Changes in Social Security and Health Insurance

Several of the most significant changes in this area effective from 1 January 2008 are stated below.

Sickness insurance

The new Act on Sickness Insurance No. 187/2006, Coll., is to be postponed taking legal effect by another year, i.e. until 1 January 2009. As a result, the same rules will apply in 2008 as in 2007:

• employees are entitled to receive only sickness benefits (employers are not required to provide compensation for wages);
• the rates of contributions remain unchanged;
• employers with more than 25 employees are required to provide sickness insurance benefits while employers with up to 25 employees shall have these benefits paid by social security administration offices.

Since January 2008, sickness benefits will be provided from the fourth day of sickness. The amounts of sickness benefits per calendar day will be as follows:

• 60% of the daily assessment base up to the 30th day of sickness, maximum CZK 384;
• 66% of the daily assessment base from the 31st day to the 60th day of sickness, maximum CZK 422; and
• 72% of the daily assessment base from the 61th day of sickness, maximum CZK 461.

The adjustment of the daily assessment base for calculation of sickness benefits means the maximum amount of sickness benefits for the first 30 calendar days of sickness will be reduced from CZK 12,995 in 2007 to CZK 10,368 in 2008.

A new change is that the employee’s participation in sickness insurance will arise on the date before commencement of employment, provided the employee was entitled to receive compensation for wage for such day or for which the wage is not reduced (e.g. 1 January – the New Year)

Since 2008, the protection period for which there is an entitlement to sickness insurance benefits after termination of employment from is shortened from 42 to 7 days.

Employee’s assessment base

As a result of the change, the definitions of the employee’s income accounted for under the assessment base for payment of insurance contributions will include all taxable income of the employee, including, for example, 1% of the initial price of a motor vehicle that the employer provides to the employee for company use as well as private purposes or the difference between the so-called usual price and the price for which the employee purchased rights, services or things from the employer.

The assessment base will not include income exempt from tax and six types of income specified by law (for example, recall or notice severance pay).

The maximum assessment base for payment of insurance contributions

The maximum annual assessment base will apply (“MAS”) for both employees and self-employed individuals. For 2008, this amounts to CZK 1,034,880. The rates of social security and health insurance contributions will not change.

In connection with the determined MAS, every employer is required to pay contributions for its employee during the year until the employee’s income achieves the MAS.

An overpayment of contributions may arise to an employee who has two employers in the course of a calendar year, simultaneously or gradually. In such case, the employee is required to apply to its local social security administrator and health insurer for a refund of the overpayment.

Extension of the circle of persons participating in health insurance

For the purposes of health insurance, the circle of persons considered as employees participating in health insurance will be broader than in the case of sickness and pension insurance. As a result of the new legal regulation, members of boards of directors and supervisory boards, liquidators, and authorized signatories will pay health insurance contributions from their income taxable as employment income from January 2008.