Over one million people in the Czech Republic work under employment agreements

More than one million people in the Czech Republic are currently working under employment agreements, according to recent data from the Czech Social Security Administration (CSSA). In the second half of last year alone, workers on these agreements earned a total of CZK 40.7 billion, yet only CZK 2.7 billion — less than seven percent — was subject to social insurance contributions.

Since July 2024, employers have been required to report income from employment agreements monthly to the CSSA. Contributions are only required when earnings from an agreement exceed a quarter of the national average wage. For 2025, this threshold is CZK 11,500 per month.

In December, the CSSA recorded over 1.02 million individuals working under these agreements, which amounted to more than 1.24 million individual contracts. However, only about 25,300 of these agreements exceeded the contribution threshold and had social insurance paid. The remaining agreements fell below the limit and were not subject to levies.

Nearly 190,700 employers used such agreements in December, collectively paying more than CZK 6.5 billion in wages. On average, an individual earned CZK 5,122 under an agreement during that month. Social insurance contributions were paid on just CZK 478.7 million of that total.

Filip Pertold, Deputy Executive Director at the Institute for Democracy and Economic Analysis (IDEA) and adviser to the Minister of Labour, has voiced concerns about the widespread use of these contracts. He argues that they are often used as a substitute for standard employment and represent a form of tax optimization. According to Pertold, many workers are involuntarily employed under agreements, which were originally intended for short-term or casual work.

Experts also point out that these agreements often take the place of part-time jobs, an area in which the Czech labour market lags behind the EU average. Only about ten percent of workers in the country are employed part-time. In such roles, regular levies apply, though employers benefit from reduced premiums for certain groups, including parents of young children and those nearing retirement.

To address these issues, the think tank PAQ Research has proposed reforms aimed at easing the tax burden on low-income and part-time workers. Their proposal includes increasing tax allowances for individuals and families, expanding eligibility for tax bonuses, and reducing taxes on shorter working hours. According to PAQ, such reforms could encourage up to 50,000 people to shift from informal or agreement-based work to regular employment.

The Ministry of Labour is also planning a deeper analysis of employment agreement data. Analyst Magdaléna Klimešová noted that the ministry aims to identify barriers to part-time employment expansion. She emphasized that work under agreements not subject to levies does not count toward social insurance, which may affect future pension entitlements. Klimešová added that the low flexibility of the Czech labour market contributes to the heavy reliance on these types of contracts.

Source:CTK