Changes in Agreements to Perform a Job or What are Employers in for from 1 July 2024 and in the Next Year?
Employers can expect a number of changes with regard to employing individuals on the basis of agreements to perform a job (the “APJ”) in the near future. They will have new obligations in relation to the Czech Social Security Administration Authority from July. In 2024, the existing regulation applying to compulsory insurance contributions for APJs as we have known it will cease to apply. APJs will be treated as either standard employment or a small-scale employment from 1 July 2025, so-called notified agreement mode being the only exception.
What will Change from 1 July 2024?
The consolidation package has introduced a registration duty for employers who employ individuals on the APJ basis. If an employer has employees working based on APJs and the employer has not registered in an employer register yet, they will be obliged to do so by 31 July 2024. They will register electronically using an “Employer Register Application” form (e.g. here).
In addition to this, the employer will also be obliged to inform all APJ employees no later than by 8 July 2024 that they may newly be obliged to make compulsory contributions to social security and healthcare insurance.
It will also be mandatory to report data about all employees performing their work on the basis of APJs by the 20th day of each following calendar month (i.e. by 20 August 2024 for July 2024 for the first time). The reported data include the first and last name, birth number (date of birth), the healthcare insurance company, date of joining and leaving the employer, and the level of income for the concerned calendar month.
The Czech Social Security Administration Authority (the “CSSAA”) has developed a new electronic form “VPDPP” (the APJ Income Sheet), which will be available from 1 August 2024.
What will Change from 1 July 2025?
The Act on Healthcare Insurance has newly introduced so-called “notified agreement” mode (Sections 7a through 7c).
An employer who will be the first one to report an agreement to perform a job to the CSSAA in the concerned month will be the employer in the notified agreement mode. The duty to make insurance contributions in the concerned month in the notified agreement mode will only arise once the threshold of 25% of the average wage (CZK 10,500 for 2024) is reached. In such case, the taxpayer will apply withholding tax (up to the key threshold where a tax declaration has not been signed by the employee).
If income from all agreements of an employee with an employer who applied the notified agreement mode does not exceed such threshold, the employee will not be obliged to make insurance contributions.
In other employers (i.e. those who will not apply the notified agreement mode), the APJ employment will be considered standard employment or small-scale employment; as a consequence, the duty to make insurance contributions will depend on the agreed level of income for the concerned calendar month.
If you want to receive more information about the new regulation, please feel free to contact us. We will be happy to help you.
Lenka Kolmanová
kolmanova@clarksonhyde.cz
