[Czech Republic] Adjustment of the new rules for agreement on the performance of work

In our articles of 4 December 2023 and 22 December 2023, we informed about the upcoming changes in the field of social insurance for labour agreement on the performance of work (DPP). The changes, which were to come into force from 1 July 2024, established a new obligation for employers to report to the Czech Social Security Office (ČSSZ) the income earned by their workers on agreement on the performance of work (DPP). The Czech Social Security Office (ČSSZ) had to then sum up all incomes of a given worker with several employers and, if the limit of 40% of the average wage was reached (for 2024 it would be CZK 17,500), it had to retroactively impose social insurance premiums. This summarization of agreements has been replaced by other legislation, which was approved by the Chamber of Deputies in April 2024 and is now being discussed in the Senate.

If the new legislation draft will pass in the Senate and will be signed by the President, the original legislation will be partially repealed and the new legislation that should replace it will be postponed from 1 July 2024 to 1 January 2025. According to the new proposal, agreement on the performance of work (DPP) should be in the same regime as full-time employment (HPP) or agreement on work activities (DPČ). If the agreed remuneration reaches at least CZK 4,000 (the limit for 2024), the agreement on the performance of work (DPP) would be automatically insured and insurance premiums would be deducted. If the agreed remuneration in the agreement on the performance of work (DPP) would not be fixed or would be less than CZK 4,000, it would be a small-scale employment and the insurance would only arise in the months when the income from the agreement on the performance of work (DPP) reaches the threshold of CZK 4,000. However, the new legislation draft introduces one major exception.

It is suggested that there should be a so-called notified agreement regime. Under this regime, insurance would only apply if the income from the agreement on the performance of work (DPP) in a calendar month reaches 25% of the average wage (for 2024 this is CZK 10,500). In order to be covered by the notified agreement scheme, the employer must notify the Czech Social Security Office (ČSSZ) of its intention to apply the notified agreementregime. If no other employer is already using this regime for the employee, ČSSZ will confirm the employer that the agreement on the performance of work (DPP) is newly under the notified agreement regime and the employer who has received this confirmation from the ČSSZ can apply these special rules.

The principle is that if an employee has multiple agreement on the performance of work (DPP) with multiple employers, only one employer will be able to apply the ” advantageous ” regime, where the insurance premium will be paid only if the employee achieves an income of approximately CZK 10,500, and it will be the employer who notifies the intention to apply this regime first. Other employers will be out of luck and will have to pay the insurance premiums under the same conditions as for full-time employment (HPP) or agreement on work activities (DPČ). The notice of intent is quite similar to the employer’s intent to notify the application of the part-time premium discount, which we reported on in our 29 July 2022 article. One employer will be able to apply the advantageous scheme and the others will not. The rule is “first come, first served”.

In conclusion, the obligation to notify the ČSSZ the income earned on the agreement on the performance of work (DPP) from the original legislation is to be maintained. Thus, from 1 July 2024, employers should report to ČSSZ their income on the agreement on the performance of work (DPP) on a monthly basis via a special form which is being prepared.