What are the most common mistakes young people make after finishing secondary school or university?

When it comes to taxes and social and health insurance contributions, young people need to understand that the different paths they may take after finishing school have different tax and contribution implications.

It is important to check whether they are entering into an employment contract, another form of work agreement or a contractor relationship, for example by becoming self-employed. They should consider their current net income together with the employment protection and social insurance entitlements arising from the chosen arrangement.

Young people who decide to pursue freelance activities should also be aware that both monetary and non-monetary income from these activities may be subject to tax and social or health insurance contributions. These obligations require proper attention—they will not simply resolve themselves.

A specific situation arises when young graduates decide to begin their employment or business careers abroad. Although their tax and contribution obligations will usually arise in the country concerned, they may not completely avoid Slovak taxation, particularly if they remain Slovak tax residents under Slovak legislation and the applicable double taxation treaty.

What do young people most commonly overlook after finishing school in terms of taxes, contributions or administration?

The first significant change after finishing school concerns health and social insurance, as young people cease to have the status of persons insured by the state.

The next question is which form of activity is most suitable and how the related tax and contribution obligations should be set up correctly. In the case of employment or other work agreements, the employer handles most of these obligations. However, graduates can no longer enter into the contribution-advantaged agreement on temporary student work.

The situation is more complicated for graduates who decide to start a business or combine business activities with investing. In such cases, they also need to understand the related tax rules and obligations.

What should graduates deal with immediately after finishing school to avoid problems or penalties?

The first step is to determine when they cease to have student status for health insurance purposes and what their new status will be—employee, self-employed person, registered jobseeker or someone moving abroad.

We therefore recommend checking the obligations associated with every change in status. The worst approach is to assume that no obligation exists simply because no letter has arrived from an authority. Authorities often get in touch only months or even years later.

What problems can arise if someone ignores the health or social insurance authorities?

It is important to remember that social and health insurance has two sides: paying contributions and receiving benefits.

Failure to pay contributions can result in outstanding amounts as well as penalties of up to 100% of the unpaid contributions.

The benefits side is equally important. Losing entitlement to healthcare—or being entitled only to urgent care—sickness benefits, maternity benefits or unemployment benefits can come as an unpleasant surprise. In the longer term, contribution gaps may also affect a person’s future pension.

What should young people look out for when signing their first employment contract?

Young people should always read their employment contracts carefully. From a tax and contribution perspective, the type of working relationship they are entering into is crucial, as it determines their tax and contribution obligations and, ultimately, their net income.

Even if we focus on employment contracts and set aside the frequently discussed issue of dependent work being performed under a self-employment arrangement, there are still certain tax and contribution differences between an employment contract and other forms of work agreement.

Other provisions of the employment contract are even more important than its tax and contribution implications. These include salary, monetary and non-monetary benefits, working conditions and holiday entitlement. Remote work and working from home have also become important aspects of employment contracts in recent years. We recommend reviewing not only the employment contract itself but also any applicable collective agreement and the employer’s internal policies, which often regulate employment conditions, entitlements and benefits. These may include the available meal benefit options or the rules and limitations governing working from home.

Do you think young people are adequately prepared to deal with public authorities, money and practical obligations?

In general, we believe that young people are digitally proficient and have significantly easier access to information than previous generations did.

At the same time, concerns are often raised about their lack of practical financial and tax literacy. Although they may know how to use AI and other technologies, the question is how well they understand taxes and social and health insurance contributions in practice. For example, do they understand their payslips and know which tax and contribution obligations apply to the activities they perform? It should also be acknowledged that the legislation itself is not always clear and often struggles to keep pace with the new types of activities that are particularly popular among young people.

What three things should everyone know before finishing school?

First, taxes and contributions are very difficult to avoid. There is no universal solution for bypassing or optimising them. In principle, income received under any type of legal relationship and in any form is subject to tax and may also be subject to social and health insurance contributions. Exceptions do exist—for example, income that is not subject to tax or is tax-exempt—but great care is required when applying them.

Second, whenever someone performs an activity in exchange for compensation, they need to understand the obligations that arise. This applies to temporary work, other forms of work agreement, employment, copyright agreements, self-employment, business activities conducted through a legal entity and various types of investment. It is useful to know when a particular legal arrangement may be appropriate or advantageous and what administrative, tax and contribution obligations it entails.

Third, everyone should have at least a basic understanding of the tax, social insurance and health insurance obligations associated with the different ways in which their activities and income may be structured.

Young people who understand at least the basic rules can avoid unpleasant surprises and unnecessary problems.