Contributions when you combine a trade licence with employment

Social and health insurance contributions when you combine a trade licence with employment are a frequent topic for people who run a business alongside their job. The good news is that combining the two is entirely legal and in some cases even advantageous. You do, however, need to know which contributions are paid on both incomes and where a cap or an exception applies.

Two separate relationships

On employment income, insurance contributions are paid by both the employer and the employee from the gross wage. On trade licence income, the entrepreneur pays the contributions themselves. These are two separate legal relationships, so insurance is assessed for each of them separately – even though in some cases, for example with health insurance, the sum of both assessment bases is ultimately taken into account.

Health insurance contributions when combining both

Health insurance contributions are paid on both incomes. In the annual reconciliation, the health insurance company adds up the income from employment and from the business and assesses the total amount of insurance due. Thanks to the minimum assessment base, an employed sole trader does not have to pay the minimum advances from the business if the minimum is already “covered” by the employment.

• an employed sole trader does not have to pay the minimum health insurance advances from the trade licence
• the advance from the trade licence is paid on the actual assessment base
• the annual reconciliation adds both incomes together

Social insurance contributions when combining both

Social insurance is assessed separately. Whether compulsory insurance arises from the trade licence is determined in the same way as for a “pure” self-employed person (SZČO) – on the basis of the income in the tax return. Employment has no direct effect on this, but with very high incomes from both sources the maximum assessment base applies and no insurance is paid above the cap.

Where the advantage lies

If you already pay insurance from your employment on the minimum or a higher assessment base, you do not have to top up to the minimum for the health insurance contributions from your trade licence – you pay only on your real business income. This lowers the monthly burden compared with an entrepreneur who has no employment and makes the combination attractive, especially when starting up a side business.

What to watch out for

Combining the two does not release you from the obligation to register and to file a tax return covering both activities. If you exceed the maximum assessment base, you may be entitled to a refund of the overpayment on social insurance. The payment deadlines (by the 8th day of the following month) must still be met for the contributions from your trade licence.

• the tax return includes income from both employment and the trade licence
• a possible refund of the overpayment if you exceed the cap
• you pay the contributions from your trade licence separately and on time

A practical example of an employee with a trade licence

Imagine an accountant who is employed full-time and earns extra money on the side by doing single-entry bookkeeping under a trade licence. From her employment, insurance is paid on her gross wage, which covers the minimum health insurance assessment base. From her trade licence she therefore pays health insurance advances only on her real business income, without topping up to the minimum. She becomes subject to social insurance on her trade licence only once her business income in the tax return exceeds the statutory threshold. Such a combination is more demanding administratively, but often more advantageous financially than a trade licence alone, because part of the insurance is “carried” by the employment.

Summary

Contributions when combining a trade licence and employment can work in your favour if you make proper use of the minimum base and the caps. At Bilvao, when processing payroll and contributions, we calculate how much you will really pay and whether you are entitled to a refund of an overpayment after exceeding the maximum. Check the specific minimum and maximum amounts for the period concerned.

Related articles: Registering and deregistering an employee with the Social Insurance Agency (Sociálna poisťovňa), Health insurance contributions of a sole trader and the annual reconciliation, Electronic access to the Social Insurance Agency: setting it up.

Frequently asked questions

When combining both, do I also have to pay the minimum health insurance contributions from my trade licence?

No. If you are also an employee, you pay health insurance advances from your trade licence on the actual assessment base and do not have to top up to the minimum advance. In the annual reconciliation, the insurance company adds both incomes together.

Does social insurance arise from my trade licence even though I am employed?

Yes, whether compulsory social insurance arises from the trade licence is assessed separately according to the income in the tax return, independently of your employment. With very high incomes, the maximum assessment base applies and you may become entitled to a refund of the overpayment.