Working from home has become very common these days. Many companies hire employees who work from their home offices. This raises compensation issues. The Employee finds himself paying more for electricity, water, and basic expenses. In the Czech Republic, it is expected that the employer pays employees who work for home certain compensations. Under the current legislation the employer is obliged to reimburse the employee for the costs demonstrably incurred during the work. These costs are tax deductible for employers. The employee does not incur taxable income from employment and the compensation is not subject to social and health insurance.
Employee’s expenses
Wear and tear, electricity, water, gas, heating, internet, phone etc. these are part of employee’s expenses while working from home. According to the Czech Labour Code, the employee’s work is performed at the employer’s expense. Therefore, employers are obliged to provide all employees with the required working equipment and supplies (typically IT and office equipment) regardless of the employee’s place of work. The employee is obliged to prove these costs by submitting relevant receipts.
How is the sum for compensation determined?
This amount is determined by the employer based on the calculation of actual expenditures. It is decisive to correctly determine the amount of reimbursement of costs, since the amount higher than the actually incurred costs would represent a benefit for employee and as such, a taxable income. On the employer’s side, such costs would not be considered as those to serve to achieve, secure and preserve taxable revenues and as such would be treated as tax non-deductible. At the same time, should the employee bear no costs related to the work performance outside the employer´s workplace (since no costs has occurred), there is no reimbursement obligation for the employer. Compensation for wear and tear of own tools, equipment and items required for the performance of work may be determined by 2 ways:
- lump sum.
- Costs actually incurred and proven by the employee.
Compensation for wear and tear of equipment is more difficult to prove, and therefor more reasonable to have a lump sum. Compensation for costs other than wear and tear of equipment – these are costs for heating/cooling, electricity, telecommunications services, home office cleaning costs, etc. According to the Financial Administration’s interpretation, these expenses cannot be proved otherwise than on the basis of actual expenses, i.e. not as a lump sum.
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