

Changes to the DPP that are already in force

Finally, it is worth remembering that there have already been a number of changes in relation to employees working on a FTE from 1 October 2023 and from 1 January 2024 onwards. Employees working on a FTE are now entitled to holiday pay or additional pay for weekend, holiday and night work, including compensatory time off, if the conditions are met. In addition, if the employee has worked for the employer in previous 12 months, he may request in writing to transfer to the main employment relationship. The Labour Code has also introduced new information obligations for employers. Finally, whereas, the fact that the FTE is often used for temporary student employment, we also consider it appropriate to point out that in 2024 it will no longer be possible to use the student discount, which has been abolished.

If you too are dealing with employing people on non-employment agreements and are unsure of the legal or tax matters, please do not hesitate to contact us.