Legislative changes affecting payroll processing since the start of year 2023

Legislative changes affecting payroll that are valid for payroll processing in year 2023 are presented below. Included are parametrical changes but also for example changes to the calculation of wage garnishments or to the periodic occupational health assessments.

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Legislative changes affecting payroll processing in 2023 in Czechia  – SME Info Czechia 2023-01

Changes concerning occupational health assessments

The original intention to abolish occupational health assessments for low-risk occupations did not pass through the legislative process. However, the ordinance regarding occupational health services was amended and as of January 1, 2023, periodic assessments are not mandatory for low-risk occupations in the first and second categories. However, there are no changes to the initial medical examinations, which are still mandatory.

 

Changes to the calculation of wage garnishments and insolvency withholdings

There has been a change in the non-deductible amount calculations.

 

Until end of 2022, the basic non-deductible amount was calculated as three-quarters of the sum of the minimum subsistence amount and the amount of the standard cost of living for a single person.

Newly, the basic non-deductible amount is calculated as two thirds of this sum.

At the same time the non-deductible amount per a dependent is now calculated as one quarter of the basic non-deductible amount (in 2022 it was one third).

The threshold for the fully deductible amount was reduced to one and a half times of the sum of the minimum subsistence amount and the amount of the standard cost of living (from twice the sum).

 

Changes to the minimum and guaranteed salaries in 2023

The basic rate of minimum salary for a fixed weekly work time of 40 hours is now CZK 17,300 per month or 103.8 CZK per hour.

There has also been an increase in the guaranteed salaries, but only for the first and eighth job groups. The guaranteed wage for job groups two to seven remains the same.

 

Average salary for the first to third quarters of 2022

The confirmed average salary in the national economy for the first to third quarters of 2022 is CZK 39 306.

The amount affects compensations for work-related injuries, the calculations of compensation under the compulsory share of employment of persons with disabilities and also, for example, the compensations of salaries of employees on leave to organize children’s camps.

 

Changes concerning employees’ income tax

In relation to the change in the average salary, the income threshold from which income of employees who did not sign the taxpayer’s declaration and have an employment relationship or an agreement on activity is subject to advance tax is changed to CZK 4,000 (previously CZK 3,500).

The threshold from which income is subject to the higher tax rate of 23% is also changed. The new monthly threshold is CZK 161,296 (previously CZK 155,644) and the annual threshold is CZK 1,935,552 (previously CZK 1,867,728).

In addition, the limit for gross income from other sources where an employee can still be eligible for an annual tax reconciliation prepared by their employer has been increased. The limit is CZK 20,000 from year 2023 (previously CZK 6,000).

In connection with the increase in the meal allowance for domestic business trips, the maximum amount of the tax-exempt meal voucher lump sum has also changed to CZK 107.10 as of 1 January 2023 (previously CZK 99.40).

 

Changes concerning health insurance calculations

The income threshold for employees’ income subject to health insurance is changed to CZK 4,000 (previously CZK 3,500), this is in connection to the change in the average salary.

 

Changes concerning sickness and social benefits

As of 1 December 2022, the paternity leave regime has been amended, whereby paternity leave is now considered as a protected interval at the same level as maternity leave. It is also possible for a father to take paternity leave in the event of the death of the child (at birth or within six weeks of the child’s birth).

As every year, the reduction thresholds for sickness benefits and salary remuneration during sick leave are also increased. The first reduction threshold for salary remuneration is CZK 227.15, the second CZK 340.55 and the third CZK 681.10.

 

Changes concerning the archiving of payroll documents

The existing archiving period for payroll and accounting records of data required for pension insurance purposes is extended from 30 to 45 years.

 

Changes concerning social insurance calculations

Here, too, in connection with the change in the average wage, the income threshold where an employee’s income is subject to social insurance is changed to CZK 4,000 (previously CZK 3,500).

The maximum assessment base after which there is no longer social insurance to be calculated has also changed, to CZK 1,935,552 (previously CZK 1,867,728).

Employers who employ paramedics and company firefighters have new obligations in connection with the possibility of their early retirement. They are now required to keep a list of these employees and regularly issue confirmations of shifts worked. At the same time, higher social security payments from employer will be levied on the income of these employees. The insurance rate for these employees will be increasing gradually in the following years, in year 2023 the rate is 26.8%.

 

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Download here the English+Czech bilingual pdf of this newsletter:
Legislative changes affecting payroll processing in 2023 in Czechia  – SME Info Czechia 2023-01

The purpose of SME INFO is to provide general information and to draw the attention to the current changes in law which we believe to be important for the business operation of our clients. It is not a replacement for careful review of the acts and rules and the consultation with your tax advisor. © Copyrights 2023, Process Solutions, – All rights reserved