Czech Government Proposes Increase in Contributions for Self-Employed Workers

The Czech coalition government is planning to increase social contributions for self-employed and freelance workers, who currently pay significantly less than employees. The move aims to ensure that self-employed workers have higher pensions in the future, but may result in low-income earners relying on government support in old age.

The government is considering several options, one of which would increase contributions by 60% over three years, but the main issue is that self-employed individuals often report low incomes, resulting in low contributions to social insurance.

The aim of the change is to balance and adjust the current system fairly and sensitively, while ensuring a decent retirement for those who have worked honestly, says Michael Kohajda, member of parliament for the Christian Democratic Union.

According to Olga Richterová, a member of the governing Pirate Party, some self-employed workers’ contributions do not even cover the minimum pension, so others end up paying for their support. She adds that everyone suffers as a result of the current system, including employees who are burdened with taxes and people who turn to the black market to avoid contributing to social security. However, she stresses that any measures should avoid discouraging self-employed workers with low incomes or penalizing them.

Most economists agree that self-employed workers’ contributions to pensions should be increased. They have relatively low contributions, and their pensions are subsidized by the state. Self-employed workers pay only a fraction of what employees contribute to social security.

Filip Pertold, a member of the advisory board to the Ministry of Labor and an economist with IDEA Cerge-EI, argues that while it is true that self-employed workers will have lower pensions, the difference will not be as significant as the difference in contributions.

The planned changes have sparked controversy among self-employed workers, many of whom are already struggling due to the pandemic. The government is seeking a balanced approach to reform the system, which should not discourage self-employment or undermine entrepreneurship, but at the same time must ensure that everyone has a dignified retirement