Overview of legislative changes in the area of wages as of 1.1.2023

In effect from 01.01.2023, several changes have been adopted in the area of payroll accounting, which entail various obligations. In this article we will give you an overview of the most important ones.

I. Changes to the Labour Code       

More favourable employment under an employment contract - seasonal work

The amendment to the law brought the possibility for employers to form a new type of employment agreement for the performance of seasonal work. This aims to solve the shortage of seasonal workers. The scope of work for which this type of agreement may be concluded is listed in Annex 1b of the Labour Code. It consists oft he following seasonal jobs:

• in agriculture and cultivation, harvesting, sorting and storage
• in tourism
• in the food processing industry, in the processing of agricultural products referred to in letter (a)
• forestry

Tools to meet the objective of the legislation:

1. reduction of the employer's administrative burden when registering/unregistering employees - i.e. the agreement is registered from the beginning with the social insurance office for all types of insurance (sickness insurance, pension insurance and unemployment insurance).
2. reduction of the levy burden on both the employee and the employer by introducing a levy deduction as an exemption from the payment of unemployment and old-age insurance premiums.

Specific rules of the agreement:

• a maximum of 520 hours of work per calendar year,
• it will not be subject to the exceptionality condition,
• the average weekly working time for the duration of the agreement, up to a maximum of 4 months, must not exceed 40 hours,
• because the work is seasonal and depends on the change of seasons, the agreement is allowed to be concluded for a maximum of 8 months

II. Changes to the Social Insurance Act

Introduction of a deduction for seasonal work

Regarding the new type of seasonal employment agreement, a so-called seasonal deduction has been introduced which reduces the employee's and the employer's assessment base for unemployment and old-age insurance.

The employee does not have to apply for this deduction, he/she is automatically entitled to it even if he/she has concluded several agreements as such at the same time.

The amount of the deduction for seasonal work is EUR 605.50 for 2023 (50% of the average monthly wage for 2021).

Introduction of a levy deduction – students and pensioners on an agreement

From 1 January 2023, this type of deduction replaces the so-called deduction exemption for students and pensioners working on agreements, which has been valid until 31 December 2022.

The tax deduction can be claimed if:

• an employee in a legal relationship based on a student temporary work agreement
• an employee in a legal relationship based on a contract of employment or a work agreement and the person is in receipt of a pension.

Another advantage is that students and pensioners working on an agreement will be continuously insured for pensions on the basis of the agreement under which they apply the tax deduction, i.e. they don‘t have to exceed an income of EUR 200 per month for it to apply (as was the case until 31.12.2022).

An employee can only claim the levy deduction for one agreement per calendar month using the form "Levy Deduction Notification and Affidavit", which is separated specifically for students and specifically for pensioners.

The amount of the levy deduction is EUR 200 per month.

The social insurance institution is obliged to keep a record of the applied deductions on the basis of the data sent by the employer by means of a registration letter and to make available to the employer information on the impossibility of applying the deduction if it has already been applied at the same time in another agreement.

Keeping track of analytical data

The amendment to the Social Insurance Act as of 1 January 2023 introduces the obligation of an employer to keep track of the employee's analytical data from the commencement to the termination of the employee's pension insurance. The employer is obliged to report this data from the register to the social insurance institution:

• when fulfilling the reporting obligations when registering an employee
• when sending monthly statements

The obligation to record analytical data applies to all employees registered in the social insurance system (i.e. employees working on the basis of an employment contract, agreement, managing directors, etc.

Contents of the analytical data record:

• the numerical code of the place of work
• the numerical code of the type of work agreed
• agreed amount of working time
• the number of hours corresponding to the income charged to payroll for the month

The method and a time limit for the communication of analytical data:

• via the natural person's registration letter – a change
• by the deadline for submission of the monthly statement/statement of insurance premiums and contributions for the month of January 2023, i.e. by 28 February 2023 at the latest. This goes for employees whose insurance commenced in the social insurance system before 1 January 2023 and continues after 31 December 2022.

III. Changes to the Health Insurance Act

Introduction of a minimum insurance premium and an employee's advance payment

One of the most important changes adopted by the amendment to the Health Insurance Act and the relevant regulations with effect from 1 January 2023 (starting with the processing of wages for the month of January 2023) is the application of the institute of the so-called minimum insurance premium and the employee's minimum advance payment.

The way it works is that the insured employee will pay the insurance premium and the advance payment for health insurance at least from the minimum subsistence level valid as of 1 January of the given year, regardless of the actual income of the employer, i.e. from 1 January 2023 on the amount of EUR 234.42.

The employer's tax burden remains unchanged. Any additional payment up to the amount of the minimum advance payment for insurance and the minimum insurance premium shall be paid by the employee.

The minimum insurance premium does not apply to:

• employees who are also insured by the state (e.g. working pensioners, students, persons registered at the labour office, persons on parental leave, etc.),
• employees with disabilities, entitled to a reduced rate of insurance.

This group of employees continues to pay contributions on their actual income, despite the fact that it is below the minimum subsistence level.

The employee's minimum premium for 2023 is the sum of:

• employee's insurance premium calculated as 4% of 12 x €234.34 = 4% of €2,313 = €112.52
• the employer's contribution for this employee calculated as 10% of 12 x €234.34 = 10% of €2 313 = €281.30

The employee's minimum premium for 2023 is therefore € 393.82.

The employee's minimum advance during 2023 is the sum of:

• the employee's advance payment of insurance premiums, calculated as 4% of €234.42 without taking into account the deductible, which amounts to €9.37
• the employer's employer's insurance contribution for such an employee, calculated as 10 % of € 234,42 without taking into account the deductible, which amounts to € 23,44

The minimum insurance premium as well as the minimum advance payment will be reduced by the proportional part corresponding to the number of calendar days during which the employee was at the same time an insured person of the State, a person with a disability, a self-employed person, a declared missing person, was not considered to be an employee.

If the employee has several employers at the same time or is covered by exemptions (e.g. is considered to be self-employed), he/she can choose not to apply the procedure for making up the difference up to the amount of the minimum advance payment. The employee will then notify the employer of these facts by means of a written notification 'Employee's notification of non-application of the top-up to the minimum advance payment' within 8 days of the date of such a fact.

Any arrears of health insurance will then be settled in the annual health insurance settlement.

IV. Changes to the Income Tax Act

Child Tax Bonus in 2023

The amount of the tax bonus is determined as follows:

• 140 € per child up to the age of 18
• 50 € per child aged 18 and over

At the same time, the tax bonus goes up to:

• 20 % of the partial tax base for 1 child
• 27 % of the partial tax base for 2 children
• 34 % of the partial tax base for 3 children
• 41 % of the partial tax base for 4 children
• 48 % of the partial tax base for 5 children
• 55 % of the partial tax base for 6 or more children

You are only entitled to a tax bonus for a child under the age of 18 if there is no food subsidy for the child.

In the case of an employee, only the partial tax base of the parent claiming the tax bonus is taken into account when calculating the monthly advance tax payments.

The partial tax base of the other parent (the beneficiary) is only taken into account when filing the 2023 tax return.