Czech companies are currently navigating the challenges posed by the introduction of limits on employee benefits as part of the government’s consolidation package. Originally, the package aimed to eliminate tax advantages for employee benefits, but after facing widespread criticism, the Ministry of Finance revised its approach. The benefits will now retain their tax-advantaged status, albeit with a newly imposed limit.

Starting next year, the limit on tax-free benefits for individuals will be set at 21,983 korunas, half the average wage fixed at 43,967 korunas. Consequently, employees can anticipate monthly tax-exempt bonuses of up to 1832 korunas. Amounts beyond this limit will be subject to taxation as income.

A recent survey sheds light on the landscape of employee benefits in Czech companies. It reveals that two-thirds of companies provide flexible working hours, while 54% offer summer or Christmas bonuses. Other anticipated benefits include meal vouchers, work-from-home options, and contributions to training and pension savings. Notably, the survey indicates that a majority of employers plan to introduce pension savings contributions next year.

However, some companies are contemplating limitations on gift vouchers, contributions to sports and culture, and even work-from-home options, which saw significant adoption during the COVID-19 pandemic. This shift is particularly relevant for larger companies with collective agreements already locked in for several years, where benefits play a substantial role in these agreements.

Despite the changes, companies are expected to prioritize benefits that are minimally affected by tax adjustments. Most firms are planning only minor adjustments to their benefit offerings, such as modifying the amount of meal allowances to align with new legislation.

The impact of these changes is not limited to the private sector, as public administration is also grappling with discussions around employee benefits. The government has proposed cutting benefits for state employees by half, with 50% of the remaining funds earmarked for pension savings. As companies navigate these shifts, they aim to strike a balance between complying with regulatory changes and ensuring that employee benefits remain competitive and attractive in the evolving landscape.

Article by Prague Forum