Illustrative photo – Minister of Labor and Social Affairs Marian Jurečka at a press conference in Prague after the government meeting, January 25, 2023.
Prague – The Ministry of Labor proposes changes in support for work at retirement age. Instead of the current permanent pension increase, older employees should stop paying social security contributions. That would leave them with 6.5 percent of the money from the earnings base. The levy rate for self-employed persons would be reduced accordingly. This follows from the draft amendment on the implementation of social security. The Ministry of Finance rejects the loss of income to the pension system, which is in debt. Trade unions are also against the proposal. According to them, pension increases for “overtime” should be increased.
“Unlike the current legal regulation of a moderate but permanent increase in the old-age pension for years of service, the proposed legal regulation is a more effective solution to help old-age pensioners, the financial support will be more significant and immediate,” the Ministry of Labor said in the documents for the amendment. It specified that the pension for an additional year of work is increased “in the order of ten crowns”.
After working for 360 calendar days, old-age pensioners can now request a pension increase from the social administration. The merit percentage part of their pension will increase by 0.4 percent of the calculation base. According to the proposal, employees would not have to pay 6.5 percent of the base earnings to social security.
With a gross salary of 25,000 crowns, they would keep about 1,600 crowns a month, with a gross salary of 30,000 crowns, it would be over 1,900 crowns, and with a salary of 40,000 crowns, about 2,600 crowns. Employers' levies would not change. Self-employed people would also keep 6.5 percent of the profit, their insurance premium rate would drop from 29.2 to 22.7 percent. According to the proposal, the discount could also be applied to a flat rate.
According to the Ministry of Labour, the social administration has to decide on approximately 80,000 requests for pension increases every year, which puts a considerable burden on it. “The result for the insured is usually frustrating due to the long processing time and the relatively small amount by which the pension will increase,” the ministry said.
According to the documents for the amendment, about 270,000 old-age pensioners work. After the abolition of levies, the state would lose four to 4.5 billion crowns annually. Expenditures on increasing pensions would decrease, but this decrease would be offset by a drop in income to the system in almost 30 years, the Ministry of Finance said. He refuses to increase the pension account deficit. He adds that the proposal also disrupts the flat rate setting.
The loss of income also bothers the unions. They liken the proposal to abolishing the super gross wage. People were left with more money, but state finances fell into high deficits. Trade unionists, on the other hand, suggest that the bonus for “overtime” be increased. They point out that while younger seniors have extra income for their pension, in old age people can no longer increase their income by working.
In the program statement, the government promises to support work in retirement and for seniors to “take more into account years of service”. . In addition, a bonus for each year of work was also mentioned by the then pension commission in its proposals in the last election period. The coalition of Pirates and Mayors stated before the last parliamentary elections that they would advocate for higher remuneration for work in the pension. But she also talked about lower levies. Several years ago, a study by the Institute for Democracy and Economic Analysis (IDEA) of the Institute of National Economy of the Academy of Sciences of the Czech Republic drew attention to the fact that the pension system does not sufficiently take into account work in retirement.