21.01.2021 Salary

[Czech Republic] Payroll – changes in 2021

The beginning of the year is traditionally a period of changes, whether we are talking about changes in legislation, as well as changes in various limits and important amounts. So let’s summarize the main changes that occurred with the new year.

Repealing of “super-gross” wage

After 13 years, the super-gross wage has been abolished, which means a real reduction in employees’ tax burden. The new tax will be calculated only on the basis of gross wage and the tax base will not be increased by health and social insurance paid by an employer. At the same time, the taxpayer tax relief was increased to CZK 2,320 per month (it will increase again to CZK 2,570 in 2022). The so-called solidarity tax was formally abolished, yet in fact the second tax rate remained at almost the same level and the limit from which it will be paid will be calculated as it was until 2020. Newly, people with higher wages, taxed by the higher tax rate of 23%, will not have an obligation to file a tax return.

The limit for the higher tax rate increased to CZK 1,701,168 per year, resp. 141,764 CZK per month.

Holiday in hours

In the article from 22.6.2020, we have already informed about a significant change in the calculation of the holiday entitlement. As of January 1st, 2021, the holiday entitlement is calculated in hours. This has eliminated some of the disadvantages, especially for employees with uneven distribution of working hours and employees who work fewer days a week. Although the entitlement is calculated in hours, the holiday may be taken in half of the work shift unless it is the final remainder of the holiday for the year or at the end of the employment relationship.

Monetary contributions for meals

Employers can now contribute to employees’ meals in a form of a so-called monetary contribution for meals as an alternative to traditional meal vouchers. An employer’s contribution for meals can thus now be in cash. However, such a contribution is tax exempt only up to a limit of CZK 75.60 (limit for 2021) per shift. Anything above this amount must be taxed on the employee’s side. A monetary contribution for meals is not mandatory and traditional meal vouchers can keep being used.

Minimum wage, reduction limits

The minimum wage was increased to CZK 15,200, which also caused an increase of the minimum assessment base for health insurance. At the same time, the minimum wage, that an employee has to receive to become entitled to a tax bonus, increased to CZK 7,600.

There have been changes in the reduction limits for the adjustment of the daily assessment base, from which sickness benefits are calculated as follows (in brackets there are the limits of hourly rates for wage compensation of sickness).

  • First reduction limit is CZK 1,182 (CZK 206.85)
  • Second reduction limit is CZK 1,773 (CZK 310.28)
  • Third reduction limit is CZK 3,545 (CZK 620.38).

Maximum assessment basis and decisive income

The maximum assessment base for social insurance increased to CZK 1,701,168 per year. The attentive reader will not miss the fact that this is the same amount from which the increased tax rate of 23% is paid.

The determining income for small-scale employment in sickness insurance was also increased to CZK 3,500. Newly, for small-scale employment, social insurance is calculated only from this amount. For agreement on work activities, health insurance is always calculated from this amount and at the same time it is the limit to which withholding tax is deducted if an employee did not sign a tax declaration.

Salary deductions

The non-confiscable amount per a liable person increased from CZK 7,771.50 to CZK 7,872.75 and the amount above which income is confiscated without restriction increased from CZK 20,724 to CZK 20,944.

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Martin Svoboda Payroll Business Development Manager

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