Management of social security premiums is administratively burdensome and employers’ checks do not have a significant impact
Press Release on audit No 20/01 – 28 June 2021
The SAO examined the management of social security premiums between 2015 and 2018. During this period, almost CZK 1.8 trillion premiums were raised and that accounted for one third of the revenue of the state budget. The Czech Social Security Administration (CSSA) spent around CZK 7.6 billion both on wages and current expenditure in the above-mentioned period. Neither the Ministry of Labour and Social Affairs (MoLSA) nor the CSSA monitored the expenditure related to the management of insurance premiums, nor did they adjust the procedures to make them as effective as possible. In doing so, the CSSA itself has problems in two key activities, namely in assessing the premiums of self-employed persons and in carrying out checks on the part of employers.
On an annual basis, the CSSA carried out checks on employers in a blanket and not in a targeted manner. The CSSA planned the checks in a way that would enable the verification of each employer every three years. Therefore, the CSSA did not focus primarily on employers who did not comply with their legal obligations or those who had shown serious deficiencies during previous checks. This system meant that 76.6% of the checks did not detect any deficiencies. Moreover, the blanket checks did not have a preventive effect either.
On the other hand, when recovering claims, the CSSA collected on average 52% of the financial volume recovered. Between 2015 and 2018, the recovered claims amounted to CZK 38 billion.
The CSSA did not address the workload of employees involved in the management of insurance premiums. However, there was a significant difference in the burden on employees working in the same position and carrying out the same work between various district social security administrations. For example, when recovering claims in one district administration, the employee performed more than three times the number of tasks than a colleague in another district administration.
The higher administrative complexity of the management of insurance premiums has also been an issue, but the CSSA had not addressed this. This complexity is mainly due to the fact that the self-employed pension scheme is carried out in local computer applications in individual district administrations. However, these are not interlinked. Up to now, it has not been possible to integrate this part of the agenda into the central system, although the CSSA had already planned to do so in 2014.
Employers’ files must be kept in paper form by the district administrations. This is determined by the CSSA’s methodological guidance. Thus, if an employer changes its registered office, the district authorities have to physically transfer all of the documents of such an employer from one to the other.
The fact that the CSSA does not receive information regarding the basis of assessment for the tax of self-employed persons from the Financial Administration of the Czech Republic on a regular basis also contributes to the increased administrative burden. Although the law allows it to conclude such an agreement. Therefore, if the self-employed person did not supply the district administration with the necessary data, the employees of the district administration had to request the required data from the competent tax authority.
Between 2016 and 2018, the efficiency of the expenditure for the management of insurance premiums was improved, but only because premium income grew faster than expenditure on the management of insurance premiums. Between 2015 and 2018, the premium increased by 21% per payer.
Communication Department
Supreme Audit Office