[Czech Republic] Processing of income paid after the agreement termination


In today's article, we will look at the consequences of the payment and settlement of an additional income in the period after the termination of an agreement on the performance of work or an agreement on work activities. We will try to explain what the payroll accountant has to do in this context and why. For the purposes of mild amusement, let's start by reading a paragraph of the Act on Social Security Contributions and Contributions to National Employment Policy, which addresses this issue.

“Income settled in the calendar month in which the small-scale employment or the agreement on the performance of work ended, and income settled in the following calendar month or calendar months in the amount that did not establish participation in social insurance in that month or months, shall be deemed to be income accrued in the calendar month in which the sum of the incomes included in the last calendar month in which the small-scale employment or the agreement on the performance of work last lasted reached the amount giving a rise to the insurance in that month.”

So what does this paragraph say? We all know or at least suspect that agreements on the performance of work and on work activities have a special status in terms of health and social insurance and, unlike income from the basic employment relationship, social and health insurance is not paid up to a certain income. This, of course, brings with it some negatives, for example, in such months, when the insurance contributions are not paid, such an employee is not even healthily, resp. socially insured. If s/he is not insured because of another reason, in case of social insurance this will have a negative effect on the amount, or the very existence of a retirement pension and, in the case of health insurance, the obligation to pay health insurance for a given month from their own other resources.

For an agreement on the performance of work, the monthly wage limit of CZK 10,000 has been in place for a long time now. This means that if the income from the agreement does not exceed this limit in a given month, health and social insurance does not arise and contributions are not paid. But what happens if the payroll accountant processes an income in the agreement after its termination? The paragraph quoted above basically says that we must summarize such income with the income that was processed in the month when the agreement was terminated and look again whether the given limit was not exceeded in total. Therefore, if the agreement lasted until May, 31st and CZK 10,000 was paid in May and later additionally CZK 2,000 was paid in August, the payroll accountant correctly does not pay contributions in May and keeps the employee as uninsured. However, in August, after processing of the additional CZK 2,000, s/he must summarize these CZK 2,000 CZK with the CZK 10,000, which was processed in May, and reassess whether the limit was not exceeded and resolve the employee’s insurance retrospectively. In this case, the limit was exceeded, as the total amount is CZK 12,000. In August, the payroll accountant must deduct from the amount of CZK 2,000, in addition to the tax, also the contributions for health and social insurance, which is calculated from the entire CZK 12,000.

S/he will pay these contributions to state institutions for the month of August and will also state their amounts on the overview of paid insurance for August. At the same time, however, s/he must resolve the original records of the employee as uninsured person. Therefore, an application and a deregistration for health (or social) insurance for the month of May has to be sent, the already sent pension record must be corrected (or sent it additionally) and in addition the number of insured persons on the overview of paid health insurance for May has to be corrected.

To processes payroll correctly, the payroll accountant must be careful about an income paid after a termination of an agreement, because not every payroll software takes care of this matter itself. On the other hand, an employee must consider that the additional income may be significantly affected by high contributions and sometimes because of this may even remain in debt to the employer, because even the entire amount of the additional income does not cover tax and insurance contributions.


Martin Svoboda
Payroll Development Specialist
Contract Administration
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