Trade or employment? Try both!

Chapters of the article

• Get permission
• Set up a side business
• Benefits of running a business while employed
• Disadvantages of running a business while employed
• One or the other – which is more rewarding?

Get permission

If you want to have a trade while working, you often need permission not only from the trade licensing authority, but also from your employer. This is the case when:

• you work in the civil service – here you usually need the approval of the head of the authority, regardless of the area of business.
• you want to go into business in the same field as your employer – in this case you need his written consent. If he gives it to you, it is not won once and for all, because he can take it back at any time.

However, there are some professions where the possibility of going into business is very difficult or even forbidden. These include, for example, bailiffs and judges.

Set up a side business

If none of the above applies to you, and you decide to make a living as a dog walker or fitness trainer alongside your accountancy work, you should first find out what kind of business it is. Trades are divided into two groups – licensed (for which you must first obtain a license – e.g. taxi service) and reporting trades. Notifiable trades include craft trades, bound trades and free trades. For the first two, i.e. craft and bound trades, in addition to the general conditions, there is also a condition of professional competence, while no professional competence is required for free trades.

You will then go to the trade office, where you will fill in a single registration form and apply for a trade licence. You will need a list of registered activities, proof of identity and CZK 1,000.

You can register as a self-employed person (self-employed) with your tax office, the district social security office and your health insurance company at the same time.

If you want your business to be considered a secondary activity, you must report this information to your health insurance company and the Social Security Administration. This is very important for determining the amount of the advance payments, which are significantly lower for secondary self-employment and may not even be set for the first year of business. The very fact that you are an employed person and that you will carry out this employment in parallel with your gainful activity is essential for your activity to be considered secondary. It is therefore irrelevant whether you work full-time or part-time.

You must notify the self-employed person of your secondary self-employed activity to the district social security administration no later than on the Income and Expenditure Statement filed for the calendar year for which you wish to be considered self-employed as a secondary self-employed person, and provide proof of this no later than the end of the calendar month following the month in which the statement for that calendar year was filed.

Benefits of doing business while employed

• As mentioned above, if you run a business while you are employed, your business will be treated as secondary. This gives you benefits such as lower National Insurance and Health Insurance contributions .
• You can claim business expenses as a percentage of your income so you don’t have to keep records of everything. As a rule, this flat-rate claiming of expenses is worthwhile (unless the expenses are more than the statutory 40 or 60 % of income).
• As a self-employed self-employed person, you do not have to pay monthly health insurance premiums in the first year of business. In the following years, everything depends on your income and the amount of your tax base. If the insurance premiums from your employment are paid on at least the minimum wage, you do not have to pay monthly advance payments, even in subsequent years. Health insurance is only paid after you have submitted your income and expenditure statement to the health insurance company. The calculated health insurance for the whole year must then be paid.
• For social insurance, the rule is that you do not pay it at all for secondary activities if your gross profit is within the limit. The decisive amount, i.e. the limit for 2024, is CZK 105,520. So if your profit for the year is less, you don’t pay social security at all. If you exceed this limit, you pay social insurance on the profit you actually make. If you are self-employed as a secondary activity for only part of the year, the limit is reduced proportionally.
• You do not paysickness insurance as a secondary self-employed person, or it is voluntary. However, if you sign up for it, you become self-employed as a main worker with the obligation to pay minimum monthly pension contributions.
• Pension insurance is only payable by secondary self-employed persons whose income after deduction of expenses reaches a certain threshold amount. This amount changes every year.

Disadvantages of current employment and trade

• Tax Returns – if you had no idea what tax depreciation is and when to file your tax return because your employer did everything for you and you just signed the “pink slip”, you are now out of luck. As a self-employed worker, you are required to file a tax return if you have an income of more than £6,000 for the year.
• This also involves the necessary paperwork, keeping track of any invoices or receipts and knowing the tax forms or having a good tax advisor. In addition to income from your business, you must also include income from your employment in your tax return. Therefore, you need a certificate of income from your employer.

One or the other – which is more worthwhile?

But maybe you’re not asking yourself how to combine both types of activity, but which one to choose. For example, if your employer gives you the choice of being employed or invoiced. In this case, you should know that if you do dependent work for your employer, it is very likely to be a quasi-scheme, which is illegal and can result in fines not only for your employer but also for you. If it is indeed a scheme where you would be supplying work as an independent person (for example, as a translator), look at the following areas when making your decision:

• Income – you are very likely to have a higher net income as a self-employed person. Your employer (or the person commissioning the service) will not pay tax on your behalf (up to 33.8% of your gross pay) and therefore may give you some of the money they would have spent on tax. He will still get a good return on his investment and you will get a higher income.
• Security – if you are in a precarious social situation, for example caring for parents or young children, then opt for an employment relationship. You are significantly more protected and you are not at risk of losing your job again quickly.
• Protection during sickness – the employee protection also applies in the next situation, which is sickness. While employees can take the flu in their stride and their pay will only be reduced proportionately, self-employed workers must have either a good insurance policy, high savings or a partner to support them financially. In the worst case, they then have to ride out the illness. So, again, this is not an ideal situation for single mothers.
• Flexibility – does time flexibility or home office suit you? Such a need is more conducive to working as a self-employed person. For many employees, free working hours and a high proportion of home offices are not an extraordinary benefit, but rather a daily bread.