Payroll Newsletter - Autumn 2023

Travel reimbursements – change in average diesel price

As of 1 July 2023, the decree on the change of the rate of basic compensation for the use of road motor vehicles and meal allowances and on the determination of the average price of fuel for the purpose of providing travel reimbursement for 2023 has been amended. The amount of the average price of diesel fuel has been reduced from the previous CZK 44.10 to CZK 34.40 per 1 litre of diesel fuel.

Social insurance premium discount

From 1 February 2023, a social insurance discount of 5% can be applied to selected groups of employees on behalf of the company if the conditions for applying it are met. One of them is that the aggregate of the assessment bases per hour does not exceed 1.5% of the average wage.Please note that according to the interpretation of the Czech Social Security Administration, the number of hours should not include holidays granted in excess of the rate set by the Labour Code (Section 212). In the event that the employee’s holiday entitlement is higher than the “statutory” entitlement, only the number of hours of holiday up to the “statutory” entitlement will apply.

Summer of Mercy III

The bill was passed and the third Summer of Mercy will last until 30 November 2023. This time, administrative enforcement, i.e. debts for social security or tax arrears, will be forgiven. After the principal has been paid, accessions of tax and insurance (interest, penalties, fines, legal costs) are forgiven. For debts exceeding CZK 5,000, debtors are allowed to spread their payment over several instalments.

Children of foreigners will be covered by public health insurance from January

All minor foreign nationals will be newly covered by public health insurance from 1 January 2024. This measure applies to the children of foreigners granted long-term residence in the Czech Republic, regardless of the purpose of the residence (it does not apply to children granted a long-term visa or to children with a temporary residence permit for family members of an EU citizen).

Unlike Czech children, where the insurance is paid by the state, in the case of children of foreign nationals with long-term residence, it is paid by the legal representative, curator or guardian of the minor. Participation in public health insurance is mandatory by law and premiums are paid for the entire reference period. A child born in the territory of the Czech Republic from 1 January 2024 to a mother with a long-term residence permit becomes a beneficiary of public health insurance for the entire period of the procedure for the application for a long-term residence permit. However, the legal representative must submit the application for long-term residence within 60 days of the date of birth and fulfil their notification duty to the health insurance company within 8 calendar days of the birth. The insurance premiums are subsequently paid by the legal representative, guardian or curator. We emphasise that the transition from private health insurance to public health insurance must be smooth and there must be no period when the children of foreigners are not insured.

It will now be possible to conclude comprehensive health insurance with any insurance company that is authorised to provide such insurance, not only with VZP, as was previously provided by law. The amount of the insurance benefit is also changed and the limit is increased from EUR 60,000 to EUR 400,000.

Amendment to the Labour Code

On 1 October 2023, a long-awaited amendment to the Labour Code came into force, bringing a number of significant changes that will affect all employers. Among other things, it introduces the regulation of telework and the related obligation to have a written telework agreement with the employee. Within the agreement, the employer should deal in particular with the issue of costs related to the performance of telework, but also, for example, with OHS, which is not explicitly addressed by the amendment. In addition, the employer’s information obligation will be significantly extended and this obligation will also be introduced for employees working under an agreement to complete a job/to perform work and employees posted abroad. The amendment introduces fundamental changes in the area of agreements on work performed outside the employment relationship. This will bring the working conditions of “agreement workers” closer to those in an employment relationship, where the employer will now be obliged, for example, to schedule working hours and, from the new year, these employees will also be entitled to holidays. The amendment opens up the possibility of concluding employment contracts and other agreements in electronic form more widely and simplifies the rules for electronic communication and delivery.

Stricter agreements on work outside employment:

• Mandatory working time scheduling• Possibility for a worker to request employment under certain conditions
• Obligation to provide reasons in writing in certain situations for giving notice and not agreeing to employment at the employee's request
• Application of holiday provisions in a similar way to the employment relationship (effective from 1 January 2024)
  

New rules for working from home:

• Mandatory written agreement with the employee
• Option for both parties to terminate the telework agreement for any reason or no reason with a 15-day notice period
• The flat-rate amount of reimbursement for telework is CZK 4.60 per hour (according to the Ministry of Labour and Social Affairs); however, it is possible to agree that the employee is not entitled to reimbursement
  
• Employer’s obligation to provide reasons in writing if they refuse to allow work from home for employees providing care

New rules for electronic signing and delivery of employment documents:

• Easing of rules for electronic signing and delivery - a simple electronic signature and delivery to the employee’s e-mail address is sufficient for signing the employment contract and amendments as well as agreements on termination of employment, if the employee has given consent for such delivery
• Employee’s right to withdraw from an employment contract concluded electronically within 7 days of its delivery• “Stricter” delivery and higher level e-signature requirement only for unilateral termination documents, removal from managerial position and resignation from managerial position and salary statement
• Waiving the requirement for a higher level of electronic signature with an external certificate (recognised e-signature) for an employee, e.g. in the event of termination or cancellation during the probation period

Changes in informing the employee about the content of the employment relationship:

• Significant shortening of the monthly deadline for the employer to comply with the information obligation to 7 days, in case of a change of data even no later than to the day of the change of data
• Extension of the range of data that must be provided to the employee
• The possibility to inform in electronic form
• Introduction of an extensive obligation to inform the employee about the conditions of posting to another country
• Information obligation for employees working under an agreement

Parental leave:

• The employee will now be obliged to submit a request for parental leave in writing at least 30 days before the beginning of the parental leave. The request must specify the required duration of parental leave and may be made repeatedly.

Consolidation package

The Ministry of Finance submitted a draft amendment to the Income Tax Act to the Chamber of Deputies as part of the consolidation package. One of the planned changes includes a change in tax relief for the provision of employee benefits.

In the area of so-called leisure benefits, the government seems to back away from the original proposal to fully abolish the tax exemption and a “softer” version is going to the third reading. It maintains the original tax-favourable regime, but introduces an aggregate annual limit, i.e. the annual limit for holidays of CZK 20,000 is abolished, but an aggregate annual limit for the entire category of so-called leisure benefits is set at half of the average wage. The new annual limit would thus be CZK 21,983.

In the case of benefit programmes, i.e. cafeteria or benefit cards, most employers will probably fit within the upcoming limit with the basic benefit allocation. A potential problem may arise for employers who contribute to their employees beyond the basic benefit programme, for example, for children’s activities (summer camps, clubs or kindergarten) or above-standard health care. Now, these benefits will also become subject to the relevant limit. Although the forthcoming amendment does not prohibit the provision of even higher benefits, it will be necessary to set up a good record of all benefits in precise values so that the employer is always able to tax and insure the exceeding of the limit of specific employees correctly and in a timely manner. It should be noted that, compared to the current situation, companies will have the advantage of being able to charge anything that exceeds the limit to tax expense under certain conditions.

Changes will also affect the provision of meal vouchers, where the tax implications of meal vouchers and the monetary meal allowance should be unified according to the proposal. Therefore, meal vouchers should be exempt only up to a certain amount (linked to the amount of the upper limit of the meal allowance) and if the value of the meal voucher paid by the employer exceeds this limit, the difference should be treated as taxable income. On the other hand, the employer can now claim the entire amount paid by the employer for tax purposes.

The tax exemption for non-monetary gifts on life or work anniversaries is also abolished. The limit for tax exemption in the case of social assistance provided by an employer to an employee to overcome exceptionally difficult conditions (declaration of a state of emergency in a given territory) should be reduced from CZK 500,000 to CZK 50,000.  There should be no change in the case of support for (supplementary) pension insurance or life insurance.