Main changes in payroll from 1 January 2014 – Part 1

Please find below a brief overview of the new developments in payroll and HR management.

1. Social security

  • The maximum assessment basis for social security has been increased to CZK 1,245,216;
  • With effect from 1 January 2014, all employers are required to communicate electronically with the social security administration authorities. Given the fact that some employers have not managed to prepare for electronic communications, the deadline for making electronic filings have been extended by a year.

2. Solidarity tax

  • The annual threshold for the application of a solidarity increase in tax has been increased to CZK 1,245,216;
  • The monthly limit has been set at CZK 103,768
  • Employees that were subject to the solidarity tax in 2013 (even for one month only) cannot be provided with an annual withholding statement. Such employees are required to file a tax return for 2013.

3. Wage compensation for sickness leave

  • Since 1 January 2014, employees have been again entitled to sickness benefits from the 15th calendar day of the sickness leave. This means that employers only pay wage compensation for the first 10 days, i.e. 14 calendar days;
  • If an employee’s temporary illness started in 2013 and continues in 2014, the employee is entitled to wage compensation from the employer for the first 21 days of the sickness leave. Sickness benefits are provided from the 22nd day of the sickness leave.
  • Reduction limits for the payment of sickness benefits have been increased.

4. Agreements on the performance of work

  • The limit for the application of the final withholding tax has been increased in the case of taxpayers who did not sign the PIT statement from CZK 5,000 to 10,000 per month.

5. Compliance with the mandatory rate of employees with disabilities

  • The statutory duty to employ persons with disabilities remains effective;
  • People recognised as disadvantaged until 1 January 2015 are not subject to new assessment even if the decision granting the disadvantages status states “permanent validity”. The current status will remain in effect by 1 January 2015 at the latest unless a shorter period has been prescribed. For the term of effect of the decision, a disadvantaged person will be considered a person with disabilities for employment purposes, which is important for compliance with the mandatory rate of employees with disabilities for 2013.