Major changes ahead for freelancers in Czechia: Here's what you need to know

As the government continues its mission to change the nature of part-time, flexible employment contracts – the DPP and DPČ – by bringing them closer to traditional work agreements, an upcoming legal amendment may change the face of part-time work in Czechia.

The dohoda o provedení práce (DPP) and pracovní činnosti (DPČ) are two types of part-time, flexible work contracts used for supplementary income. 

Under the DPP, also known as a work-performance contract, a person can work under an employer for up to 300 hours in a calendar year. A person working on a DPP does not need to pay any social or health insurance if the gross monthly income does not exceed one-quarter of the national average wage (about CZK 10,500 in 2024).

Under a DPČ, a person can work up to 20 hours per week for an employer. Unlike a DPP, a DPČ contract allows someone to work for an employer for over 300 hours per year. The earnings limit for not paying in any social or health insurance on a DPČ is much lower than a DPP, at CZK 4,000. A živnostenský list (trade license), in contrast, applies to self-employed people working more hours and usually earning over CZK 10,500 monthly.

In short, the state wants to collect more money from social and health insurance payments for DPP and DPČ workers. The change will ultimately be more costly for both employees and employers, and involve more bureaucracy. 

At present, someone working on a DPP can theoretically have multiple jobs (at the same or different companies) that pay up to CZK 10,000 each per month, allowing workers to avoid paying any health and insurance payments despite earning over the minimum threshold. 

As per the government’s plans, employees on a DPP will now need to make health and social insurance contributions if the value of their total monthly earnings from multiple jobs exceeds 40 percent of the average wage – around CZK 17,500. The rules for DPČ workers will stay the same as at present. The CZK 10,500 limit if working for one employer under a DPP remains the same.

The government assumes this will generate around CZK 1.8 billion in state income per year. 

Employers will face more financial risk and even more bureaucracy following the change. 

After the government enacts the law, companies will have to report each employee's total earnings on a DPP/DPČ to the Czech Social Security Administration by the 20th day of the calendar month for the month-earlier period.

If an employee on a DPP earns over CZK 17,500 (one-quarter of the average national wage) in a month, employers must pay an insurance premium of 24.8 percent within the next month. 

This is bad overall for small- and medium-sized companies. They complain that under the new rules, they will be in the dark about how much a contractor will cost them due to employees’ work at other companies and the potential for paying employees’ insurance premiums every month. 

At the beginning of this year, changes to the Labor Code also obliged employers to provide employees with a statutory holiday allowance and scheduled working hours, given in advance. For firms, this is an added administrative and financial burden. 

Aside from paying more in insurance contributions every month, the new law's effects could be much more far-reaching. 

The changes for DPP/DPČ contract workers technically add obstacles to a generally flexible and straightforward process for enabling part-time work. In many cases, employers will spend more time and money, and employees are subject to paying higher insurance contributions. 

This will make DPP/DPČ contract work less attractive – potentially causing employers to terminate employees’ contracts, leaving hundreds of thousands out of work. 

It may also push people into the gray economy in a bid to increase work flexibility and circumnavigate tax and insurance payments.

The original amendment is due to come into force on July 1, 2024, but must first gain approval from the Chamber of Deputies and Senate. However, the Czech business news website Hospodářské noviny notes that the government disagrees about the exact conditions of the law due to its constraining nature on employers and employees. This will likely delay its implementation.