24.06.2024 13:08
Dear clients, let us briefly inform you about the current situation with regards to the Agreements to Complete a Job, specifically the change regarding the establishment of sick-leave (and therefore pension) insurance and the related administrative obligations.
With the signature of the President of the Republic, the legislative process of amending the Investment Companies Act has been completed. This amendment includes, among other things, an amendment to Act No 349/2023, which is referred to as the consolidation package, in the part relating to sick-leave insurance for employees working on the basis of Agreements to Complete a Job. The amending law will be published in the Collection of Laws in the coming days. It will take effect on July 1st 2024.
The following changes will be made in relation to employees working under Agreements to Complete a Job (hereinafter referred to as “DPP“s):
1) as of July 1st 2024, the previously announced change to the rules for participation in sick-leave insurance of an employee working under a DPP will not take effect with regard to the amount of qualifying income (establishing participation upon reaching 25% of the average wage in the national economy in a calendar month for one employer or 40% of the average wage in a calendar month in aggregate for several employers);
2) until at least January 1st 2025, the amount of 10,000 CZK shall remain the qualifying income for establishing participation in sick-leave insurance for employees under a DPP. Similarly, the rule on aggregation of income from a DPP in a calendar month with a single employer is maintained;
3) the regime referred to as “notified agreement” regime should apply from January 1st 2025. This would consist in the employer’s “reservation” of a preferential contribution scheme for an employee’s DPP with the Czech Social Security Administration. It should only be possible to apply the notified agreement scheme to one employer. The notified agreement scheme should apply to the employer who first notified the scheme to the ČSSZ.
The qualifying monthly income for a “notified agreement” triggering participation in sick-leave insurance should be 25% of the average wage in the national economy. Non-notified DPPs should have the same rules for establishing participation in sick-leave insurance as those prescribed for Agreements to Perform Work (DPČ) (from January 1st 2025, the amount of the qualifying monthly income being CZK 4,500).
However, given the volatility of the legislation, it is not possible to guarantee the above.
We will inform you of the final status of the legislation, as well as of details on making the DPP reservations etc. well before the end of this year;
4) starting on July 1st 2024, the statutory regulation introduces new administrative obligations in relation to employees working under a DPP.
This includes the obligation to notify the commencement and termination of employment of an employee working under a DPP, regardless of the amount of income from the DPP, i.e. even in cases where no participation in sick-leave insurance arises.
Furthermore, there is an obligation to send information on taxable income of all employees working under a DPP, even if there is no sick-leave insurance participation (no qualifying income within the meaning of point 2 or later under point 3).
The beginning and end of employment will be included in the notification.
The notification (containing a list of all employees working under a DPP and their income) shall be submitted by the 20th day of the following calendar month at the latest, using the prescribed form titled “DPP statement”. The form should be available in electronic form on the website of the Czech Social Security Administration.
The first submission of the statement will be for July 2024, i.e. the notification must be submitted by 20 August 2024. The notification must also include a list of all employees working under a DPP who started employment before July 1st 2024 and whose employment relationship is based on a DPP and continues as at July 1st 2024 and all employees working under a DPP who commenced employment between the 1st and 31st of July 2024 or employees under a DPP whose legal relationship based on the DPP ended during that time period.
For employees working under a DPP, it will not be required to submit the ‘Notification of commencement/termination of employment’ form from July 1st 2024.
By July 31st 2024, employers who have so far employed only employees working under a DPP whose participation in sick-leave insurance has not been mandated must register in the register of employers.
If there are any questions about the above, we are fully at your disposal.
Currently, the possible flexibilization amendment to the Labor Code, which envisages a number of changes, for example, in the area of probationary periods, notice periods, etc., is also being publicly discussed. Similarly, the introduction of a termination of employment by the employer “without giving grounds” has been floated. These amendments are not yet considered by the Parliament of the Czech Republic and it is therefore unclear whether and possibly in what form they will be adopted. We therefore do not deem it appropriate to cover these legislative proposals in detail at this time. As soon as their form and effective date are certain, we will inform you.
This update was drafted by JUDr. Jakub Morávek, Ph.D., attorney at law and partner
Felix a spol. advokátní kancelář, s.r.o.