Consolidation package - labour law perspective
The Act on the Consolidation of Public Budgets, or the consolidation package, brings numerous changes in labour law, in particular new obligations for both employers and employees. Major changes concern agreements to perform work outside employment. The law has already been signed by the president and is now awaiting its promulgation.
For the agreements to perform work (outside employment), two new limits for obligatory payments of social security premiums by employees are being introduced. The original fixed limit of CZK 10 thousand will change to a variable limit of 25% of the average wage (CZK 10,500 for 2024). The second limit will apply to concurrent agreements with multiple employers: both employees and employers will be obliged to payments if the worker’s remuneration exceeds 40% of the average wage (CZK 17,500 for 2024). This means that a worker’s earnings from all their agreements with all employers shall be added up. This may make work under agreements (outside employment) much less attractive for many workers.
Employers will also be obliged to inform the social security administration of the commencement and termination of work under the agreements, and of the amount of income accounted for the workers. They will also have to keep all related records. A centralised register of agreements and the income arising from them has been established, making the treatment of work performed under the agreements rather similar to that of common employment. Employers will also be obliged to notify employees in writing that they may be liable for social security contributions should they work under several agreements at the same time.
Employers who provide their employees with non-financial benefits, typically under the cafeteria system, should also be more vigilant. The advantageous tax treatment of defined non-financial leisure related benefits (admission to sports facilities, cultural events or health services) will now be capped at half the average wage for the calendar year. This means that for 2024, benefits up to CZK 21,983 should not be taxable.
Furthermore, employer contributions to employee meals are being unified in the conditions for their tax exemption, i.e., regardless of their form. The limit for the exemption of meal allowances will thus also apply to meals provided in non-financial form (meal vouchers or meals in a company canteen). For this non-monetary income to be tax exempt it will be necessary to observe the limit of CZK 107 per working shift. This is expected to increase to CZK 115.5 for 2024.
To cover the deficit caused by the COVID-19 pandemic, employees are to start contributing to sickness insurance premiums. For employees, this means that they will pay a total of 7.1% instead of the current 6.5% for social insurance. Sickness insurance will therefore account for 0.6% of gross wages.
The consolidation package is set to take effect on 1 January 2024. The effective date for the changes to the agreements to perform work (outside employment) has been postponed to 1 July 2024, hence, there is still time to prepare. Yet, by being aware of the new obligations early on, potential penalties from the inspection authorities can be avoided.