The Czech government has taken measures to address the disparity in social security contributions between self-employed individuals and employees in the country. The move aims to promote financial sustainability and fairness in the system. Currently, self-employed individuals contribute significantly less than their employed counterparts, prompting the need for changes.

With approximately one million active self-employed individuals in the Czech Republic, around 60% of them pay the minimum insurance contribution. Among self-employed individuals, younger entrepreneurs who are just starting their businesses are more likely to pay the minimum amount, while more experienced individuals tend to contribute more. Roughly 80% of self-employed individuals around the age of 20 pay the minimum contribution, whereas approximately half of those aged 60 make the minimum payment.

Currently, the average contribution rate for self-employed individuals stands at around 60%, which is a stark contrast to the substantial contributions made by employees. Last year alone, employees contributed over CZK 600 billion compared to just CZK 34 billion from self-employed individuals. As a result, self-employed individuals only account for 6% of the total social security contributions.

To address this imbalance, the government has decided to gradually increase the minimum calculation base for social security contributions for self-employed individuals from 25% to 40% of the average wage. This adjustment will be implemented between 2024 and 2026. Consequently, self-employed individuals who do not pay taxes on a flat-rate basis will be required to contribute a minimum of CZK 4,710 per month, compared to the current CZK 2,944 per month.

This measure is expected to significantly raise the contributions made by self-employed individuals towards social security, ensuring greater financial stability for the system. However, concerns have been raised by some self-employed individuals who fear that the increased contributions may pose challenges for small businesses, especially those in their early stages or operating in industries with narrow profit margins.

The government’s decision to increase social security contributions for self-employed individuals is part of an ongoing effort to create a more equitable and sustainable system. It aims to strike a balance between ensuring adequate contributions to the social security fund and supporting the viability of self-employed businesses.