Last year, self-employed workers contributed CZK 34 billion to social insurance for pensions, which is CZK 4.7 billion more than the previous year, according to the Czech Social Security Administration.
However, this is still only about one-twentieth of what employees pay. The state collected CZK 603 billion in social insurance from employees’ income, up from CZK 566 billion in 2021. Therefore, the share of self-employed workers in total social insurance revenues has only slightly increased.
While the number of employees last year was 4.65 million, only 748 thousand self-employed persons were obligated to pay pension insurance advances. The government coalition is considering increasing social contributions for self-employed workers to boost pension system revenues and ensure that these workers will not have meager pensions.
The current minimum social insurance contribution for self-employed workers is 29.2% of a quarter of average wages each year, with a minimum advance of CZK 2,944 for those carrying out their main activity and CZK 1,178 for secondary actions. In contrast, the rates for employee contributions are 6.5% of the assessment base and 24.8% for the employer.
One proposal being considered is to increase the contributions of self-employed workers by 60 percent over three years. However, economists argue that the primary issue is that self-employed workers typically have low incomes, leading to a low assessment base on which social insurance contributions are calculated. While the state collects around CZK 150 billion a year in income tax from employees, self-employed workers only contribute a few billion.
About 100,000 self-employed persons currently use the flat-rate tax system, paying income tax, health insurance, and social insurance in one payment. For instance, in the lowest tax bracket, an entrepreneur pays CZK 3,386 in monthly social insurance, CZK 2,722 for health insurance, and CZK 100 for the tax itself. However, most entrepreneurs find it not worth paying even this low tax because they have not paid any income tax yet, primarily due to tax credits and various deductible items.