Major changes to work performance agreements
The Chamber of Deputies is currently debating a government bill amending the Labour Code. One of the amended areas is agreements on work performed outside the employment relationship, i.e. agreements to complete a job and agreements to perform work.
The proposed changes affecting agreements to complete a job and agreements to perform work include in particular the following:
- The employer will be obliged to schedule the working time in a written working time schedule and to inform employees working on the basis of agreements of the schedule or any changes thereto at least three days before the beginning of the shift or period for which the working time is scheduled (unless the employer agrees with the employee on a different time of notification).
- Employees working on the basis of agreements will have the right to draw all the obstacles at work and take leave from work. Related to the right to leave is the adjustment of the weekly working time of these employees for the purposes of calculating leave, based on a working week of 20 hours per week.
- The employer’s obligation to inform the employee about the content of the legal relationship established by the agreements will apply, in a similar way to the current employment relationship. It should be added that the scope of the current information obligation will be further extended by the amendment and the information period shortened to seven days.
- Employees working based on these agreements will have the right to apply in writing for employment in an employment relationship if their legal relationship on the basis of an agreement to complete a job or an agreement to perform work has lasted for at least 180 days in total with the employer in the previous 12 months. The employer will be obliged to provide the employee with a reasoned written reply within one month at the latest.
- The employer will be obliged to inform the employee in writing without undue delay of the reasons for the termination of an agreement to complete a job and an agreement to perform work if the employee considers that the termination is due to the exercise of some of his/her rights under the Labour Code, and within one month from the date of delivery of the termination notice to the employer, he/she shall request in writing the reasons for the termination.
- Employers will be obliged to provide employees working under agreements with compensatory time off for working on public holidays and extra pay for Saturday and Sunday work, night work and work in difficult working environments.
The amendment to the Labour Code will probably introduce significant improvements to the rights of employees working on the basis of an agreement to complete a job or an agreement to perform work and contribute to a substantial reduction of the differences between these two types of agreements and permanent employment. However, it can be assumed that, as a result, agreements to complete a job and agreements to perform work will be used less. However, the legislative process is ongoing and the amendment may still undergo a number of further changes. We will have to wait a little longer for the final version.
The so-called “agreement workers” will also be affected by the proposed changes to the “recovery” tax package recently introduced by the Czech Finance Ministry in an effort to reduce the state budget deficit. According to the amendment to the Act on Social Security Contributions and Contributions to State Employment Policy, the principles concerning the establishment of participation in sickness insurance and thus the payment of social security contributions for employees working on the basis of an agreement to complete a job will probably be changed. The draft law is currently in the comment procedure and its final form and planned effectiveness from 1 January 2024 are still subject to change.
According to the current regulation, a natural person may have several agreements to complete a job, and he/she does not have to pay any social or health insurance contributions from agreements to complete a job up to the limit of CZK 10,000. Revenues from multiple agreements have not previous been aggregated in any way. This would change if the proposal were to be adopted, as the aggregate of the imputed income from all agreements to complete a job concluded with different employers would now be examined on a monthly basis. The proposal thus clearly targets the accumulation of agreements to complete a job, whereby “agreement workers” with several agreements to complete a job up to the limit are not covered by pension insurance, as a result of which they are not entitled to an old-age pension (or the pension is very low) and draw state social support benefits at the end of their working capacity.
As of January 2024, the qualifying amount for participation in the insurance will apply:
- social insurance will be paid from earnings at 25% of the average wage (which would currently correspond to the current limit of CZK 10,000) for all agreements to complete a job with one employer,
- for at least two agreements to complete a job with different employers, social insurance will be paid on earnings of 40% of the average wage (currently approx. CZK 16,100).
Once the above ceilings are exceeded, the employer will also have to pay social insurance on behalf of the individual working based on an agreement to complete a job.
The limits set for social security contributions should also apply to health insurance, given the link to participation in sickness insurance.
A new reporting obligation to the Czech Social Security Administration (hereinafter “CSSA”) will be introduced for employers, consisting in the disclosure of personal data (registration in the register within 8 calendar days) and the income accounted for the calendar month of their employees working on the basis of agreements to complete a job. Based on the data provided, the CSSA system evaluates if the employee has earned the relevant income in a given calendar month and, if so, the CSSA informs all affected employers of this fact, who are then obliged to make social insurance contributions on the remuneration of these employees.
The draft amendment also states that the employee’s penalty for failing to notify his employer of the existence of additional agreements to complete a job (when the total exceeds the relevant income) is to be the employee’s obligation to pay all premiums on all his agreements to complete a job instead of his employers (i.e. the employee himself becomes the payer of premiums in the amount of 31.9% of the assessment base, including 2.7% for sickness insurance, 28% for pension insurance and 1.2% for state employment policy).
Another novelty is the participation of employees in sickness insurance. Before the amendment, the employer’s contribution was 2.1% of the employee’s assessment base. Employees will probably now be added to the reimbursement of sickness insurance expenses and a total premium of 2.7% of the assessment base is to be paid, i.e. the employer will contribute 2.1% and the employee 0.6%.
If you have any questions on this topic, please do not hesitate to contact us at any time.
Author: Veronika Odrobinová, Martina Šumavská, Roman Burnus, Marek Toráč