Permanent employment, contract or trade: What are the main differences and what is more beneficial for you

1. Permanent employment relationship 

A permanent employment relationship is a classic form of employment in which the employee and the employer have an employment contract. The contract establishes the rights and obligations of both parties, while the employer is obliged to pay income tax, social and health contributions and fulfill other legal obligations for the employee.

Advantages of a permanent employment relationship:

• Security and stability: The employee has a guaranteed regular income, which is clearly defined in the contract.
• Legal protections: The Labor Code provides protection against unfair dismissal, the right to leave, protection of working hours and other benefits.
• Social and health insurance: The employee is automatically insured by the social and health insurance company, which ensures the right to sickness, pension, maternity and other benefits.
• Benefits of Collective Bargaining: In some cases, employees can obtain benefits through unions, such as better conditions or higher wages.

Disadvantages of permanent employment:

• Less flexibility: The employee has fixed working hours and job duties that may be difficult to change.
• Higher tax burden: Compared to other forms of employment, employee contributions are relatively high.
• Dependence on the employer: The employee is tied to one employer, which can limit the possibility of working for several companies at the same time.

2. Agreements (Agreement on performance of work, Agreement on work activity)

Agreements are a more flexible form of employment relationship that is often used for temporary jobs or short-term assignments. There are two basic types of agreements: Agreement on performance of work and Agreement on work activity.

Advantages of the agreements:

• Flexibility: Contract work allows greater freedom in scheduling working hours and the volume of work. This is especially beneficial for students, retirees or workers who want to earn extra.
• Lower levies: A lower levy burden is applied to agreements.
• Easier termination of cooperation: Agreements are usually concluded for a specific time or task, and therefore their termination does not require complicated processes.

Disadvantages of agreements:

• Restrictions on working hours: In the case of an agreement on the execution of work, it is possible to work a maximum of 350 hours per year with one employer, which may be a disadvantage for some workers.
• Less protection for the employee: The Labor Code provides fewer rights for contract employees, especially when it comes to vacation, sick leave or protection against dismissal.
• Irregular income: Because the arrangements are usually short-term, workers may face income uncertainty.

3. Business (self-employed person)

A trade is a form of independent business, where a natural person performs work on the basis of a trade license. This way of working offers a high degree of independence, but also brings with it more responsibility.

Advantages of the business:

• High flexibility: self-employed persons can determine their own working hours, the choice of customers and the way they will do their work.
• Lower contributions: In the first years of business, contributions to the social and health insurance company may be lower than with TPP, especially if the entrepreneur earns less than the set limit.
• The possibility of higher incomes: With an efficient business, the entrepreneur can earn more, since he can set his own prices and work for several clients.

Disadvantages of the business:

• Higher administrative burden: The entrepreneur is obliged to keep accounts, file a tax return and take care of contributions to the health and social insurance company himself.
• Lower social security: self-employed people are not automatically entitled to some benefits, such as sickness benefits, and their pension may be lower compared to a permanent employee.
• Risk and Uncertainty: Self-employment carries higher risk as income may be irregular and the entrepreneur bears all the costs and risks alone.

Conclusion

The choice between a permanent employment relationship, an agreement and a trade depends on the personal preferences, needs and goals of the individual. Permanent employment offers stability and protection, but with less flexibility. Agreements are suitable for short-term or occasional work with lower wages, but also lower rights. Business brings independence and the potential for higher incomes, but also higher risk and responsibility.

Everyone has to consider their priorities – whether they prefer the security of stable employment, the flexibility of short-term contracts, or the entrepreneurial freedom and risks of trade.