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

The amendment to the Labour Code changes many of the previously established rules for performance of work agreements (DPPs). The popular method of earning extra income is now subject not only to central registration but also to new limits for levies. Join us for a look at the main changes that will affect DPPs in 2024/2025*.

*Legislation relating to the DPP has undergone many significant changes since 2023 and more are likely to follow. We will continue to monitor the amendments 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 work, 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. Unlike the employment agreement (DPČ), it is rather one-off in nature and also has its own specifics and requirements.

DPP 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 any number of DDPs for different activities with one employee, he/she may work no more than 300 hours per calendar year in your company under a DPP. 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 at your company), you will appreciate this form especially when you are doing business remotely.

Changes to the DPP from 1 January 2024

• Minimum and guaranteed wages: As of January 2024, the hourly wage on a DPP must not be less than the minimum hourly wage in the period. Thus, in 2024 you must not pay your contractors less than CZK 112.50 per hour. 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 theoretical compensation for the costs involved.
  
  

  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 can either pay the actual costs of teleworking as a lump sum (in 2024 this is CZK 4.50 for each hour worked) or 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 him or her back as compensation at the rate of average earnings.

Changes to the DPP from 1 July 2024

• Central registration of agreements: you as an employer must now report all DPPs 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 are also subject to registration, but remain active after this date.

As your employee may also work on a DPP for other companies, you will base the registration on his/her declaration in the standard form.

As an employer, you are also obliged from July 2024 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 ČSSZ launches a new electronic submission of the DPP - the Single Income Statement for persons working on a DPP.

Changes to the VPP from 1 January 2025

The original draft of the amendment worked with changes to the rules for premium payments as early as 2024. In the end, these changes were not only postponed until January 2025, but also adjusted.

• Notified Agreements Scheme: there can only be 1 notified agreement for each employee for all their employers. The specific DPP in the notified scheme is chosen by the employee for each calendar month, but as the employer you must 'book' it with the CSSA.
  
  

  The advantage is exemption from social security and health insurance payments if the income from the notified DPP does not exceed 25% of the average wage for the year. The CZK 10,000 experienced so far will increase to an estimated CZK 10,500 to 11,000/month in 2025. The same conditions apply to the simplified withholding tax regime.

• Unnotified agreements scheme: for all other DPPs of the same employee, you will pay the standard social security and health insurance contributions and advance income tax. The only exception to this rule is the small-scale scheme (the employee's income does not exceed CZK 4,000 per month).

Will temporary employment on a temporary employment contract pay off in 2024?

The agreement to perform work, as well as the employment agreement, is one of the most unique types of employment contracts in Europe. After the amendment of the Labour Code, it may become more expensive for employers. According to a survey by the Chamber of Commerce in 2024, almost 60% of companies have reduced the number of their contractors or redistributed their work among other employees.

From 2025 onwards, DPPs will now be considered either classic (other) employment or small-scale employment (ZMR), depending on the amount of income agreed per calendar month.

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