LEGISLATIVE CHANGES FOR THE PROTECTION OF SELF-EMPLOYED PEOPLE IN THE CZECH REPUBLIC

As of 1 January 2025, the Czech Republic introduced significant legislative changes concerning employment and cooperation with self-employed workers (OSVČ, “osoba samostatně výdělečně činná”), with the aim of countering the so-called “svarcsystem”, which is the practice of masking employment relationships as self-employed. This is problematic for both workers and the tax system, because it reduces guarantees for workers and leads to a loss of tax revenue for the state. For this reason, the amendments aim to strengthen sanctions for illegal work and ensure greater fairness in the labour market.

What does the new legislation provide?

First, as previously mentioned, increased sanctions are foreseen. Companies employing self-employed workers illegally will face tougher financial penalties and authorities will focus more on identifying and penalising companies that use this practice to save labour costs, for instance, by avoiding paying social security contributions and insurance.

Further clarification of the definition of employment is required to distinguish between employed and self-employed. The law provides clearer criteria, including the level of autonomy in managing the work, the presence of fixed hours and the use of tools and resources provided by the company.

In addition, greater protection for workers is provided. The legislation aims to ensure that workers have access to employee benefits such as paid leave, health insurance and pension contributions. This is particularly relevant for sectors such as construction, commerce and IT where the svarcsystem is most widespread.

Finally, there is increased control and supervision. Thus, the labour inspectorates, such as the Ministry of Labour and Social Affairs, will have more powers to carry out checks and verify the nature of employment relationships.

The European context

At the European level, the new measures adopted by the Czech Republic are in line with the directives of the European Commission. These are aimed at improving the transparency of contracts, so that every worker must be clearly informed about the terms of their contract.

They also aim to prevent the abuse of fictitious self-employment by the Commission identifying cases where employers exploit self-employment contracts to reduce costs and liabilities.

Finally, they aim to guarantee minimum rights for workers. Therefore, all workers, including the self-employed, must have access to decent and fair working conditions.

Practical implications

For companies, it will be necessary to review the contracts with their self-employed employees to ensure that they are in line with the new criteria set by law.

Companies will have to examine the criteria which distinguish a self-employment contract from a subordinate relationship, such as control over working hours, autonomy in determining methods of work execution and use of corporate resources.

For example, if a company provides the tools and defines working hours for an independent worker, this could raise doubts as to whether it is a subordinate relationship with all the rights and protections that flow from it. However, other criteria will obviously need to be checked.

If the company does not adapt, it may face more severe penalties such as fines or compensation for the worker’s rights.

On the other hand, for workers who operate in situations similar to those of a salaried contract but are formally registered as self-employed, there will be likelihood that their contractual status will be changed.

If a self-employed person does not have effective autonomy, this may trigger the transformation of his contract from an independent to an employee. The immediate consequence would be access to all the protections provided by the employment contract, such as paid holidays, sickness and social security contributions, which are generally absent in self-employment.

From the workers’ point of view, therefore, the reform could lead to greater security and stability, but also to changes in their rights and payment methods. In addition, the regularization of the contract could also lead to a change in their tax and contributory position.

In conclusion, the legislative changes introduced in the Czech Republic from 1 January 2025 represent an important step towards a more equitable and transparent labour market. The introduction of stricter penalties and greater clarity in the definition of self-employed contracts are key measures to combat the “svarcsystem”, a phenomenon that has endangered workers’ rights and undermined tax justice.

The practical implications of these changes will require significant effort on the part of both companies and workers, as they will be required to adapt to a stricter regulatory framework and greater supervision.

However, the future of these regulations is still uncertain. It will be crucial to see how they are applied in the field, what concrete effects they have on the labour market and whether they can balance the flexibility needs of enterprises with workers’ rights. The balance between economic sustainability and social justice remains an open challenge, and it will be interesting to see how the various actors involved, including institutions, companies and workers themselves, will deal with this new legislative phase.

Sources: https://www.spoladore.com/it  , https://www.mpsv.cz/web/cz