Financial administration stepping up illegal work checks
The Czech financial administration is significantly intensifying its inspection activities focused on illegal forms of employment, in particular disguised labour mediation. We therefore recommend that all employers pay increased attention to the correct setting of their labour-law relations.
In its press release, the financial administration points out that within its analytical activities and inspections, it aims to assess the actual economic substance of business relationships and the factual characteristics of the work performed, and verify compliance with tax obligations. Several recurring patterns of illegal work have emerged from the financial administration’s inspection practice. Most common are artificially created contractual relationships involving chains of companies, including formal employment agencies, where it is often impossible to trace the actual legal employer of the workers provided.
Another risky scheme involves chains of legal entities that invoice for the delivery of work even though the employees perform the work under the direct supervision of the user.
The financial administration also mentions cases where employers formally transform part of taxable wage to various types of allowances to which employees are not entitled or that are provided to employees on a lump-sum basis, which are not subject to tax: such as travel allowances, contributions for the maintenance of work clothing, or allowances for wear and tear on personal tools. These allowances are sometimes paid unjustifiably, or their amounts are overestimated through lump-sum calculations.
The financial administration recommends that companies take specific measures and always verify the actual nature of the cooperation. If a user cooperates with an employment agency, they should verify the validity of its license from the Ministry of Labour and Social Affairs and require proof that the agency pays the mandatory contributions for its employees. According to the financial administration, caution is advised, and in case of uncertainty, consulting an expert is recommended.