From 1 July 2024, all employers who employ employees under agreements to complete a job (“DPP”), a special contract governed by Czech labour law, based on which the employee can work up to 300 hours per calendar year, will face new social security obligations.
From 1 July 2024, employers will be required to register all their employees working under agreements to complete a specified task (dohoda o provedení práce”, “DPP”) with the Czech Social Security Administration (CSSA) and regularly submit information about their income, using a special form. Currently, employers are only required to register employees whose income exceeds the threshold for sickness insurance contributions (CZK 10,000 per calendar month). Employers will have to make the registrations monthly, starting from the 20th day of the month following the month in which the respective employee started work. The first registrations must be submitted by 20 August 2024 at the latest for the month of July. By then, the employer must also report to the CSSA the employees under the DPP that started working before July 2024 and whose DPP is still running.
This means that even employers who only employ DPP employees with incomes below the sickness insurance contribution threshold will have to register as employers with the CSSA by 30 July 2024.
In addition, employers will be required to keep records of all employees under the DPP regardless of their income to the same extent as for employees with standard employment contracts.
Further changes in this area are on the horizon. From 1 January 2025, the sickness insurance threshold for the DPP will change. Currently, DPP employees and their employers pay social security and health insurance contributions only for months in which the income under the DPP exceeds CZK 10,000. Some employees and employers have taken advantage of these rules by entering into multiple, low-income agreements to avoid paying the social security contributions.
The proposed changes will introduce two categories of DPP: “reserved” and “non-reserved”. The “reserved” agreements will have a more beneficial treatment regarding social security and health insurance contributions. For “reserved” DPP, employees and their employers will only pay social security and health insurance contributions if their monthly income exceeds 25% of the average salary (for 2024, the threshold would be CZK 10,500, and for 2025 it could be higher). In simple terms, only the “reserved” DPP will retain the current favourable regime. In order for the DPP to become “reserved”, the employer will have to submit a special form with the CSSA. If an employee concludes a DPP with more employers (which is not uncommon), employers will need to register their employees working under the DPP quickly to ensure their respective DPPs have the “reserved” status to be able to benefit from lower contributions, because DPPs will be granted “reserved” status on a first-come, first-served basis. DPPs that are not a small-scale employment and are concluded with other employers who do not reserve the DPP first, or if the employer does not reserve it at all, will be “non-reserved” and subject to full social security and health insurance contributions for the months in which the income exceeds the threshold for sickness insurance contributions (for 2024, CZK 4,000, and for 2025 it could be higher). DPPs that are small-scale employment (monthly income does not exceeds CZK 4,000) will be exempt from the contributions.
If you have any questions about the DPP, please do not hesitate to contact your local CMS experts.
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