The Czech government is considering increasing social contributions for self-employed and freelance workers to ensure that they have higher pensions in the future. Self-employed workers currently pay significantly less than employees, resulting in low contributions to social insurance, and a potential reliance on government support in old age. The government is examining various options, one of which would increase contributions by 60% over three years. However, the main challenge is ensuring that low-income self-employed workers are not discouraged or penalized by the change.

The aim of the reform is to balance and adjust the current system fairly and sensitively, ensuring a decent retirement for those who have worked honestly. Many 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.

Despite the potential benefits of reform, the proposed changes have sparked controversy among self-employed workers, many of whom are already struggling due to the pandemic. The government aims to strike a balance between ensuring a dignified retirement for all citizens and not discouraging self-employment or undermining entrepreneurship.

Olga Richterová, a member of the governing Pirate Party, argues that everyone suffers under the current system, including employees who are burdened with taxes and people who turn to the black market to avoid contributing to social security. She emphasizes the need for measures to avoid discouraging self-employed workers with low incomes or penalizing them.

Filip Pertold, a member of the advisory board to the Ministry of Labor and an economist with IDEA Cerge-EI, believes that while self-employed workers will have lower pensions, the difference will not be as significant as the difference in contributions. The government is seeking a balanced approach to reform the system to ensure that self-employed workers have access to a decent retirement while encouraging entrepreneurship and self-employment.

Article by Prague Forum