Czech Business Today

The governing coalition could negotiate agreement modifications as early as this week. Discussions in the expert group suggest that the current rules could continue to apply to the contract that a company with a contract employ first reports to the Czech Social Security Administration (ČSSZ). Insurance premiums would only be paid on it if the monthly earnings at the company exceed roughly CZK 10,000, as is the case today. Employers have reduced the number of agreements in response to legislative changes to agreements on work performance and work activity, triggered by amendments to the Labour Code and the consolidation package. They often redistributed work among other employees, hired self-employed persons or converted agreements into part-time or full-time jobs. They also hire more workers under different contractual arrangements, such as work contracts, or use the services of employment agencies. Around 30% of employers in Czech Republic reported that the government changes had no impact on the employment of contract workers in their firms. This is according to a new survey by the Chamber of Commerce of 457 businesses across the Czech Republic.

In the Czech Republic, large firms with over 250 employees were the most likely to reduce the number of contract employees. Also 60% of large firms redistributed their work at least partially among other employees. Compared with a significantly higher proportion in different sectors, personal services firms were the most responsive, with only one-fifth of them making no changes to contract employment.

Changes to the rules on employment outside the employment relationship were introduced by the amendment to the Labour Code and, in addition, by the government’s consolidation package. Employers must now schedule the working hours of employees on agreements at least three days in advance. Contract employees are also now entitled to holiday pay and extra pay for working on weekends and public holidays.

In addition, the consolidation package introduces an obligation for employers to report contingent contract employees to the ČSSZ from 1 July this year. At the same time, when agreements with several employers coincide, and the limit is exceeded, the employer will be obliged to pay social and health insurance on the remuneration and will have to pay it back, which will massively increase bureaucracy and uncertainty for employers in personnel planning.

Among other things, the Czech Chamber of Commerce (HK CR) is concerned that the employer will not know until the last moment how much the contract employ will cost him in the end. It is also concerned that the parametric adjustments will reduce the participation of specific population groups, such as students, mothers on parental leave or the elderly, in the labour market, which HK CR has long recommended to increase due to unfavourable demographic trends. It has, therefore, challenged the adjustments to the agreements both in the inter-ministerial comment procedure and during the approval of the recovery package.

The government coalition could discuss the agreement modifications as early as this week. Discussions in the expert group suggest that the current rules could continue to apply to the contract that a company with a contract employ first reports to the ČSSZ. Insurance premiums will only be paid on the contract if the monthly earnings at the company exceed roughly CZK 10,000, as is the case today.

According to earlier surveys by the HK CR, 93% of employers provide work on agreements. Thus, over 250,000 employers must adapt to the new rules. Companies mainly employ students, seniors, and mothers on parental leave.

The government has decided to severely restrict agreements because of the practice of people avoiding paying insurance premiums by entering into agreements with many employers. According to the Ministry of Labour and Social Affairs’ calculations based on data from 2021, insurance contributions are not paid on more than CZK 50 billion of agreement earnings in the Czech Republic, which deprives the social security system of about CZK 15 billion a year. This is why the HK CR is calling for the rules to be adjusted so that the agreement for earning extra income remains simple and advantageous for those who want to increase their income through their own activity.

Source: komora.cz