Amendment to the Labour Code tightens the rules for the Bogus Self-Employment

Bogus self-employment, also known as the Schwarz system, are the subject of increased attention of the supervisory authorities.

This is a situation where an employment relationship between an entrepreneur and a natural person (a sole trader or a single-member limited liability company without employees) is formally presented as a commercial relationship, even though it is a dependent work.

Legal definition and characteristics of dependent work

According to the Slovak legal system, dependent work was characterised by:

• personal performance of work for the employer,
• according to their instructions, on their behalf,
• during the specified working hours, and
• at a specified place.

If these characteristics are met, it is an employment relationship that should be governed by an employment contract. The Schwarz system occurs when such a relationship is formally concealed by a contract for work or a contract for the provision of services (or similar contracts) supplied by a natural person who is a sole trader.

In order to combat the Schwarz system, the definition of dependent work has been changed as of 1 January 2026. The condition of performing work during working hours determined by the employer has been removed.

Basic differences of entrepreneurships

Unlike dependent work, entrepreneurship is an activity performed continuously and independently, in one's own name and on one's own responsibility, with the main objective being to make a profit. The entrepreneur decides on the manner, time and place of work himself, acts on his own behalf and bears the risk of the business. Entrepreneurship must be carried out in accordance with the conditions set out in the Trade Licensing Act or the Commercial Code.

Liability for damage caused by entrepreneurs is not limited and is covered by all that person's assets, unlike the liability of employees in an employment relationship, which is limited to four times the amount of their average monthly salary.

In the case of a business by a natural person, a sole trader, it can be difficult to determine the boundary between business and dependent work.

The following characteristics indicate the commercial nature of the contractual relationship, namely if:

• the sole trader has more than one customer (business partner) to whom they provide their services, i.e. they have more than one business partner or client,
• they make independent decisions in relation to the performance of their activities – they have independent decision-making power over the execution of orders and the selection of contractual partners,
• they have their own employees or other contractual partners with whom they can cooperate in the delivery of the services they have contracted.

Motivations of employers and self-employed persons

The primary reason for using business relationships on the part of both sole traders and employers is:

• high tax and contribution burden on dependent work, as Slovakia has one of the highest labour costs in the EU
• greater flexibility of contractual relationships compared to employment relationship, whether in terms of termination of the contractual relationship, setting the conditions for the performance of "work", contractual freedom in concluding multiple contractual relationships by self-employed persons, etc.

Control of bogus self-employment – what is the subject of examination?

As a result of increasing pressure on public finances and consolidation, the government has declared a fight against illegal employment caused by the so-called Schwarz system.

When checking the Schwarz system, not only the formal aspect of the contractual relationship is assessed, but also its actual content and performance of work. The supervisory authorities, in particular the labour inspectorate, analyse several aspects:

• Working conditions – whether the worker performs the work under similar conditions as employees in an employment relationship,
• Personal performance of work – whether the work is performed personally and according to the instructions of the client,
• Remuneration and its regularity – whether remuneration is paid regularly, similar to a salary,
• Benefits – provision of benefits, protective work equipment, meal vouchers, etc.
• Invoicing – whether the self-employed person invoices exclusively or predominantly to one client,
• Regularity and long-term nature of the relationship – whether the work is long-term and regular.

It is not enough to prove that, formally and legally, i.e. on paper, everything is set up in accordance with the law.

Risks and consequences for the parties

For self-employed persons: Such workers lose basic employment rights, such as holiday entitlement, protection against dismissal, sickness benefits or unemployment benefits, unless they voluntarily pay the relevant insurance. In the event of illness, accident or job loss, they are at greater risk of financial hardship. Long-term consequences may also include a lower pension and weaker social protection.

For employers: Disguising an employment relationship as a commercial relationship is considered illegal employment, i.e. performing dependent work without an employment contract.

If such illegal work is discovered, employers face significant penalties. The Labour Inspectorate may impose a fine ranging from EUR 4,000 to EUR 200,000 (from 1 January 2026, the lower limit of the fine has been increased from the original EUR 2,000 to EUR 4,000), with the amount of the penalty depending on the seriousness and extent of the violation. In addition to financial penalties, employers may be placed on a list of illegal employers, which has far-reaching reputational and legal consequences. There is also an obligation to pay back taxes and contributions.

Thorough control of actually implemented contractual relationships, evaluation of their legal nature and setting up correct contractual relationships will allow you to avoid unwanted surprises from the control authorities.

If you need advice, please do not hesitate to contact us. We will be happy to help you.