Retired seniors often find a variety of less demanding jobs, whether as doormen, ushers in theatres or security guards in galleries. There are almost no limits to the earning potential. However, early retirees must beware of early retirees whose earning potential is limited. What type of contract is worthwhile and what to look out for?
Let’s start with those who are already retired, although they don’t yet fit into this category in terms of age. People who receive an early retirement pension are the most closely monitored in terms of earnings. They must not engage in gainful activity that gives rise to insurance coverage until the date they reach retirement age. Otherwise, the Social Security Agency may stop their pension and, in addition, assess an overpayment of pension after the period of work.
It is, however, possible to engage in earnings that do not give rise to pension insurance. This may take the following form:
If an early pensioner were to consider resuming a conventional employment relationship with a contract of employment and earnings of, for example, CZK 25,000 gross, he or she would have to discontinue receiving the pension.
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However, a senior who is entitled to a regular pension (i.e. has reached the standard retirement age) does not have the above restrictions. All those already receiving a standard retirement pension can work as an employee or self-employed person (self-employed) without restriction. If they pay social security contributions from this work, they may be entitled to an increase in their pension after a certain period of time (but this can only be granted on application, not automatically).
Being a retired senior employee does not, however, exempt you from obligations such as paying social security or taxes. Social security is paid according to the amount of annual earnings. If the annual earnings exceed a certain amount – the so-called decisive amount – participation in social insurance is triggered. This year the amount is CZK 105,520, last year it was CZK 97,000. In other words: if a pensioner earns more money than this amount in a year, he or she must pay social insurance contributions for secondary activities.
Retirees who have more than one contract job and pay advance income tax must also file a tax return. If you work on a permanent placement and your income is up to CZK 10,000 per month, you will have tax withheld which you do not have to include in your tax return. It is possible and advisable to take into account other benefits and tax credits that the law allows on your tax return.
A work performance agreement is flexible and allows employment for work not exceeding 300 hours per year with one employer. For pensioners, a DPP can be attractive because no health or social insurance is paid up to an income of CZK 10,000 per month, which means a higher net income. Income tax is withheld at 15%, but seniors can take advantage of the basic tax credit and other possible concessions, which can minimize or even eliminate the tax burden. DPP is therefore ideal for short-term and less regular jobs that allow flexible working hours to suit the needs of seniors.
If the earnings limit of CZK 10,000 is exceeded in this option, social security (6.5%) and health insurance (4.5%) must be paid. Also, a withholding tax of 15% is always withheld on earnings above this limit.
Tip: 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? We have discussed this in our separate article.
Anemployment contract is suitable for longer and more regular employment that does not exceed half the normal weekly working hours (i.e. a maximum of 20 hours per week). With an income of up to CZK 4,000 per month, no health or social insurance is paid, which is advantageous for seniors with lower incomes. At higher incomes, insurance premiums must be paid, which reduces net income, but on the other hand can ensure access to sickness benefits and other social benefits. The FTE is suitable for seniors looking for a more regular job with a degree of flexibility.
If the limit of CZK 4,000 is exceeded, social security and health insurance must be paid in the same way as the employer. The FTE therefore becomes less advantageous compared to the DPP if you plan to earn higher amounts.
In retirement, you can set up a business or continue your current one. As a self-employed person, you have the option of invoicing for your services. The advantage is that your trade in retirement is considered a sideline trade, which brings various benefits. It applies to you that if your gross annual profit does not exceed the limit (105,520 CZK for 2024), you do not pay social insurance. Health insurance is compulsory, but you do not pay it at all in the first year and only on the basis of the previous year’s income from the minimum assessment base in the second year – so unlike regular self-employed workers, you do not have to pay the statutory advance payments.
You have to file your own tax returns and income and expenditure statements for health and social insurance.
A traditional employment relationship provides the greatest stability and protection for the employee. For retired seniors , this type of employment may be advantageous if they are looking for a long-term, stable work engagement. Stable employment can also have a positive effect on pension levels due to regular social security contributions. Even with part-time work, social security and health insurance are always payable, regardless of how much you earn.
For retired seniors who are looking for short-term, irregular employment with the highest possible net income, a contract of employment (CBA) is the ideal choice. If they are looking for more regular and longer-term work but still want to maintain a certain degree of flexibility, a contract of employment (CBA) can be advantageous. A traditional employment relationship provides the highest degree of stability and protection, but brings with it a higher tax and levy burden, which may not always be ideal for retired seniors. When choosing the right form of employment, it is important to consider your specific needs, financial situation and work options in order to select the most advantageous option.
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