A trade licence alongside employment

With health insurance contributions the situation is different, in that a sole trader who has both a job and a trade licence at the same time is not obliged to pay monthly advance payments on health insurance in respect of the business. This is because they already pay such advance payments through their employment. As a sole trader alongside employment, however, they can pay the advance payments voluntarily.

However, the fact that such a person does not have to pay advance payments on health insurance does not mean that they do not have to pay health insurance at all. On the contrary, they must pay health insurance of 14% both on the income earned as a sole trader and on the income earned as an employee, once a year, always after the annual reconciliation of the advance payments on health insurance. The health insurance company carries out this reconciliation by the end of September, based on the tax return that the sole trader/employee filed by the end of March or, where applicable, by the end of June.

In simplified terms, the annual reconciliation of advance payments on health insurance calculates the 14% health insurance contribution on all income from employment and from the trade licence for the previous year together. The advance health insurance payments that the person paid as an employee are then deducted from this figure. A positive difference is refunded to them; if the difference is negative, they must pay it. Put simply.

For this reason, a trade licence alongside employment can be advantageous, for example, for those who carry on business activity alongside their job only occasionally, on a small scale, or not at all. An open trade licence costs them nothing each month (they pay no advance payments on it), and the annual reconciliation of health insurance contributions will not surprise them with a large additional payment.

However, if a sole trader with a job does business “on a large scale” right from the start, voluntary advance payments on health insurance may come in handy later on. With them, they are essentially prepaying their annual health insurance contributions. Alternatively, they can set up a limited liability company (s.r.o.), where they do not pay health insurance contributions at all.

THE TRADE LICENCE AND YOUR EMPLOYER

In principle, an employment relationship does not prevent you from setting up a trade licence. It does not matter whether the employment is full-time (often also called permanent employment) or only part-time.

However, if an employee has decided to set up a trade licence alongside their job, they should bear in mind one fundamental restriction: under the Labour Code, an employee may, alongside their employment, carry on another gainful activity that competes with the employer’s business activity only with the employer’s prior written consent. Otherwise, the employee risks being penalised for a breach of work discipline.

As this wording allows a relatively broad interpretation, we can only recommend that, before deciding to set up a trade licence, the employee asks the employer in writing in advance whether they have any objection. If the employer does not respond within 15 days of receiving the employee’s request, the Labour Code provides that consent has been given.