From 1 July 2024, all employers in the Czech Republic will be obliged to report monthly on concluded contracts for work (DPPs)
Initial provision on performance contracts
The DPP changes were originally introduced by Act No. 349/2023 Coll. known as the consolidation package to improve the state budgets.
The proposal stipulated:
- introduction of two sickness insurance participation limits for labour contracts. The first limit will be 25% of the average salary with one employer. The second limit will apply if the employee has entered into a Labour Contract with more than one employer. In this case, participation in sickness insurance would occur when the limit of 40% of the average salary of more than one employer is reached. We have described this topic in detail in our article. This rule was cancelled before the above-mentioned amendment came into force.
- the introduction of the obligation to report all work performance agreements to Social Security on a monthly basis. This obligation has been maintained and remains in force.
New obligations of employers under the DPP from 01.07.2024
From 1 July 2024, all employers will be required to report monthly on concluded work contracts. The report will have to be submitted electronically in the prescribed form «Statement of income accrued by the employer to employees working under a work contract». Employers will be required to submit this form by the 20th of the following month. The first report for July must be filed by 20 August 2024.
Employers must list by name in the report all employees with DPPs, including those with whom no Social Security and Medicare payments arise and those who were not paid at all in a given month.
On the form, the employer must include all the employee’s details and the amount of income accrued under the labour agreement to that employee in a given month. The form is also used to register and deregister the employee.
Contracts of employment (DPČ) will not be included in this reporting. Here the changes are not imminent. As before, employees on DPČ will be subject to social and health insurance only if their salary is CZK 4,000 per month or more.
DPP from 1 January 2025
Until the end of 2024, contracts for the performance of work (DPP) up to CZK 10,000 per month with a single employer will not be subject to insurance contributions. From 1 January 2025, such contracts will be subject to social and health insurance contributions if the income reaches the small employment limit. In 2024, this limit is CZK 4,000. It is expected that from 1 January 2025 this limit will be increased to CZK 4,500.
If an employee works under two DPP contracts with the same employer and the total income exceeds the ceiling, the employee will be subject to insurance on both contracts. If the employee has two DPP contracts with two different employers and the income of each of them does not exceed the ceiling, insurance premiums will not be payable on either contract.
Scheme of notified agreement
As of 01.01.2025, the DPP notified agreement scheme will be introduced, according to which only one employer will be able to apply it to one employee. Such «First» employer will only pay social and health insurance contributions if the salary exceeds 25% of the set average salary rounded up to CZK 500. This is expected to be the amount of CZK 11,000 in 2025.
I.e. from 2025 onwards, the «First» employer monitors the limit of 11,000 CZK for the employee in question and the other employers monitor the limit of 4,500 CZK. If the salary does not exceed these limits, no contributions to the social and health insurance fund are made, such income is only subject to income tax.
Health insurance with DPP from 1 January 2025
As of 1 January 2025, participation in health insurance for DPP contracts will take place under the same conditions as for social insurance. If a DPP employee is subject to health insurance, the employer is obliged to pay his/her contributions at least at the minimum assessment base, which is CZK 18,900 in 2024. The amount of the minimum wage for 2025 is currently unknown.
The obligation to pay at least the minimum contribution base for health insurance does not apply to employees who are not subject to the obligation to comply with the minimum contribution base, i.e. persons for whom the state pays insurance contributions (e.g. students up to the age of 26, pensioners, recipients of parental pensions, persons receiving maternity benefits, persons providing full-time personal and proper care for at least one child under the age of 7 or at least two children under the age of 15, etc.) or self-employed persons. If an employee has more than one job with health insurance, the contribution bases are added together. The employer must be able to prove that the conditions for not having to pay health insurance at the minimum base are met.
Conclusion
These innovations are designed to improve transparency and record keeping of performance contracts, but they will also entail significant labour costs for employers and accountants. Monthly reporting and compliance with the new rules require meticulous attention to detail and timely execution, which can distract you from your strategic objectives and business development.
Entrust this complex and time-consuming job to the professionals at DoMyTax. We’ll ensure that all new obligations are met accurately and on time, freeing you up to do more important things — grow and prosper your business.
