Employment under an agreement vs. permanent employment

When filling a position, a company often has to decide whether to conclude an employment contract or an agreement on work performed outside an employment relationship. The decision affects costs, social and health insurance contributions and the extent of the obligations. Employment under an agreement vs. permanent employment is therefore one of the questions entrepreneurs ask most often. There is no single universally correct answer, because each form has its advantages as well as its limitations. The decision should be based on the nature of the work, not just on the immediate aim of saving money. Let us look at the main differences.

The basic difference between an agreement and an employment contract

Permanent employment is created by an employment contract and is intended for continuous, regular work. An agreement on work outside an employment relationship, by contrast, is a tool for occasional or time-limited activities. While an employment contract gives the employee broad protection, agreements are administratively simpler but limited in scope.

Types of work agreements

The Labour Code recognises several types of agreement, which differ in the number of hours and in the range of people with whom they can be concluded.

• agreement to perform work (dohoda o vykonaní práce)
• agreement on work activity (dohoda o pracovnej činnosti)
• student temporary work agreement

Contributions and costs

Permanent employment carries the full contribution burden for both the employee and the employer. With agreements, contributions vary by type of agreement, and some groups, such as students or pensioners, may enjoy reduced rates. As the contribution rules and thresholds change regularly, always check the current conditions before setting up payroll.

Scope of rights and protection

When comparing employment under an agreement vs. permanent employment, the scope of rights is key. A permanent employee is entitled to annual leave, a notice period, severance pay under the conditions laid down by law, and further protection. People working under agreements also have some rights, but to a limited extent.

• employment contract: annual leave, notice period, broader protection
• agreement: simpler administration, limited scope
• in both cases, hours worked must be recorded

When to choose which form

If you need an employee for regular, long-term work, permanent employment is more suitable. An agreement is suited to seasonal, one-off or short-term tasks. Be careful: work that has the features of permanent employment should not be covered by an agreement over the long term, as this creates a risk during an inspection.

The risk of disguised employment

When comparing employment under an agreement vs. permanent employment, you also need to consider the inspection risks. If a company covers regular, dependent work over the long term with agreements, or even with invoices from a sole trader, the Labour Inspectorate (inšpektorát práce) may assess the relationship as disguised employment. The consequences tend to be back payments of contributions and fines. What matters is not just the form of the contract but the actual substance of the relationship, i.e. whether the worker works according to instructions, during working hours and at the employer’s workplace. It therefore pays to choose the form that genuinely corresponds to the nature of the work performed.

How to make the right decision

The choice between an agreement and permanent employment has a direct impact on both costs and administration. We recommend assessing the nature of the work, its scope and its expected duration. Our payroll specialists will help you compare the options of employment under an agreement vs. permanent employment and set up a solution that is correct both economically and legally, that will stand up to any inspection and that also takes account of your real operational needs.

Related articles: Employing foreign nationals in Slovakia: obligations, Probationary period: rules and the most common misconceptions, Employing minors and students.

Frequently asked questions

Is an agreement always cheaper than permanent employment?

Not necessarily. For some groups, such as students, contributions may be lower, but for ordinary agreement workers the burden comes close to that of employment. Check the current contribution rules, as they change regularly.

Can I cover long-term work with an agreement?

Agreements are intended mainly for occasional and short-term activities. If the work shows the features of permanent employment, covering it with an agreement over the long term poses a risk during an inspection. In such a case, an employment contract is more appropriate.