Are you looking for flexible short-term work and wondering what legal form is suitable? An easy way to arrange such short-term work is to enter into one of two types of employment agreements. For example, a work performance agreement. What to look out for when entering into one and what are its advantages?
A contract for performance of work (DPP) falls under the so-called agreements for work performed outside the employment relationship. Since its hourly subsidy is limited by law, it is used, for example, for service work, but also for consultancy work, or seasonal work, such as holiday jobs for students, where units, at most low tens of hours per month, or a larger volume of work is expected on a sudden (one-off) basis.
In general, a number of provisions of the Labour Code also apply to work on a VPA, but the Labour Code (as with an employment agreement) specifically excludes certain things that are typical of an employment relationship, such as:
You must not work more than 300 hours for one employer per calendar year on a FTE. This agreement is therefore particularly suitable for short-term or one-off work that does not exceed the stated limit of hours.
If the hours worked exceed this limit, you must choose another type of employment relationship, such as a contract of employment (CBA) or a traditional employment contract.
If the monthly remuneration from a FTE is less than CZK 10,000 with one employer, no social security or health insurance is payable. However, this also applies if one employee has several agreements with different employers and the total income from these agreements does not exceed CZK 10,000.
However, if you do not pay health insurance for any other reason (for example, as an employee), you become a person without taxable income from the point of view of the insurance company, in which case you must pay health insurance separately. The amount of this insurance is CZK 2,552 per month for OBZP 20 24 and it is payable by the eighth day of the following month, for example for March by the eighth day of April. It is calculated as 13.5% of the assessment base, which is the current minimum wage. You do not have to pay social security, but you should bear in mind that the time you do not pay it does not count towards your pension.
However, once you exceed 10,000 a month, you already pay a premium; the health insurance rate is 4.5 per cent and the social insurance rate is 6.5 per cent.
Are you entering into a work agreement?
Sometimes, paradoxically, concluding a performance agreement can be more complicated than signing an employment contract. As this type of employment relationship is not protected by law in the same way as a traditional employment relationship, there are many more things to look out for in the contract. If you are not sure about the wording of the contract, do not hesitate to consult a lawyer who can prepare comments on the contract or prepare everything “from scratch”.
Mr. Jiří performs work for the Learning Center under a work agreement for 100 hours in calendar year 2024. The work consists of installing, setting up, modifying and updating educational programs and personal accounts for teachers. The agreed hourly rate is 700 CZK. Mr Jiří will thus earn CZK 70 000 per year on the basis of the performance agreement. As this is a regular activity, Mr Jiří invoices himself approximately CZK 5 800 each month. He does not pay social security or health insurance on this remuneration.
However, Mr Jiří also works for other employers on the basis of a performance agreement – in addition to the training centre, his clients include a university and a government office. He works for the university on the basis of a work performance agreement with a monthly remuneration of CZK 9,000, and for the state office he works on the same agreement with a monthly remuneration of CZK 8,500. In the aforementioned education centre, he receives approximately CZK 5 800 each month. The total monthly income is therefore CZK 23 300. As he does not exceed CZK 10 000 with either employer , he does not have to pay social security or health insurance on this. However, Mr Jiří pays his own health insurance as an OBZP.
The fact that in total Mr Jiří works about 600 hours a year on work performance agreements does not matter at all, because he has not exceeded the legal limit of 300 hours for one employer.
The decisive threshold for taxation is whether you have signed a pink tax declaration with the employer in question and also the income threshold of CZK 10,000.
If you have not signed a tax declaration and have an income of up to CZK 10,000, the agreement is subject to a withholding tax of 15%. In this case, you no longer have to file a tax return. However, if you do file, it is possible to recover the tax withheld by claiming tax credits for the tax year in question. Depending on your income for the year, you may be entitled to a tax refund.
If you earn more than 10,000 a month and you don’t have a signed tax return, the DPP is taxed at 15% advance tax. However, you cannot claim any rebate from your employer, but you can claim tax credits as part of your tax return.
However, if you have signed a tax declaration (you can only have one employer sign it), you are liable to pay 15% advance tax. You can claim any discounts that apply to you from that employer. You must file a tax return if you work for more than one employer at the same time during the year.
From 1 June 2024, there is a change in levy payments. The 10,000 limit is abolished and two new limits will apply. If the contractor exceeds these limits, he will have to pay contributions. The first limit is set at 25% of the average wage if the conciliator works for only one employer. And the second limit is set at 40% of the average wage if the contractor has more than one employer.
Since this year, people working on an agreement are entitled to paid holidays. The terms and conditions are the same as for a regular job. In order to qualify, the employee must have worked at least four times their weekly working time, which is 20 hours per week for agreements. The second condition is that the agreement must last at least 4 weeks. This also applies to agreements that are directly linked to each other.
Tip: Some self-employed workers are also entitled to paid holidays. Find out if this applies to you.
If social insurance is deducted from your gross pay (i.e. for monthly income of more than CZK 10,000 with one employer), then you are also entitled to sickness benefits. If, on the other hand, your income is lower and no contributions are made, you will not be entitled to sick pay.
The TOS may specify the period for which the agreement is valid and, on expiry of the agreement, the employment relationship is automatically terminated. The same applies if you have worked 300 hours. However, you can also terminate the agreement earlier. However, there is a mandatory notice period of 15 days. This starts as soon as you give your employer written notice. The same applies to the employer. They can dismiss you without cause, but only if you have worked for them for less than 3 months.
Of course, it is also possible to terminate your employment immediately if both parties agree. Such an agreement must not lack the identification of the employee and the employer, the identification of the employment relationship and the date of termination.
Tip: Did you get fired at work? We’ll make sure you get everything you’re entitled to. We can help you defend yourself against your employer. We will offer a solution in as little as two days, nationwide.
In addition to the change in the threshold for contributions and holiday entitlement, the amendment to the Labour Code brings further changes:
Employers are now required to report all concluded agreements to the Czech Social Security Administration. This is to prevent fraud by employees. This is because they could easily earn over the limit with several employers and thus not pay social security, health insurance and tax.
All this means for you as an employee is that when you sign the agreement, your employer will also ask you to fill in and sign a document stating whether you are working for someone else. At this point, it really doesn’t pay to hide other agreements to save a bit on insurance premiums.
You will simply be caught out for registering and will then have to pay the insurance premiums not only for yourself but for your employer. In addition to the usual 7.1% of your income, you will also have to pay 24.8% for your employer. And if you don’t pay, you will incur a debt for health and social security. This will incur a penalty of 0.0403% of the amount owed for each day it is outstanding.
Tip: We’ve discussed what to do if you incur a health and social security debt in our article.
An employer must not discriminate against its contractors. This means that they must be paid the same wage as full-time employees who do the same work or work of equal value. This rule also applies to the provision of employment benefits in the form of meal vouchers, multisports, etc. Consequently, contract workers should be legally entitled to the same benefits as full-time employees.
The minimum wage rules also apply to agreements. An employee working on an agreement must therefore receive a minimum of CZK 112.50 per hour. However, what does not apply to agreements is the guaranteed wage.
Tip: What does a guaranteed salary guarantee? Find out in our article.
Contract workers are also now entitled to certain additional payments for their work. Specifically, these include:
The allowances are determined in accordance with the rules on remuneration by wages, even if the conciliator is employed in the public sector and receives a salary.
Thehome office for agreement work must now be set out in writing. At the same time, the employer can only impose it on the conciliator on an exceptional basis and must reimburse the conciliator for the costs associated with it (utilities, etc.). This amount is set at a flat rate of CZK 4.60 per hour for working from home.
Tip: Under what conditions can an employee use the home office and what does it mean for the employee and the employer? Read our article.
The employer must inform the contract worker of the work schedule or changes to it at least three days before the start of the shift. The employer must then cancel the shift at least 24 hours before the shift starts or else the contract worker must be reimbursed.
As a contract worker, you now have the option of asking your employer to transfer you to a main employment contract. However, you must meet several conditions:
If you ask for a transfer to a permanent contract, your employer has a maximum of one month to respond. If they refuse your request, they must have a reason.
Even self-employed people (self-employed) may have a slow period in their business, perhaps to help out with a part-time job in another industry. In such a case, there may be a concurrence of a trade and a work performance agreement.
As far as taxation is concerned, the above principles will apply to you. As a self-employed person, you will in any case file a tax return for the previous year. In this, you may reduce your tax base after applying all tax deductions and allowances and you may incur an overpayment of tax which will be refunded by the state. You will need taxable income certificates from all your employers to complete the form.
If your business is not profitable, it may be worthwhile to find a job on a FTE where your monthly income exceeds CZK 10,000. In this case, your health and social insurance will be deducted, your business will be treated as a secondary activity and you will pay less in compulsory contributions.
Tip: Learn how not to pay taxes or pay less.
The main difference lies in the number of hours worked and the threshold for taxation and social and health insurance:
| DPP | FTE | |
|---|---|---|
| Maximum number of hours worked | 300 hours per year | 20 hours per week |
| Levies | When exceeding the threshold of 10 000 CZK | If the threshold exceeds 4 000 CZK |
Such a question cannot be answered unequivocally. It depends primarily on the circumstances under which you want to take up a DPP – for example, if you are an employee, student or pensioner and your health and social security contributions are paid by the state or your employer, you may find it worthwhile to work on a DPP earning up to 10,000 a month. However, if you are not in this position and you do not pay social security and health insurance, then working on a DPP is not likely to be worthwhile.
If you earn more than 10,000, your income will be reduced by the health insurance, at least at the minimum level (in 2022, 2,968 CZK).
Tip: If you’re thinking about whether you’re better off with an employment agreement or a performance agreement, consider first what your monthly remuneration will be. If you know that it will be less than CZK 10,000, it is better for you to conclude a work performance agreement. We have discussed the employment agreement in our separate article.
The work performance agreement must specify:
You can also agree other details with your employer. The condition is that the agreement is in writing.
It can look something like this:
AGREEMENT TO PERFORM WORK
Concluded pursuant to Section 75 et seq. of Act No. 262/2006 Coll., the Labour Code, as amended.
The contracting parties
Employer:
[Company name]
Registered office: [Address of registered office]
COMPANY REGISTRATION NUMBER: [COMPANY REGISTRATION NUMBER]
TAX IDENTIFICATION NUMBER: [TAX IDENTIFICATION NUMBER]
Represented by: [Name and position of person authorised to act for the company]
Employee:
Name and surname: [Name and surname of employee]
Birth number: [Birth number]
Residence: [Home address]
ID number: [ID card number]
Subject of the agreement
The employee agrees to perform the following work for the employer:
[Description of work or task]
Place of work
The place of work is the employer’s registered office at [Address].
The employer’s place of business is the employer’s headquarters at the employer’s place of business
The Agreement is concluded for a fixed period from [Start Date] to [End Date].
The maximum amount of work is set at 300 hours per calendar year.
Remuneration for the work
For the work performed, the employee is entitled to remuneration of [Remuneration amount] CZK per hour.
The remuneration shall be paid no later than [Date of payment] to the employee’s bank account No. [Account number] or by other agreed means.
Employee’s rights and obligations
The employee undertakes to perform the work personally, conscientiously and in accordance with the employer’s instructions.
The employee has the right to reasonable working conditions and to health and safety at work.
Employer’s rights and obligations
The employer is obliged to pay the employee the agreed remuneration for the work performed within the period specified in this agreement.
The employer is obliged to ensure safe working conditions for the employee and to comply with the regulations on occupational safety and health.
The employer has the right to control and supervise the progress and quality of the work performed by the employee.
Final provisions
This Agreement shall enter into force on the date of signature by both parties.
The Agreement may be amended or cancelled only in writing by agreement of both parties.
This Agreement shall be drawn up in two copies, each of which shall have the force of an original. Each Party shall receive one copy.
At [Place], on [Date]
Signatures of the Parties.
With a limit of 300 hours per year with one employerand exemption from social and health insurance up to a monthly income of CZK 10 000, the FTE offers a simple form of employment with minimal administrative requirements. The amendment to the Labour Code for 2024 introduces the right to paid holidays, the obligation to report concluded agreements to the Social Security Agency, and the right to additional payments for work. Although the VPA remains attractive for its flexibility, it is important to carefully consider its benefits in light of the new rules and individual work needs.
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