Amendment to Act on Sickness Insurance and Amendment to Act on Social Security Insurance

Increase in social insurance contributions for employees

• The social insurance rate that an employee is required to pay is increasing from 6.5% to 7.1%.  Of this, 0.6% will now be a payment for sickness insurance and 6.5% for pension insurance (Section 7 (1) (c) of Act No. 589/1992 Coll.).

Changes to contracts for work (CFW)

• As part of the consolidation package, major changes are being made to contracts for work regarding the creation of participation in sickness insurance and thus the payment of social security premiums. At present, one person can have any number of contracts for work concluded, and if he/she has less than CZK 10,000 from each income, he/she does not pay insurance premiums. The amendment should affect the limit of participation in insurance for contracts for work (Section 7a of Act No. 187/2006 Coll.).
  There should now be two new limits, where exceeding one or the other will lead to participation in the premiums for contracts for work:
  • 1st limit: 25% of the average wage (rounded down to the nearest multiple of CZK 500) for all CFW for only one employer (this year this limit would be CZK 10,000).
  • 2nd limit: 40% of the average wage (rounded down to the nearest multiple of CZK 500) for CFW for all employers in total (this year this limit would amount to CZK 16,000).
• The employer will be obliged to submit data on employees on a CFW and the amount of their income in the given month to the relevant regional social security administration by the 20th day of the following month after the settlement of the wages (the new Section 9a (1) of Act No. 589/1992 Coll.).
  Subsequently, the relevant social security administration will determine whether the sum of the assessment bases for all employers for the given employee exceeds 40% of the average wage. If it does, it shall inform all employers of the need to pay the premiums no later than 30 days after the delivery of this notice (the new Section 9a (2) of Act No. 589/1992 Coll.).
  The employer will also have to notify the relevant social security administration electronically when the employee begins a CFW and upon the termination of employment, no later than within 8 calendar days (Section 94 (1) of Act No. 187/2006 Coll.), and also to keep records of these employees (Section 95 (4) of Act No. 187/2006 Coll.). Now employers who only employ employees working on the basis of contracts for work will be obliged to register in the Registry of Employers (Section 93 (1) of Act No. 187/2006 Coll.). 
• There will also be a new information obligation for employees and employers. The employer will have to notify the employee of the possible occurrence of the obligation to pay social insurance if he has concluded CFWs with several employers and his income from all CFWs exceeds the threshold for participation in social insurance (Section 97a of Act No. 187/2006 Coll.). The employee will be obliged to inform the employer that he/she is performing work on an CFW in the same month with another employer, at the latest on the day he/she starts working at the new employer.
• In the event that participation in the insurance arises for employees on CFWs, it will no longer be possible to apply the withholding tax. The remuneration from a CFW with participation in the insurance will be subject to an advance tax.

Author: Blanka Knedlová, HR & Payroll Senior
Editor: Martina Farářová, HR & Payroll Manager