Payroll changes effective from 1 January 2016

The new year is approaching and so are changes in employent legislation and personal income tax. This issue explains some of the changes effective from 1 January 2016.

Second pillar abolished

• The second pillar will be scrapped as at 1 January 2016. From this date on, companies will no longer pay for 3% of the employees’ pension insurance and 2% of gross wages to the pension insurance company’s account.
• Funds accumulated in the second pillar will be returned to employees;
• By the end of March, all participants in the pension savings scheme should receive a letter from their pension insurance company, giving them a choice from three alternatives:
  • receiving their funds in private bank accounts;
  • receiving their funds by a postal order;
  • re-investing them in the third pillar.
• The choice must be made and the pension insurance company informed of the decision, by the end of September 2016. The funds will start to be transferred in October 2016.
• If no choice is made by the end of September 2016, the money will be automatically transferred to the taxpayer’s tax account.
• Child tax credits
• The tax credit for a second, third and further dependent child will be increased from 1January 2016;
• The tax credit for a first dependent child will remain the same, i.e. at CZK 13,404 per year (CZK 1,117 per month);
• The tax credit for a second dependent child will be increased from the current CZK 5,804 to CZK 17,004 per year; and the credit for a third and another child will be increased by CZK 300 per month, i.e. from the current CZK 17,004to CZK 20,604per year.
• Minimum wage
• The minimum wage will increase by CZK 700, i.e. to CZK 9,900 per month;
• The amount paid to recipients of a disability pension will also increase to CZK 9,300 per month
• In addition, the basic hourly rate will be adjusted from the current CZK 55 to CZK58.70
• Changes in social security
• The maximum assessment base for social security applicable in 2015 was CZK 1,277,328. The maximum assessment base for 2016 is increased to CZK 1,296,288.
• Changes in health insurance
• From January 2016, the minimum assessment base will be increased to the minimum wage amount.
• The new assessment base is CZK 9,900 and the monthly insurance derived from the base is CZK 1,337 (CZK 1,242 in 2015).
• We would be happy to answer any payroll questions you may have. We can also take care of all of your payroll administration. Don’t hesitate to contact us!