Discount on the insurance premium for part-time workers

Motivating the employer to create more part-time jobs for people who, for various reasons, cannot work full-time.

On 22 July 2022, Act No. 216/2022 Coll. was published in the Collection of Laws. Its aim is to motivate employers to create more part-time jobs for people who, for various reasons, are unable to work full-time. Reduced working hours will made preferable through a 5% reduction in social security contributions. This Act comes into effect on 1 February 2023. All the conditions that must be met in order for an employer to become qualified for the reduction are summarised below. At the same time, these must be documented by the employer during a possible inspection by the Czech Social Security Administration

CONDITIONS FOR ENTITLEMENT TO A REDUCTION IN SOCIAL SECURITY CONTRIBUTIONS

The reduction in social security contributions mainly applies to specific groups of employees. It concerns these following employees:

• An employee over 55 years of age
• An employee who is a parent or adoptive parent of a child under 10 years of age – the relationship to the child and the child’s age are proven by the child’s birth certificate and this decision;
• An employee who cares for a close person under the age of 10 who is dependent on the assistance of another person in Grade I (slight dependence), or for a close person who is dependent on the assistance of another person in Grade II (medium-heavy dependence) or Grade III (heavy dependence) or Grade IV (total dependence) – such care is proven by a confirmation from the regional branch of the Labour Office (not older than 1 month) and an affidavit.
• An employee who is also preparing for a future profession by studying (at secondary school or university); the studies are assessed under Section 21(1)(a), Section 22 and Section 23 of the Pension Insurance Act – such studies are then proven by a confirmation from the relevant school and, if studying abroad, by a decision of the Ministry of Education, Youth and Sports stating that such studies are equal to the studies in the Czech Republic .
• An employee who as a job seeker, in the period of 12 calendar months preceding the calendar month for which the reduction in the social security contributions is applied, has started retraining under Section 109 or Section 109a of the Employment Act – such retraining is proven by confirmation from the relevant branch of the Labour Office.
• An employee who is a disabled person under Section 67(2) of the Employment Act – such a disability is proven by the opinion or confirmation of a social security authority on disability or by the confirmation or decision of a social security authority on a medical disadvantage.
• An employee under the age of 21

Furthermore, the following must be met:

• Agreed shorter working hours or civil service hours of work than the established weekly working hours or civil service hours of work. The range of shorter working hours agreed in this way must be between 8 hours and 30 hours per week. In the case of multiple jobs with the same employer, the specified range applies to all jobs in total. For employees under the age of 21, shorter working hours or civil service hours of work are not a condition for applying the reduction in social security contributions.
• The employee’s assessment base or the sum of the employee’s assessment bases from all jobs in the employment or civil service relationship with the same employer for a calendar month will not exceed 1.5 times the average salary – specific values of these indicators are announced by the government by a decree by the end of September for the following calendar year).
• And at the same time the employee’s assessment base or the sum of the employee’s assessment bases from all jobs in the employment or civil service relationship with the same employer attributable to 1 hour of the total hours worked from all such jobs in a calendar month will not exceed 1.15% of the average salary,
• The time worked by an employee in the employment or civil service relationship from all jobs with the same employer in a calendar month will not exceed 138 hours. (If the employee commences employment during a calendar month, this number will be proportionately adjusted.)
• The reduction in social security contributions may not be applied for an employee who is a disabled person, if the employee’s employer is recognised as a sheltered labour market employer under Section 78 of the Employment Act. Such an employer is already entitled to a contribution to support the employment of disabled persons under Section 78a of the Employment Act.
• The reduction in social security contributions may not be applied for an employee, if the employee is listed in the monthly summary of expenses in compensation of employees’ salaries for claiming the payment of the allowance during part-time work under Section 120e (5) of the Employment Act.
• Application of the reduced rate The employer is eligible for the reduction in employee’s social security contributions only if, before applying the reduction, it has notified the Czech Social Security Administration of its intention to apply the reduction for such an employee. The amount of the reduction in social security contributions per calendar month is 5% of the total assessment bases of those employees who are subject to the reduction. This notification is the result of an amendment according to which the reduction in social security contributions for the same employee can be provided to only one employer per calendar month.
• The intention to apply the reduction in social security contributions for an individual employee can be announced by the employer no earlier than 1 month before the day from which the reduction in social security contributions for a specific employee will be applied, but not earlier than the day of submission of the notification of the employee’s commencement of employment under Section 94 of Act No. 187/2006 Coll., on Sickness Insurance (hereinafter referred to as “ZNP”), and no later than the deadline for submitting an overview of social security payments under Section 9(2) of the Act on social security contributions and contributions to national employment policy for the calendar month for which the reduction in employee’s social security contributions is applied.
• The reduction may be applied for February 2023 for the first time.

From the point of view of practice, it is already obvious that the Act places great demands on the correct setting and implementation of extensive control mechanisms directly into the payroll software, regardless of the agenda associated with checking all confirmations and their constant updating by employees and payroll accountants which increases another administrative burden.

Considering all the above-mentioned facts and conditions which must be observed, checked and documented by both the employee and the employer during any controls, the question is whether this Act will ultimately discourage the employer, or whether it will be sufficient motivation for the introduction of part-time jobs and the current offer of these – which are actually in high demand – will be somehow positively affected.