A social security or health insurance debt can arise quickly – just forget one payment or fail to pay the full amount and you’re done for. On top of that, there are penalties and you could be in for a nasty surprise. So how exactly does it work if you’re self-employed and what if your employer doesn’t pay your insurance?
Public health insurance is used to pay for the health care of the insured. It is compulsory for all citizens of the Czech Republic from birth until death. This does not mean that everyone pays for it out of their own pocket. The state pays for a large part of the population. The amount of health insurance is determined on the basis of the minimum assessment base(minimum wage) or the average wage of the national economy. Different groups therefore pay different amounts. It depends on whether you are an employee, self-employed or have no taxable income.
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Social security contributions consist of three components: sickness insurance, pension insurance and the state employment policy contribution. Its main purpose is to provide support in unfavourable social situations and to pay old-age pensions, which form the bulk of the scheme. The amount you have to pay for social insurance is determined as a multiple of the percentage rate and the assessment base. These vary depending on whether you are an employee, employer, self-employed or self-payer.
Tip: Being self-employed involves a certain amount of administrative burden in the form of levies, payments and tax returns. What does all this entail and when is a flat-rate tax worthwhile instead? This is the focus of our next article.
As we have already said, everyone has to pay health insurance. However, not everyone pays it directly. The state pays for some groups of people. These include dependent children, pensioners, women on maternity leave, people on parental leave, recipients of parental allowance, people registered with the Labour Office as jobseekers, people receiving material hardship benefits, people dependent on and caring for another person from the second degree of dependence onwards, people of pensionable age without a retirement pension, and people caring for children all day.
These people therefore do not have to deal with health insurance. Neither do employees for whom their employer pays health insurance. Those who then pay health insurance for themselves are the self-employed and people without a job who are not registered with the employment office. They therefore have to deal with health insurance themselves and keep track of whether they have paid health insurance.
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Not everyone pays social security. But those who have to pay it are employers, employees, self-employed persons, foreign employees and persons voluntarily participating in pension insurance.
Again, employees do not have to deal with social security payments as their employer pays them for them. However, those who have to deal with social insurance are again self-employed persons.
Tip: Read what payments and levies the self-employed must take into account.
It is legally obligatory to pay for health insurance. If a self-employed or unemployed person does not pay the insurance, he or she will incur a debt. In addition, with each passing day, a penalty also accrues , which is set at 0.0403% of the amount owed. The health insurer is legally obliged to recover this debt and the penalty from the debtor. The exception in this case is the insurance premium up to CZK 200 and the penalty up to CZK 100 per calendar year.
In the event of a debt, action must be taken. Contact your health insurance company as soon as possible to find out the amount of the debt and the penalty. If you can afford it, pay the debt in full as soon as possible. It is common practice to forgive the penalty once the debt has been paid. However, there are several conditions that must be met. First of all, you must not be in liquidation, you must not be the subject of an insolvency petition and you must have paid your premiums in full.
If you are short of funds, it is possible to apply for a repayment plan. The insurance company is not obliged to give you one, but it usually gives them to people who are genuinely interested in repaying the debt. However, if you ignore the debt, foreclosure proceedings will be initiated and the debt will be collected.
Tip: Execution on account is one of the relatively easy options for the bailiff to get to the recovered amount. This freezes the funds in the bank. How does this process work, to what extent is your disposal of your account restricted, how are family members’ bank accounts affected and when is your account unblocked again? This is the focus of our next article.
A similar situation applies to social insurance. If you don’t pay National Insurance, you will incur a debt and a penalty. The penalty is based on the Czech National Bank‘s repo rate, which is set for the first day of the calendar half-year in which the debt is incurred, plus 8%. If you pay the debt in instalments, the penalty is reduced and is 0.025 of the amount owed for each day.
You will be notified of the debt by the district social security administration and subsequently sent a payment order or arrears statement for payment. If you fail to pay the debt including the penalty, you are still liable to execution and debt recovery.
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As an employee, you may find that your employer does not pay your social security or health insurance for you. Fortunately, you can rest easy. It doesn’t mean that you’re accruing a debt somewhere or that your hours don’t count towards your pension. It is the employer who has to pay the insurance for the employee and therefore only the employer will bear the consequences.
If you suspect that your employer is not paying social security and health insurance for you, it is a good idea (but not compulsory) to report this as soon as possible. In the case of social insurance, to the district social security office and in the case of health insurance, to your health insurance company. In addition, if you do not pay social insurance, you have the option of terminating your employment contract immediately and quitting your job.
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Unfortunately, however, it may happen that the employer will not respond to calls from the Social Insurance Institution for retroactive payment of social insurance. In this case, you should send the Social Security Agency your employment contract and an affidavit of your employment from two witnesses (e.g. former colleagues).
In addition, you should also make sure that your employer submits a pension registration form to the Social Insurance Institution every month with the correct amount of wages. This is crucial for the award and determination of your future pension.
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