The difference between a FTE and a salaried job: which is more profitable for you?

What is agreement work

Contract work is a simplified employment relationship between an employee and an employer that is outside the traditional employment relationship. This type of work is often also called temporary work. It is mainly used for occasional, short-term or time-limited work – for example, for various jobs or one-off projects.

Unlike an employment relationship, some standard employment guarantees and obligations, such as fixed working hours, entitlement to severance pay or obstacles to work, do not apply in agreement work. The agreement must always be in writing and contain at least the basic details of the work to be done, its remuneration and the duration of the relationship.

Agreements tend to be flexible and can be concluded and terminated quickly. However, they also entail certain restrictions, both for the employee (e.g. less protection) and for the employer (e.g. limits on the scope of work). There are two types of work under an agreement: a performance of work agreement (PWA) and a performance of work agreement (WLA), which have different legal conditions.

Let us now compare the two types of agreements in detail:

Limits: FTE vs. FTE

Performance of work agreement (PPA): maximum 300 hours per year with one employer. This limit is fixed and cannot be exceeded – once it is reached, you must either conclude another type of contract or change employers.

Employment contract (FTE): The work must not exceed on average half of the fixed weekly working time, i.e. normally 20 hours per week (assessed over the whole duration of the contract, up to a maximum of 52 weeks). In practice, this means that you can work more hours some weeks if this is balanced by a lower workload in other weeks.

Deductions: FTE vs. DPP

The difference in levies between a performance of work agreement (PPA) and a contract of employment (CLA) is the amount of remuneration from which health and social security starts to be paid, and how income tax is applied.

Agreement work and insurance

In the case of a fixed-term contract, the obligation to pay health and social insurance arises if the gross monthly remuneration exceeds CZK 4,500. Once you exceed this limit, 6.5% of your salary is automatically deducted for social security and 4.5% for health insurance (11% in total). Your employer also deducts a further 33.8% of your salary.

The limit is significantly higher for a DPP – the contributions only start when your monthly remuneration exceeds CZK 11,500. If you earn less, you do not pay health and social insurance. If you exceed this limit, the contributions apply in the same way as for the FTE.

Agreement work and taxes

The taxation of income from temporary work, i.e. work carried out under a contract for the performance of work (DPP) or a contract of employment (FTE), depends, among other things, on whether you have signed a tax declaration (pink paper) with your employer. This affects how much tax you will pay on the temporary work and whether you will have to file a tax return.

Without a signed tax declaration:

The main difference between a FTE and a DPP lies in the threshold amount from which the method of taxation changes.

• For FTEs, if you earn up to CZK 4,500 per month, a withholding tax of 15% applies, which your employer will pay on your behalf.
• In the case of a PPA, the limit is higher – withholding tax applies up to CZK 11,500 per month.

In both cases, the withholding tax means that you don’t have to worry about anything else – the tax on the temporary work is taken care of and you don’t have to file a tax return for the temporary work.

However, once your earnings exceed these limits, the situation changes: advance tax starts to apply at the same rate (15%), but without the right to claim discounts. If you want to get money back from this tax, you have to file a tax return at the end of the year. You can claim the basic ratepayer’s allowance or other tax allowances and claim back any overpayment.

With a signed tax return:

Signing a tax declaration will make things much easier for you, whether you work on a FTE or a DPP. In both cases, you still have to pay the 15% advance tax, but you can also take advantage of tax credits – for example, for the taxpayer (currently CZK 2,570 per month) or for children. As a result, the final tax on temporary work can be zero, and if you have a low income, you may even get a tax bonus paid by the tax office.

Please note – you can only have your tax declaration signed by one employer in a given month. If you change jobs during the year, or combine several jobs at the same time, it is important to keep track of where you have signed the declaration and, if necessary, calculate and balance everything on your annual tax return.

Net pay: FTE vs. FTE

The calculation of net pay for FTEs and LTTEs differs mainly depending on whether insurance is paid on the remuneration and whether you have signed a tax declaration. Here is a brief and easy to understand explanation:

FTE – agreement to perform work

If your earnings are up to CZK 11,500 per month and you have not signed a tax declaration, your employer withholds 15% tax and that’s the end of it.

Example.

If you sign the declaration and claim the taxpayer’s rebate (CZK 2 570 per month), the tax can be zero.

Example.

If you earn more than CZK 11,500 per month, social security and health insurance are payable in addition to tax (employee 11%, employer 33.8%).

Example
– Social insurance: 6.5% = CZK 780
– Health insurance: 4.5% = CZK 540
– Tax: 15% of the base after deduction of insurance (approximately CZK 1,000-1,200)
→ Net salary approximately CZK 9 400-9 600 (without discounts).

FTE – employment agreement

Here the insurance limit is lower – once you earn more than CZK 4,500 per month, health and social insurance is automatically paid, as well as tax.

If you don’t sign a tax declaration, 15% tax is deducted on the full amount (without discounts), plus 11% for insurance.

Example
– Social insurance: 390 CZK
– Health insurance: 270 CZK
– Tax: approx. 800-900 CZK
→ Net salary approx. 4 400-4 500 CZK

If you sign the declaration and claim the rebate, the tax may be zero and you will get more back.

Example
– Same insurance
– The tax rebate will cover the entire tax
→ Net salary 5 340 CZK

So, when you work on a DPP, you often won’t have to pay health or social insurance because it is only paid when your monthly remuneration exceeds CZK 11,500. As a result, the net wage is usually significantly higher than on a FTE, where insurance is already payable when earnings exceed CZK 4,500 per month.

Holiday: FTE vs. FTE

As of 2024, both FTE and salaried employees are entitled to holiday pay under the same conditions as in a regular employment relationship. The rules are the same in both cases.

To qualify for holiday entitlement, you need to meet two conditions:

1. the agreement must last at least 4 weeks,
2. and you must work at least 80 hours during that period (equivalent to four times the notional working week of 20 hours).

If you meet these conditions, you will be entitled to a pro rata share of the holiday, which is calculated according to the hours you actually work – just like in a traditional employment relationship.

So, whether you work on a FTE or a PTO, if you work the same number of hours and the same duration of the agreement, you will be entitled to the same holiday entitlement.

Negotiation and termination of the contract: FTE vs. FTE

Both a performance of work agreement (PPA) and a contract of employment (CLA) must always be concluded in writing and contain the essential elements, i.e. the type of work performed, the scope of work and the duration of the agreement.

Both types of agreements can be terminated in the same way – either by agreement of both parties, by giving 15 days’ notice starting from the date of delivery, or by immediate termination, but only for reasons provided for by law (in particular for serious breaches of obligations).

The main difference between the VPA and the VPA lies in their practical application. The VPA is more suitable for short-term, one-off and flexible work, while the FTE is more often used for more regular and longer-term work with a larger scope of work. This difference is then usually reflected in the way a particular contract is set up and the expectations it implies.

What’s more worthwhile? Advantages and disadvantages of FTEs and FTEs

Which is more profitable – the FTE or the FTE? It depends on what you need: short-term extra income, regular part-time work or longer-term flexible work. Each arrangement has its advantages and disadvantages, which are good to know in advance.

Advantages of a FTE

• Low or no contributions: if you earn up to CZK 11,500 a month and don’t have a signed tax declaration, you don’t pay health or social security.
• Higher net wages with lower earnings.
• Easy to terminate and negotiate, suitable for one-off or short-term work.
• Suitable for students, retirees and extra income for permanent employment.

Disadvantages of a DPP

• Annual limit of 300 hours with one employer, which limits the scope of work.
• At higher incomes, insurance is no longer payable as with a DPP.

Advantages of the FTE

• Not limited by the number of hours, just an average of 20 hours per week, which allows for longer collaboration.
• Suitable for more regular and longer-term work – perhaps for several months.
• Possibility of holiday entitlement (under the same conditions as with a DPP).
• Better protection for longer working relationships, including the possibility of sick pay, maternity pay etc.

Disadvantages of the FTE

• Lower limit for exemption from insurance – contributions are already paid from income above CZK 4,500 per month.
• Lower net pay for the same gross earnings if you do not have a signed tax declaration.
• Less advantageous for occasional part-time jobs or small earnings.

So which is more profitable – a DPP or a FTE? It depends on how often and for how long you plan to work. If you only want to earn a little extra money occasionally and you don’t exceed CZK 11,500 per month, a DPP is more profitable for you. In this case, you don’t pay health and social insurance, and your net pay is usually higher. On the other hand, if you are looking for a more regular and longer-term cooperation, for example for several months at a time, you will be better served by a FTE.

Overlapping FTE and DPT (with the same employer)

The Labour Code allows an employee to have both a fixed-term contract and a fixed-term employment contract, even with the same employer. However, if you have both agreements with the same employer, you must comply with the condition that the type of work performed in each agreement must be different. For example, if you are working as an administrative worker on a FTC, you should be doing other work, such as managing a website. This rule also applies when combining an agreement with an employment contract.

Each agreement is treated separately for tax and levy purposes:

• If the monthly remuneration does not exceed CZK 11,500, no socialsecurity or health insurance is payable. If the remuneration is higher than this, contributions are payable.
• FTE: Social security and health insurance contributions are payable if the monthly remuneration exceeds CZK 4,500.

Income tax is 15% and can be withheld or paid in advance, depending on the amount of income and whether you have signed a tax declaration. You can only have a tax declaration signed by one employer. However, each agreement is treated separately – the income from the DPP and the FTE is not added together for insurance purposes .

Example

Petra has two agreements with the same employer:

• DPP for administrative assistance – monthly remuneration CZK 10,000
• FTE to manage the company’s social networks – monthly remuneration CZK 4 000

At first glance, it would seem that Petra earns a total of CZK 14,000 and will therefore definitely pay social security and health insurance. But that’s not how it works.

• DPP: income does not exceed CZK 11,500, so no insurance (neither health nor social security) is paid.
• FTE: income does not exceed CZK 4 500, so no insurance is paid.

Result? Petra pays no insurance on any of the agreements – even though she earns CZK 14 000 in total. This is because each agreement is treated separately according to its own limit. So it’s not the sum of all the income, but a separate assessment of each agreement according to the statutory rules.

Summary

A performance work agreement (PPA) and a work activity agreement (WAA) are forms of temporary work that differ in their limits, levies and use. A DPP is limited to 300 hours per year with one employer and insurance is only deducted on earnings above CZK 11,500 per month. The FTE is not limited in the number of hours, but it cannot exceed 20 hours per week on average, and insurance is deducted from CZK 4 500.

For both agreements, 15% income tax is either withheld or paid in advance – depending on how much you earn and whether you have a signed tax declaration. With a signed declaration, you can claim tax credits and receive any overpayment.

From 2024, both salaried and permanent employees are entitled to holiday pay if the arrangement lasts at least 4 weeks and 80 hours are worked. Any agreement must be in writing and can be terminated by agreement, by giving 15 days’ notice or immediately.

The FTE is more suited for short-term, non-deductible work, while the VPA is more suitable for more regular and longer-term work. Both agreements can be held with the same employer, as long as they relate to different activities, and each is treated separately.