In 2021, the assessment base for social security and health insurance contributions increases, the rates for meal allowances for trips abroad and reimbursement of travel expenses relating to business trips are changed. In addition, the minimum and average wages are increased, the super-gross wage is cancelled, and the method of vacation calculation is changed. And that is not all. You can read about this year’s changes in our article.
Maximum assessment base for social security contributions in 2021
The maximum assessment base for social security contributions in 2021 increases from CZK 1,672,080 to CZK 1,701,168. The relevant income for an employee to participate in the sickness insurance scheme increases to CZK 3,500. For agreements to perform work, the limit of settled income of CZK 10,000 continues to apply.
Increase in the minimum wage starting from 1 January 2021
Since 1 January 2021, the minimum wage has been increased by CZK 600 to CZK 15,200; the minimum hourly wage has been increased to CZK 90.50. The bottom levels of guaranteed wages for individual work groups have also been increased to CZK 15,200–CZK 30,400 (8 groups depending on complexity, responsibility a strenuousness of the work performed). The increase in the minimum wage has an effect, for example, on the limit establishing entitlement to a tax bonus (the annual income amounts to at least six times the minimum wage/at least half of the minimum wage per month, i.e. CZK 7,600); the maximum amount of earnings of a job seeker registered by the Labour Office (half of the minimum wage); the amount of state social support allowances except for allowances reflecting the applicant’s income; increase in the maximum tax relief for the placement of a child in a pre-school facility (in the amount of the minimum wage); increase in the limit to exempt pensions from income tax (up to a 36 multiple of the minimum wage – CZK 547,200 for 2021).
New amount of the minimum assessment base for health insurance in 2021
With respect to the change in the minimum wage since January 2021, there has been an increase in the minimum assessment base for health insurance and thus the minimum amount of the monthly premium to be paid by individuals with no taxable income that is paid on behalf of, for example, the so-called state categories of the insured (students, old age pensioners, women on maternity leave, recipients of parental allowances, job seekers registered by the Labour Office, etc.).
The minimum monthly assessment base for health insurance in 2021 amounts to CZK 15,200 and the monthly premium to CZK 2,052.
Change in the basic rates of meal allowances for trips abroad for 2021
Since 1 January 2021, some foreign meal allowances are subject to changes. The countries affected by the changes are: Bulgaria (EUR 40), Slovenia (EUR 40), and Sweden (EUR 55). The change will also affect some non-EU countries, such as Albania, Indonesia (EUR 40), and Taiwan (EUR 45).
Reimbursement of business trip expenses
Since 1 January 2021, adjustments have been made to the rates of reimbursement of travel expenses paid to employees on business trips. In connection with the use of a private car for a business trip, employees are entitled to the compensation for car wear as well as compensation for consumed fuel. The compensation for car wear has been increased to CZK 4.40 per km driven in 2021. If employees claim compensation for consumed fuel using the prices published in a regulation, they may request compensation of CZK 27.80 per 1 litre of consumed petrol, CZK 27.20 per 1 litre of consumed diesel oil and CZK 5 per 1 kilowatt hour of consumed electricity. Instead of prices determined by a regulation, employees are naturally entitled to claim compensation based on their actual expenses determined using confirmations of fuel payment.
In 2021, local meal allowance rates will be increased in individual time zones. Newly, employees are entitled to meal allowance of at least CZK 91 if their business trip takes from 5 to 12 hours; CZK 138 if their business trip takes more than 12 hours but less than 18 hours; and CZK 217 if their business trip exceeds 18 hours. The principle of meal allowance reduction remains the same.
Average gross wage for a period from the first to the third quarter of 2020
On 4 December 2020, the Czech Statistical Office published the average wage for a period between the first and the third quarter of 2020 in the amount of CZK 34,611 (the previous amount was CZK 33,429). This amount is used to calculate values for meeting the obligatory proportion of disabled individuals in 2020. In order to compensate one disabled person with a “substitute performance”, products and services of CZK 242,277 excluding VAT need to be consumed (34,611 x 7). Contribution to the state budget relating to one vacant full-time position that should have been staffed with a disabled person would be CZK 86,527.50 (34,611 x 2.5).
Amount of tax relief for child placement (pre-school allowance)
The minimum wage amount has an effect on the maximum amount of tax relief for a child placed in a pre-school facility, i.e. the pre-school allowance. The relief equals the minimum wage. This means that while in 2020 parents having a child in a kindergarten might utilise a tax relief of up to CZK 14,600, this year the amount is CZK 15,200.
Cancellation of the super-gross wage
Since 1 January 2021, the super-gross wage has been cancelled and progressive taxation at 15% and 23% has been introduced. Individual income will be taxed at 15% up to the limit of a tax base in the amount of 48 multiple of the average wage (i.e. in 2021 up to CZK 141,764 per month, CZK 1,701,168 per year). The increased rate of 23%, which replaced the so-called solidarity tax increase, will be applied to the annual tax base exceeding the 48 multiple of the average wage.
When the annual income to apply the tax rate of 23% is generated through income from employment from one or more successive employers to whom the employee provided their taxpayer’s declaration, no income tax return will have to be filed as was the case with solidarity tax increase.
Increased tax relief per taxpayer
Since 1 January 2021, the tax relief per taxpayer has been increased to CZK 27,840 per year (CZK 2,320 per month – the monthly increase amounts to CZK 250). In 2022, the tax relief per taxpayer will be increased once again to CZK 30,840 per year (CZK 2,570 per month).
Cancellation of the tax bonus limit
Since 1 January 2021, the maximum amount of the tax bonus paid for dependent children has been cancelled and the amount may newly exceed CZK 60,300. The condition of the minimum annual income generated from employment or business in the amount of six times the minimum wage, i.e. CZK 91,200 for 2021, still applies.
The relevant income for participation in the sickness insurance scheme is also taken into consideration for the limit for withholding tax on income arising from an agreement to perform work or an employment relation if an employee provided no tax declaration – CZK 3,500 in 2021. In respect of agreements to perform work, the limit of accounted for income of CZK 10,000 continues to apply.
Meal-voucher flat rate
Since January 2021, employers may provide their employees with a meal contribution (the so-called meal-voucher flat rate) instead of meal vouchers. It is a financial contribution that may be paid to employees together with their wages. Unlike meal vouchers, the meal-voucher flat rate per shift is only exempt from income tax on the part of employees up to a certain limit, which is 70% of the upper limit of meal allowance that may be provided to employees remunerated through pay on a business trip between 5 and 12 hours. In 2021, the meal-voucher flat rate determined in this manner will be exempt up to CZK 75.60 per shift. If the employer provides a higher meal flat rate the difference has to be taxed within the employee’s wage and social and health insurance contributions have to be paid from the difference.
Provision of the meal flat rate should be defined by an internal regulation (a collective agreement). Employees may not receive multiple types of contributions for a single period (both the meal voucher and the meal-voucher flat rate); however, various forms of meal contributions may be combined in an internal regulation (employees on different workplaces of the same employer may receive different forms of the meal benefit).
Increase in the amount of wages exempt from garnishment starting from January 2021
Since 1 January 2021, the basic amount of wages exempt from garnishment used to calculate enforcement, insolvency, statutory and agreed deductions has been increased to CZK 7,872.75 (based on the increase in the regulatory housing expenses to CZK 6,637). The liable person’s amount exempt from garnishment is newly increased by CZK 2,624.25 for each dependent person. The level above which the liable person’s wage is subject to sanctions without limitation will be CZK 20,994.
Vacation 2021 – amendment to the Labour Code
In connection with the amendment to the Labour Code, the entitlement to vacation has been determined in hours since 1 January 2021 (as opposed to days in 2020). Vacation used and its balance are also determined in hours. The entitlement to vacation is now based on the determined weekly (shorter) working hours and the hours worked in the relevant calendar year: weekly working hours x number of vacation weeks provided by the employer = annual entitlement to vacation in hours. When employment is established during the year, the entitlement is determined as a proportion of the annual vacation entitlement (for any weekly working hours worked in the amount of 1/52 from the annual entitlement to vacation).
With a full time job and the employment term covering the entire calendar year the entitlement is determined as follows: weekly working hours: 40 x number of vacation weeks: 5 = 200 hours of vacation per year.
The basic annual entitlement to vacation remains 4 weeks. Reduction of vacation for obstacles to work is cancelled, reduction is only possible for unexcused absence from work in a ratio of 1:1.
Obstacles to work are divided into three groups for the purposes of vacation entitlement:
- fully creditable time (obstacles are considered to be work performance, e.g. maternity leave, illness due to a job-related injury),
- partly creditable time (illness, parental leave, other personal obstacles – credited when specific conditions are met within a certain limit),
- non-creditable time (unexcused absence – results in no entitlement to vacation).
Vacation may only be taken in full or half shifts; the only exception is using the remaining portion of vacation shorter than half a shift.