Contribution relief for new entrepreneurs

Contribution relief for new entrepreneurs is a tool intended to reduce the cost of employing people from the register of jobseekers or from at-risk groups. Alongside this, the topic of contribution relief is often also associated with an advantage enjoyed by new sole traders themselves, who do not pay social insurance in their first year. Let us look at both perspectives.

Relief when employing disadvantaged persons

The law allows an employer who takes on a person from the Labour Office (ÚPSVaR) register (for example, a long-term unemployed person) not to pay certain contributions for a certain period, provided that conditions concerning the amount of the wage and the length of registration are met. This is targeted support for employment and for integrating at-risk groups into the labour market, intended to motivate employers to give a chance also to people who have been out of work for a longer time.

• the employee must be on the register of jobseekers before starting work
• the wage must not exceed the set limit
• the relief applies for a period laid down by law

Conditions that must be met

The relief is tied to meeting several conditions at once – the length of the previous registration, the maximum agreed wage, and the fact that the employer has not reduced the number of employees in the same positions in the preceding period. If any of the conditions ceases to be met, the relief lapses and contributions are paid in full.

The advantage for the sole trader themselves

A new sole trader enjoys a “natural” contribution relief in that they generally do not pay social insurance in their first year of business – this only arises after the first annual assessment of income from the tax return. However, this does not mean a complete exemption: health insurance contributions are paid from the outset, at least from the minimum, so nobody is entirely free of contributions.

What not to forget

The relief does not mean that you do not have to register or file reports. You still register the employee with the insurance institutions; only a reduced scope of contributions applies. The conditions are set separately for health insurance and for social insurance, so they need to be assessed separately.

• the registration obligation remains even with the relief
• the relief is applied separately in the reports
• a sole trader’s health insurance contributions run from the outset

How long the relief lasts and what happens afterwards

Contribution relief when employing a disadvantaged person applies only for a period laid down by law. Once it has elapsed, contributions start to be paid at the standard rate, so make a note of this date and set up your payroll system accordingly. If the wage were to exceed the set limit during the relief period, the advantage would lapse even earlier. The employer should also bear in mind that the relief does not mean permanently lower costs – once the period ends, its actual contribution burden for the job concerned will rise, and this needs to be factored in when planning the budget.

Why check it in advance

Incorrectly applied relief leads to arrears, which the insurer subsequently recovers together with penalties. It is therefore worth checking, before the employee starts, whether all the conditions are met, and obtaining the necessary confirmation of registration from the Labour Office.

Summary

Contribution relief for new entrepreneurs and when employing disadvantaged persons can significantly reduce costs, but only if the conditions are strictly met. At Bilvao, we will check whether you are entitled to the relief and reflect it correctly in payroll and reports. Check the specific wage limits and periods for the current period.

Related articles: Unemployment insurance: conditions of entitlement, Electronic access to the Social Insurance Agency: setting it up, Sick leave for self-employed persons and sickness benefits.

Frequently asked questions

Does contribution relief mean that I do not have to register my employee with the insurance institutions?

No. The registration obligation remains the same – you register the employee before they start work. The relief only reduces the scope of contributions paid for a period laid down by law and is applied separately in the reports.

Does a new sole trader pay any contributions in the first year?

They generally do not pay social insurance in the first year, because it only arises after the first annual assessment of income. However, they do pay health insurance contributions from the start of their business, at least from the minimum assessment base. Check the current amounts for the period concerned.