Agreements (FTE and FTE) and entitlement to remuneration

Are there employees working for you under a performance or employment agreement? Do you know what they are entitled to?

The basics of the legal regulation of employment contracts and performance contracts

The Labour Code is based on the principle that agreements for work performed outside the employment relationship are to be used by the employer only secondarily to fill part-time capacities where it is not possible to create a new job, for greater flexibility in case of variable demand, for seasonal work, etc. A significant advantage is that as an employer you are not obliged to allocate working time to the contract workers and therefore not to assign work. In addition, certain protective provisions are excluded for contract workers under Section 77 of the Labour Code.

Although it is up to you how you allocate working hours to the conciliator, for the purposes of providing compensation under agreements for work performed outside the employment relationship, you are obliged to determine the allocation of the employee's weekly working hours into shifts (either directly in the agreement or by internal regulation). This is not a scheduling of the time in which the employee should work for you, but a fictitious scheduling for the purposes of determining the amount of remuneration to be paid in the event of temporary incapacity for work or quarantine of the employee.

Employees working under agreements for work outside the employment relationship may be entitled to compensation in the event of temporary incapacity for work and quarantine. Other obstacles to work do not apply to contract workers under Section 77 of the Labour Code.

When is an employee entitled to remuneration?

An employee who is a conciliator is entitled to remuneration compensation only if he/she meets the conditions for entitlement to sickness benefits pursuant to Act No. 187/2006 Coll., on Sickness Insurance, on the date of the obstacle to work:

• in the case of an agreement to perform work, this means that in the calendar month in which the obstacle to work occurred, the employee must have achieved the relevant income of at least CZK 10,001;
• in the case of a work activity agreement, the employee must achieve a qualifying income of at least CZK 3,000.

If in a given month the employee meets the minimum income requirement and the employee suffers a temporary incapacity for work or quarantine, you must pay him or her 60% of the average earnings for the duration of the incapacity for work, up to a maximum of 14 days, in accordance with the notional weekly working time in shifts (i.e. for the days that are considered working days according to this schedule). It should also be emphasized here that the compensation you pay to the conciliator because of the impediments to work incurred is not covered by the Antivirus compensation.

If the employee does not earn the qualifying earnings in the month in which the work stoppage occurred, the employee is not entitled to wage replacement.

I do not assign work to the contractor. Do I have to pay contributions for him?

1. Public health insurance contributions

Provided that in a calendar month the employee does not achieve the relevant income and the state is not the payer of the insurance premium [1], the employee is considered to have no taxable income for the purposes of Act No. 48/1997 Coll., on public health insurance. This means that you are not obliged to make advance payments of public health insurance premiums on his/her behalf .

However, the employee must pay the advance payment of public health insurance premiums himself. The current minimum amount of this payment is CZK 1,971 [2]. Employees must pay the advance payments for health insurance for each month in which they have not earned the relevant income by the 8th day of the following month.

In this connection, it should also be emphasised that, unlike self-employed persons , persons without taxable income were not exempted from compulsory contributions on the basis of Acts No 134/2020 and 136/2020 adopted in the state of emergency.

1. Contributions to social security and state employment policy

In the event that the contracted workers do not achieve the decisive income in the calendar year, you do not have to pay social insurance on their behalf.

Employees are not obliged to pay social insurance either. The payment of social security contributions is voluntary for persons without employment and without taxable income. The minimum monthly voluntary pension insurance contribution is CZK 2,439. Months in which no pension contributions are paid are not counted towards the specified periods of insurance necessary to qualify for an old-age pension [3].

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[1] The most common situations in which the state is the payer include: jobseekers on the register of the employment office, students up to 26 years of age, women on maternity and parental leave and persons receiving maternity allowance, persons who personally and properly care for at least one child up to seven years of age or at least two children up to 15 years of age all day long, etc.

[2] Status as of 06.04.2020.

[3] The general period of insurance is 35 years.