New Labor Law: Same Conditions for Employment Agencies’ and Company’s Workers?

An Amendment to the Labor Law from July 29, 2017 concerns employment agencies and alternative employment arrangements for unemployed. Changes allegedly target frauds and social insecurities concerning employment. How does it work and why do we need the changes?

News in Labor Law: Employment agencies fall under stricter rules – even retroactively. Unemployed and registered with the Labor Office who earn some extra money fall under higher taxation now. Registered sick jobseekers must submit confirmed medical certificate.

Jiří Vaňásek, Deputy Minister of Labor and Social Affairs, informs that the Amendment including all aforementioned modifications should ensure more fairness and transparency of employment agencies with assisting people in finding a new job.

Moreover, changes in alternative employment arrangements should curb untaxed and continuous additional income of unemployed which can result in problems with pension and social insurance. Infringements should be less often thanks to the new rules.

Unemployed, yet earning money with a part-time job

Unemployed person registered with the Labor Office of the Czech Republic with an interest to earn an additional part-time income is according to the Amendment a subject to different alternative employment arrangement and thus, to higher taxation.

From July 29, 2017 onwards, it is not possible to earn some extra money without stricter taxation. So far jobseekers could earn 5 500 CZK (half of minimal wage) having signed an agreement to complete a job (in Czech: DPP, Dohoda o provedení práce) almost with no taxation.

Newly, an agreement to perform work (in Czech: DPČ, Dohoda o provedení činnosti) or an employment contract facilitates such a part-time job.

More taxes, less money as DPP turns into DPČ

Jobseekers who worked under an agreement to complete a job (DPP) have to decide whether to change the agreement to an agreement to perform work (DPČ) or to stay registered with the Labor Office. It is up to them to choose one of the possibilities within three months of the date on which this Amendment takes effect.

The problem which the Labor Office sees in DPP is its non-existing social and healthcare taxation. DPP is therefore misused by both, employers and employees.

Employer do not have to pay any taxes for such an employee which results in the State losing money. According to the Ministry of Labor, almost 95 % of registered unemployed people earn additional income having signed DPP contract basis.

Either way, jobseekers lose some of their extra money due to the Amendment. Under DPČ contract, a jobseeker is a subject to social and healthcare taxation as soon as the gross salary exceeds 2 500 CZK. A part of insurance is covered by employer, yet 6,5% is paid by a jobseeker.

Healthcare insurance system is quite similar. When earning extra money of over 2 500 CZK while registered with the Labor Office, a jobseeker is obliged to pay 4,5 % of the gross salary to the healthcare.

Let’s visualize it with an example:

You worked on DPP contract but after July 29, 2017 you switched to DPČ contract. Your gross income is 5 000 CZK. Social insurance then costs you 325 CZK and healthcare insurance accounts for 225 CZK. Compulsory deductions will in such scenario cost you 550 CZK altogether.

Sickness when registered with the Labor Office must be officially confirmed

Registered jobseeker prevented by sickness or accident from performing their duties is obliged to submit a confirmed medical certificate to the Office. The rule comes into effect October 1, 2017.

Same conditions for employment agencies’ and company’s workers?

Loyal employment agencies should be pleased by the Amendment. It zeros in on disloyal and “fake” employment agencies which strive to circumvent insurance laws and harm the rights of temporary agency workers. Employment agencies are therefore required to provide the performance security of 500 000 CZK from July 29 onwards and it is applicable also retroactively.

Temporary agency workers should be also safeguarded from unfair working conditions thanks to the Amendment. It used to be a commonplace that employees of a company could enjoy better working conditions and higher salaries. Such practices should diminish now.

The Amendment requires from DPP, DPČ or other contracts detailed working and wage conditions of a company’s employee assigned to the same job position as a temporary agency worker, so both types of workers would be treated equally.

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