Tax and Legal News – October 2022

Editorial: Working from home – will we finally see some rules?

For two and a half years now, working from home has been completely normal. But the Labour Code still pretends as if working away from the employer’s workplace doesn’t exist, and addresses only a few exceptions for teleworkers who work remotely and schedule their own hours. However, these situations are rather rare in practice. So how to meet all the requirements that the Labour Code imposes on employers with regard to the employees working from a home office while the Labor Code generally does not anticipate work from home?

Some modification of the rules by agreement between the employer and the employees provides contractual freedom. However, in an environment of strict statutory protection for employees, this is still a rather precarious route for employers who want to get things right.

While the amendment to the Labour Code and other regulations, which is meant to remedy the situation and regulate telework, has finally reached the comment procedure stage, it still has a long legislative road ahead of it on which many things can happen. At the very least, however, the proposal is a good indication of how the authorities view “telework”, a Czech legislative synonym for home office. And they’re looking quite strictly, including in relation to the provision and taxation of homeworking allowances.

For example, a telework agreement between an employee and employer must be effected in writing. If such an agreement doesn’t exist, the employer risks not only a fine from the Labour Inspectorate, but also taxation and insurance of the allowances provided to such a teleworker.

The amendment pays a lot of attention to allowances. The proposed rules explicitly regulate the employer’s obligation to reimburse the employee for costs related to the performance of telework that the employee incurs while performing the work. For these purposes, a lump sum of the average costs of gas, electricity, solid fuels, heat, water and municipal waste collection is to be introduced at CZK 2.80 per hour (commenced) of work. Such a lump sum should not be subject to personal income tax or to social and health insurance premiums.

The amendment directly provides that employers in the non-state sector may offer higher lump-sum allowances, but importantly, lump-sum allowance in excess of CZK 2.80 per hour will be subject to tax and insurance. For the employee, this means a tax-free allowance of CZK 22.40 per day of working from home, i.e. approximately CZK 450 per month if the employee only works remotely. If some companies already reimburse employees for this type of expense on a flat-rate basis, they may now be getting a little nervous, especially where their flat-rate reimbursement exceeds the proposed limit (sometimes by several times). With the new regulation, the risk of additional assessments will increase even further, not to mention the fact that the flat-rate costs of CZK 2.80 are proposed taking into account the current high energy prices.

According to the draft amendment, the lump-sum allowance may be supplemented by the reimbursement of other types of substantiated costs not included in the lump sum and incurred by the employee in connection with remote work. While such reimbursed costs are not subject to tax and insurance premiums, the employee must prove not only the amount but also the connection with the performance of the telework. This will be somewhat problematic in many cases (not to mention the associated administrative nightmare for employers). For example, the lump-sum cost of an internet connection that an employee pays each month regardless of how often or if at all they work from home hardly qualifies for such reimbursement, unless, for example, they have another lump sum to watch Netflix and another lump sum for other family members.

We’ll see how the amendment turns out; the part that doesn’t concern telework is an implementation of EU directives we can’t just sweep under the rug. But the truth is we deserve at least the basic parameters for a home office. While the proposed changes will not please everyone, it is hoped they’ll at least provide a safe harbour for most employers.