Agreement on the performance of work: what and how it changes in 2024

Amendments to the law change many of the rules that have been in place for performance work agreements (PWAs). This popular way of earning extra income is not only subject to central registration, but also to new rules and a cap on levies. Join us for a look at the main changes affecting PPAs in 2024/2025*.

*Legislation relating to the DPP has undergone many significant changes since 2023 and more are likely to follow as part of the amendments to the Labour Code. We will continue to monitor everything on an ongoing basis.

What is a performance agreement?

A work performance agreement governs the relationship between employer and employee and is used for limited earnings. It is typically used for temporary jobs, especially by students, pensioners or people on maternity or parental leave.

It is also popular for those who are considering self-employment but do not want to deal with compulsory registration. In contrast to the employment agreement (FTE), it is more of a one-off and has its own specifics and requirements.

VPA from the employer's point of view

The basic feature of performance of work agreements is the limitation to 300 hours per year. Although you can conclude as many PPAs as you want with one employee for different activities, he/she may work no more than 300 hours per calendar year in your company under a PPA. If he exceeds this limit, the contract becomes void and you face penalties for employing people without a valid employment contract.

Always negotiate a work performance agreement in writing with the employee. In the contract, be sure to include key details such as:

• identification of both parties;
• the type and scope of work to be performed;
• the place of work;
• the expected working hours and their distribution, including rest periods (lunch breaks, etc.);
• the wage and method of remuneration;
• the rate of leave and how the length of leave is determined;
• the procedure for terminating the employment relationship.

The contract can be in both traditional paper form and, now, electronic form. Together with electronic delivery (e.g. to an employee's e-mail address that is not kept directly with your company), you will appreciate this form especially when you are doing business remotely.

Changes to the FTC from 1 January 2024

• Minimum and guaranteed wages: As of January 2024, the hourly wage on a FTE must not be less than the minimum hourly wage in the period. Thus, in 2025 you must not pay your contractors less than CZK 124.40 per hour ( in 2024 it was CZK 112.50). If you negotiate a lower hourly wage with them (not including overtime, holidays, night shifts, weekends or working in a difficult working environment), you will have to pay them the difference.
• Home office and telework: Selected groups of employees (pregnant women, people caring for a child under the age of 9 or a long-term dependent) can apply for teleworking arrangements. In this case, the employee is now also entitled to a theoretical reimbursement of the associated costs.
  
  

  If you accept the request, you must put the home office scheme in writing in your contract - or give reasons why you refuse this option. You either pay the actual costs of teleworking as a lump sum (in 2025 it is CZK 4.80 for each hour worked, in 2024 it was CZK 4.50) or you agree that the employee is not entitled to reimbursement.

• Vacation: The most debated change from January 2024 is the holiday entitlement of contract workers. This will arise if they have worked at least 80 hours for you during the calendar year and the arrangement has lasted continuously for at least 4 weeks, i.e. 28 calendar days.
  
  

  Multiple agreements that are continuously linked to each other (even in a combination of FTE and FTE) are also envisaged. If the contractor then leaves your employ and does not take the leave, you will have to pay them back in lieu at the rate of their average earnings.

Changes to the FTC from 1 July 2024

• Central registration of agreements: as an employer, you must now report all FTAs to the Czech Social Security Administration (CSSA). The aim of the central register is to monitor the limits for compulsory contributions and to prevent undeclared work.
  
  Contracts concluded before 1 July 2024 that remain active after this date are also subject to registration. As your employee may also work on a FTE for other companies, you will base the registration on his/her declaration in the standard form.
  
  From July 2024, you are also obliged to declare the amount of income of all employees on a DPP by the 20th of the following month - even if their income was zero or did not reach the qualifying amount for contributions in the previous month.
  
  Then, from 1 August 2024, the CSSA has launched a new electronic submission of the UITP - a single income statement for people working on a DPP.

Changes to the DPP from 1 January 2025

With the amendment to the Sickness Insurance Act, the originally planned regime of the so-called notified agreement has been abolished. This was to have had a major impact on the calculation of FTC contributions and exemption limits.

The following rules currently governsocial security and health insurance contributions from the PPA:

• Employees' earnings from all their FTCs with one employer are added together;
• however, income from PPAs with different employers is not added together;
• no income from other types of employment is added to the income from a PPA, even if it is with the same employer;
• income from a FTE is exempt from contributions if it does not exceed 25% of the average wage for the year, rounded down to the nearest 500 crowns (in 2025 the limit is CZK 11 500).

The same limit of CZK 11,500 will also apply to the withholding tax on income from the FTE.

We will take over the payroll for you

Do you want to be able to focus on your business and be sure that you are fulfilling your obligations as an employer? We will take over your payroll accounting and deal with all the administration. Contact us!