Legislative change in Czechia – Social insurance payment discount for employer

SME INFO CZ Nr.2023-02:   This legislative change – came into effect on 1 February 2023 –  is intended to motivate employers to employ disadvantaged groups of employees, and to provide these employees with more opportunities to work employment with shortened weekly hours. However, there are multiple conditions and administrative details to work out for each case, so most of the experts do not see this change in a positive light.

Download here the English+Czech bilingual pdf of SME Info Czechia Nr.2023-02 newsletter:
Legislative change in Czechia – Social insurance payment discount for employer 

Basic information regarding the social insurance discount

The discount is for the portion of social insurance paid by the employer and is set as a 5% discount. Meaning, if the discount is used, the social insurance calculated as a percentage from the assessment basis for the affected employees is 19.8% instead of 24.8%.

 

Basic conditions for the social insurance discount

The employee must fall into one of the following groups for the employer to be eligible for the discount:

  • Is older than 55 years of age
  • Is taking care of a child younger than 10 years of age
  • Is taking care of a relative younger than 10 years of age who at the same time is dependent on help from another person
  • Is preparing for future employment as a student (has to be younger than 26 years of age, and studying a full-time attendance study program)
  • In the last 12 months before the month for which the discount is applied took part in an accredited requalification (based on a confirmation from the Labor office)
  • Has a disability (confirmed by the Czech Social Security office)
  • Is younger than 21 years of age

 

With exception of an employee younger than 21 years of age, there is another condition for the discount to be applicable which is that the employment contract also has to be contracted for shorter weekly hours, where the contracted weekly hours have to be between 8 to 30 hours.

The conditions have to be valid the whole time the employment lasted in the respective calendar month.

In case an employee has more employment contracts with the same employer, only one of the contracts is eligible for the discount.

 

Conditions which make an employee ineligible for the discount

  • Social assessment basis of all employment contracts at the respective employers is higher than 1.5 times the average salary (the threshold is CZK 60,486 in 2023).
  • Social assessment basis of all employment contracts at the respective employer divided by the number of hours worked at these employment contracts is higher than 1.15% of average salary (the threshold is CZK 463,726).
  • The total amounts of hours worked in all employment contracts at the respective employer is higher than 138 hours.
  • Employee with a disability employed by employers who employ more than 50% of employees with disabilities.
  • Employees’ salary is fully or partially compensated by the kurzarbeit government support.

 

Administrative duties

The employer is obliged to secure documents confirming that the social insurance discount can be applied for the respective employee. This might prove difficult, as the employee has no benefit from the discount, and this step comes with a responsibility for them to update the employer in case their situation changes in a way that would make them ineligible for the discount.

 

After securing the necessary information and documents which confirms that the employee might be eligible for the discount, the employer is then obliged to inform the Czech Social Security office about the intent to apply the social insurance discount for the specific employee. The reason for this is that the employee might have more employers – and only one of them can have the option to apply the discount to the social insurance calculation. The Czech Social Security Office will inform the employer, whether another employer did or did not apply for the social insurance discount for this employee, and whether the social insurance discount can be applied.

 

The discount for the respective month is applicable on the date the social insurance payment for the respective month is due at the latest and is applicable only if the statutory report regarding the social insurance for the respective month is filed by its due date.

 

If any of the steps above are not done correctly or if the employee does not inform the employer about a change in their situation regarding the conditions for the discount, the resulting difference in the social insurance calculation will be considered a debt at the social insurance in the respective month and will come with a penalty for the late payment.

 

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Download the English+Czech bilingual pdf of SME Info Czechia Nr.2023-02 newsletter:
Legislative change in Czechia – Social insurance payment discount for employer 

You may be interested in former SME Info Czechia:

Legislative changes affecting payroll processing since the start of year 2023 in Czechia – SME Info Czechia Nr.2023-01

 

 

 

The purpose of SME INFO is to provide general information and to draw the attention to the current changes in law which we believe to be important for the business operation of our clients. It is not a replacement for careful review of the acts and rules and the consultation with your tax advisor. © Copyrights 2023, Process Solutions, – All rights reserved

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