On September 1, 2012 Act No. 252/2012 Coll. on Amendment of Act No. 461/2003 Coll. on Social Insurance as amended (the “Social Insurance Act”) and amending and supplementing certain acts (the “Amendment”) was published in the Collection of Laws. Provisions of the Amendment enter into force on September 1, 2012, January 1, 2014 and August 1, 2016, but most of the provisions enter into force on January 1, 2013. A number of the provisions affects directly entrepreneurs, whether as employers or as self-employed persons.
Provisions of the Amendment which entered into force on September 1, 2012 mean for an employer only a temporary administrative burden. In connection with a redistribution of contributions between the first and the second pillar of the Slovak pension system, it is recommended for an employer to ensure an adjustment of employee contributions reports. However, the amount of contribution in total remains unchanged.
With the effect from January 1, 2013 the personal scope of the sickness, pension, but also public health insurance widens to a different degree for employees working under agreements on work performed outside an employment relationship (in Slovak “práca na dohodu”). Costs of employment of these employees will increase, with some exceptions, to the level of costs of regular employees. Therefore, employers should consider whether and in which form to employ workers under an agreement on work performed outside an employment relationship. In connection with this change, the employer should take some necessary bureaucratic steps.
The Amendment will negatively affect also costs of employment of regular employees. The change will concern especially employees earning multiples of the average monthly wage in the Slovak economy, and their employers, due to an increase in the maximum assessment base for the calculation of contributions. However, the amount of benefits remains the same. The same change affects self-employed persons.
Self-employed persons should expect increased costs in connection with the change in the manner of calculation of the assessment base for the amount of contributions. After the transitional period, this change could mean an approximately one-third increase in the social and public health insurance costs.
Other provisions of the Amendment have no direct implications for the business environment but they have effect on the standards of living of the insured persons. The old-age pension calculation in the first pillar changes so that persons with higher income will participate to a greater degree in old-age pensions of those insured persons whose incomes are lower. An important but only transitive change is the valorization of pension benefits by a fixed amount, independently from the amount of individual pension.
The second pillar of the Slovak pension system will become voluntary again with a possibility to decide to participate in it until the designated age. An interesting change is the possibility to make voluntary contributions to the second pillar as tax allowance. In connection with the change in the ratio of contributions to the first and the second pillar and with changes in pension funds, the current savers will have the right to withdraw from the second pillar until January 1, 2013.
Should you be interested to learn more about the latest amendment to the Social Insurance Act, we will be happy to inform you in more detail upon request.
© JNC Legal s.r.o. 2012
The content of this notice does not constitute legal advice and should not be relied on as such. We suggest that specific advice be sought about your specific circumstances.