Main vs secondary self-employment
  • You have main self-employment when your business is your main source of income and you meet none of the conditions for secondary self-employment
  • For the purposes of this article, you have secondary self-employment if:

 

    • you care for a child under 4 (district social-security office)
    • you receive maternity benefit (health-insurance category E)
    • you receive parental allowance (health-insurance category E) 
    • you care for a child under 7 (health insurance: Section 3a(3) and Section 3(8) of Act No. 592/1992 Coll., on Public Health Insurance Contributions

 

In practice, if you run a business claiming lump-sum or actual expenses and one of the above circumstances arises, you automatically become self-employed on a secondary basis. We recommend notifying the insurance institutions of the change. For the district social-security office, use a declaration that you care for a child under 4 — your self-employment will be secondary throughout that period. For health insurance, send a free-form notification through your data box each time your category changes: maternity benefit -> parental allowance -> caring for a child under 7, as they follow one another. 

What it means in practice

As a person with secondary self-employment, you still pay social-security and health-insurance contributions, but you do not have to observe the minimum amounts:

  • Social-security contributions depend on your actual income from the previous year. If your advances were already above the minimum, they remain unchanged and you must continue paying them. If they were at the minimum, your actual profit last year may have been below the minimum. In that case, you need to establish the advances based on last year. Look at your social-security statement, find the full year's social-security contribution (before deducting advances) and divide by 12. Voilà: you know the new advance amount you will pay once your self-employment becomes secondary.

 

Another way to calculate it is:

profit from the previous year's income tax return * 55% * 29.2% / 12

  • Health insurance works similarly. The calculation uses either your health-insurance statement or your tax return again, with a slightly different formula:

profit from the previous year's income tax return * 50% * 13.5% / 12

What if you still find the advances too high and cannot manage them alongside maternity benefit and parental allowance? 

Applying to reduce advances

If your income from January to March of the current year has fallen by at least 25% compared with the previous year, you can apply to reduce your advances. As part of your applications to the district social-security office and health insurer, they are recalculated directly based on your current profit. In our experience, the institutions always accommodate the request within a few days. 

A ban on working in your business

And now the proverbial cherry on top. While receiving parental allowance or caring for a child under 4 or 7, you can happily run your business without restrictions. However, if you receive maternity benefit from sickness insurance you paid as a self-employed person, you may not personally carry out self-employed activity while receiving it. If you have employees, you may invoice for their work. 

So if you are an architect without employees, you cannot carry out or invoice for that activity during this period. If you run a grocery shop as a self-employed person, goods may continue to be sold under your self-employment business.

Some clients discover that, because they cannot work in their business while receiving maternity benefit, they have no income from which to pay advances. In that case, I recommend suspending the activity while receiving maternity benefit. However, if you do not “mind” continuing to pay advances, do not worry about suspending your activity. In fact, having secondary self-employment for a larger part of the year may save you money. The magic here lies in the threshold for paying social-security contributions. 

Because your self-employment will be secondary for more months of the year, the prorated threshold for that year will be higher. This increases the likelihood that the income attributable to that proportion of the year will fall below the threshold, meaning you will not have to pay any social-security contributions on it. The advances for those months would then be refunded. 

If you are confused, you are not alone

Secondary activity, reduced advances, a ban on working in the business, the social-security contribution threshold — it all sounds complicated, especially with a baby added to the mix. But it can be arranged so that it makes sense. Think everything through in advance so you are ready. 🙂 If you are still unsure, book a consultation. You are not finding your way alone: we are your guides through the accounting jungle!