We would like to provide you with more details about the so-called Recovery Package that was presented by the Czech Government on May 11, 2023, particularly focusing on insurance-related changes.
Changes relating to self-employed individuals
- Increase in the assessment base for social insurance premiums (contributions)
Since more than 50% of all self-employed individuals only pay the minimum statutory contributions, the Czech Government decided to increase the relevant assessment base, as this group of people would only be entitled to low pensions based on their minimum payments.
From 2024 to 2027, the existing assessment base of 25% will increase by 5% annually. This means that the minimum social insurance contributions that currently amount to CZK 2,944 would ultimately increase to CZK 4,710.
- Increase in the assessment base percentage limit for the calculation of self-employed individuals’ contributions
According to the proposal of the Czech Government, self-employed individuals should pay contributions on at least 55% of their tax base instead of the existing 50%. The same tax rate (15%) applies to both groups (employees and self-employed individuals) for income of up to 36 times the average wage and 23% for any amount of the tax base exceeding that limit. For employees, the tax base corresponds to their gross wages. In case of self-employed individuals, the tax base is determined as the difference between their income and expenses.
Changes to employees’ sickness insurance contributions
According to information available on the Czech Government’s website, employee sickness insurance contributions should be reintroduced – at a reduced rate of 0.6%.
The following reasons are stated: “The reduction of sickness insurance contributions for employees that took place in 2009 was a non-systemic measure that was even criticized by social partners at the time and that has resulted in an imbalance of the sickness insurance system. In 2019, the sickness insurance contributions paid by employers were reduced from 2.3% to 2.1% of the assessment base to compensate the waiting period abolition. Due to this measure, together with the introduction of other sickness insurance benefits (e.g. introduction and subsequent extension of paternity benefits or introduction of caregivers’ leave), the sickness insurance account has had negative balance since 2019 (approximately CZK 8 bn. in 2022). The introduction of this measure is expected to have a positive impact on the sickness insurance account balance.”
The following table shows the development of sickness insurance contributions (rates):
Sickness insurance contributions (%) | Until 2008 | 2009 – 30 June 2019 | As of 1 July 2019 | As of 2024 |
Employers | 3.3 | 2.3 | 2.1 | 2.1 |
Employees | 1.1 | 0 | 0 | 0.6 |
How will the proposed increase in sickness insurance contributions impact employee’s take-home pay?
In case of gross wage of CZK 20,000, the take-home pay (net wage) now amounts to CZK 17,370. As of 2024, it would amount to CZK 17,250, leading to a reduction of CZK 120 in such employee’s take-home pay.
In case of gross wage of CZK 25,000, the take-home pay (net wage) now amounts to CZK 21,070. As of 2024, it would amount to CZK 20,920, leading to a reduction of CZK 150 in such employee’s take-home pay.
In case of gross wage of CZK 30,000, the take-home pay (net wage) now amounts to CZK 24,770. As of 2024, it would amount to CZK 24,590, leading to a reduction of CZK 180 in such employee’s take-home pay.
In case of gross wage of CZK 40,000, the take-home pay (net wage) now amounts to CZK 32,170. As of 2024, it would amount to CZK 31,930, leading to a reduction of CZK 240 in such employee’s take-home pay.
In case of gross wage of CZK 50,000, the take-home pay (net wage) now amounts to CZK 39,570. As of 2024, it would amount to CZK 39,270, leading to a reduction of CZK 300 in such employee’s take-home pay.
In case of gross wage of CZK 60,000, the take-home pay (net wage) now amounts to CZK 46,970. As of 2024, it would amount to CZK 46,610, leading to a reduction of CZK 360 in such employee’s take-home pay.
According to the Czech Statistical Office, the average gross wage amounted to CZK 40,353 a month in 2022. In this case, an employee’s take-home pay would be reduced by CZK 242 a month (0.6%).
