Employee benefits – what’s new in 2024

What are employee benefits?

For clarity, I would divide them into three groups. Each group has its own limit for the benefits it includes. These limits across the groups are not added together.

Employee benefits with a limit of CZK 50,000 / year

Very common forms of benefit are private life insurance (with a pension component) and supplementary pension insurance. The state encourages people to save for retirement. In terms of benefits, it therefore allows employers to pay up to CZK 50,000 per year towards an employee’s selected insurance. Up to this limit, this is exempt income for the employee. This means they receive the contribution “just like that”, without paying tax or insurance contributions on it. Once the limit is exceeded, however, it becomes taxable income for the employee. For the employer, it is always a tax-deductible expense. The table below gives a clear summary.

Until now, contributions could be made to private life insurance (with a pension component) and supplementary pension insurance contracts taken out for at least 5 years (60 months), ending no earlier than the employee reaching age 60. From 2024, however, the required term for newly concluded contracts increases to 10 years (120 months). Contracts concluded up to 2023 continue to be subject to the original conditions. If your contract or your employees’ contracts do not meet the new condition, the income will not be exempt even up to the limit. Should this unfortunate situation arise, I recommend having the contract amended to meet the conditions.

On the other hand, from 2024 a third type of product will be available in this group. Alongside supplementary pension insurance and life insurance contracts, it will also be possible to use a pension investment product, known as DIP. Essentially, these are savings that do not simply sit somewhere, but are invested in the markets. For more information about this product, I recommend contacting your bank or financial adviser. 🙂

This group of benefits is available only to employees, not their family members.

Employee benefits with a limit of half the officially announced average wage / year

These include, for example, admission to cultural and sports facilities, goods and services of a medical nature (from healthcare facilities), printed books, various educational courses, recreation and holiday trips, or contributions towards children’s summer camps and preschool facilities.

Until now, these benefits were exempt from income tax for employees regardless of their value. From 2024, there will be an annual limit for the exemption of these benefits. It is set at half the officially announced average wage, meaning approximately, for 2024, CZK 21,983. The value of non-cash benefits exceeding this limit will be subject to tax and contributions. The treatment for employees and employers is essentially the same as for the first group, just with a different limit.

This group of benefits is available to employees and their family members.

Meals with a limit of CZK 116.20 / shift worked

There are enormous changes in meal benefits from 2024. Essentially, after 30 years, the ability to provide employees with tax-exempt meal benefits above a certain limit is being restricted. As the various forms of meal vouchers, cash meal allowances and meals provided at the workplace generally are among the most common benefits, I have decided to devote a separate article to them.

I can say, however, that minor refreshments at the workplace (coffee, tea, sandwiches at training sessions) remain exempt income for employees and a non-deductible expense for employers.

---

To sum up, I recommend setting maximum limits for each type of benefit in an internal policy and keeping within them. Above the limit, it no longer feels like a “benefit” to me; you might as well give the employee a bonus through payroll. If you are unsure, do not hesitate to get in touch and we can look at it together. 🙂

Those of you who receive non-cash benefits as employees or provide them as employers should take note. This area will also be affected by the changes in the consolidation package.

What are employee benefits?

For clarity, I would divide them into three groups. Each group has its own limit for the benefits it includes. These limits across the groups are not added together.

Employee benefits with a limit of CZK 50,000 / year

Very common forms of benefit are private life insurance and supplementary pension insurance. The state encourages people to save for retirement. In terms of benefits, it therefore allows employers to pay up to CZK 50,000 per year towards an employee’s selected insurance. Up to this limit, this is exempt income for the employee. This means they receive the contribution “just like that”, without paying tax or insurance contributions on it. Once the limit is exceeded, however, it becomes taxable income for the employee. For the employer, it is always a tax-deductible expense. The table below gives a clear summary.

Until now, contributions could be made to private life insurance and supplementary pension insurance contracts taken out for at least 5 years (60 months), ending no earlier than the employee reaching age 60. From 2024, however, the required term for newly concluded contracts increases to 10 years (120 months). Contracts concluded up to 2023 continue to be subject to the original conditions. If your contract or your employees’ contracts do not meet the new condition, the income will not be exempt even up to the limit. Should this unfortunate situation arise, I recommend having the contract amended to meet the conditions.

On the other hand, from 2024 a third type of product will be available in this group. Alongside supplementary pension insurance and life insurance contracts, it will also be possible to use a pension investment product, known as DIP. Essentially, these are savings that do not simply sit somewhere, but are invested in the markets. For more information about this product, I recommend contacting your bank or financial adviser. 🙂

This group of benefits is available only to employees, not their family members.

Employee benefits with a limit of half the officially announced average wage / year

These include, for example, admission to cultural and sports facilities, goods and services of a medical nature (from healthcare facilities), printed books, various educational courses, recreation and holiday trips, or contributions towards children’s summer camps and preschool facilities.

Until now, these benefits were exempt from income tax for employees regardless of their value. From 2024, there will be an annual limit for the exemption of these benefits. It is set at half the officially announced average wage, meaning approximately, for 2024, CZK 21,983. The value of non-cash benefits exceeding this limit will be subject to tax and contributions. The treatment for employees and employers is essentially the same as for the first group, just with a different limit.

This group of benefits is available to employees and their family members.

Meals with a limit of CZK 116.20 / shift worked

There are enormous changes in meal benefits from 2024. Essentially, after 30 years, the ability to provide employees with tax-exempt meal benefits above a certain limit is being restricted. As the various forms of meal vouchers, cash meal allowances and meals provided at the workplace generally are among the most common benefits, I have decided to devote a separate article to them.

I can say, however, that minor refreshments at the workplace (coffee, tea, sandwiches at training sessions) remain exempt income for employees and a non-deductible expense for employers.

---

To sum up, I recommend setting maximum limits for each type of benefit in an internal policy and keeping within them. Above the limit, it no longer feels like a “benefit” to me; you might as well give the employee a bonus through payroll. If you are unsure, do not hesitate to get in touch and we can look at it together. 🙂