The amendment to the Employment Act, implemented by Act No. 248/2021 Coll., brought the institution of a part-time work allowance, or so-called kurzarbeit, into the Czech legal system with effect from 1 July 2021.
General
The amendment to the Act No. 435/2004 Coll., on Employment, as amended (the Employment Act) provides for a legislative implementation of systemic support for employers in times when it may be economically more advantageous for them to dismiss employees rather than compensate their wage while they are on the obstacles to work.
The essence of the legislative implementation of kurzarbeit in the Czech legal system is to partially compensate employers for wage costs so that jobs in an economically unfavourable situation are maintained for a certain period until the situation improves.
We have prepared a practical overview of important information concerning the use of the part-time work allowance.
When the so-called “activation” of the allowance occurs
First, it should be mentioned that the part-time work allowance can only be used in a case such measure is activated. Activation can only be carried out by the Government of the Czech Republic by regulation, in accordance with Section 120b of the Employment Act.
The Government may proceed to activation if the economy or its sector is seriously threatened by a natural disaster or an epidemic, cyber-attack, or other emergencies which constitute vis maior.
The allowance may be activated for the entire territory of the Czech Republic, but also only for a certain part of it or a specific sector of the economy. It is also possible to determine the range of employers who can apply for the allowance.
In such a case, it is up to the Government of the Czech Republic, in accordance with Section 120b sub. 3 of the Employment Act, to establish binding employer indicators according to which it is possible to clearly determine whether an employer is entitled to apply for the allowance. The parameters for the assessment of the employer must always be determined by a regulation of the Government of the Czech Republic. Similarly, the regulation will determine the period for which the allowance will be granted and the extent of the weekly working time during which the employer is unable to assign work to employees.
The allowance may only be drawn on employees whose employment has lasted at least 3 months on the date of notification regarding the occurrence of the work obstacle to the Labour Office. To avoid any abuse of this legislation, the allowance cannot be drawn if the working hours’ account is used or if the employer has been fined for allowing illegal work.
To summarise the abovementioned, the Government Regulation activating the part-time work allowance must specify:
- the date from which the allowance may be claimed;
- the period for which the kurzarbeit is activated (the period may be repeatedly extended);
- the territory in which the kurzarbeit is activated, or the range of employers affected by the kurzarbeit;
- the range of working hours within which the employer is unable to assign work to employees.
Who is entitled to the part-time work allowance?
Employers who, due to a serious threat to the economy of the Czech Republic or its sectors for economic reasons, are unable to assign work to their employees for at least 20 % and no more than 80 % of their weekly working time will qualify for the part-time allowance. The fulfilment of the condition concerning the assignment of work to employees to the above extents pursuant to Section 120c(1)(b) of the Employment Act shall be assessed cumulatively for all employees of the employer.
In practice, this means that the legislation reflects the employer’s factual possibilities and the diversity of positions. Although an employer may not assign any work to some employees, it may assign a standard amount of work to other employees as a matter of fact. In practice, therefore, a situation may arise where some employees are fully occupied, and others are at home for 4 days a week. The employer is always obliged to inform the employee in writing that there is an obstacle to work on the employer’s side, based on which the employer will receive a part-time work allowance.
For how long can be the allowance received?
The allowance is provided by the Labour Office of the Czech Republic for the entire calendar month in which employees are unable to work due to one of the obstacles to work under Sections 207 to 209 of the Labour Code. These obstacles include, for example, a temporary restriction in the sales of the employer’s products or a decline in demand for its services. Such obstacles must arise for the employer for the reasons for which the Government Regulation activating the allowance to be drawn during part-time work was issued. The allowance is granted to the employer in relation to a specific employee whose wage is to be compensated in a certain amount.
Kurzarbeit may be declared by a Government Regulation for a maximum period of 6 months. However, this period can be repeatedly extended by three months. The maximum duration of the allowance provision is 12 months.
Amount of allowance during part-time work
The allowance is granted to the employer in the amount of 80 % of the employee’s wage compensation and social security contributions, state employment policy contributions, and public health insurance contributions.
The maximum amount of the allowance during part-time work is 1.5 times the average wage in the national economy per month. The specific amount of the allowance will therefore always have to be calculated in the light of the national average wage.
Prohibition of notice to the employee and other restrictions
To prevent possible misuse of the allowance during the period of part-time work, certain guarantees are laid down in the law to ensure that the allowance will lead to the preservation of jobs at the employer affected by the emergency.
Section 120e sub. 2 (g) of the Employment Act, therefore, stipulates that the employer may not terminate the employment with the employee for whom the allowance is to be provided for organisational reasons referred to in Section 52 (a) to (c) of the Labour Code.
Among other things, the employer may not draw down other public funds during the period of receipt of the allowance or pay out extraordinary profit shares or make early repayments of loans or borrowings in the month preceding the entry into force of the Government Regulation. These measures are intended to ensure that the funds are truly granted to the employer for the purpose of protecting and promoting employment.
What to do if the government does not activate kurzarbeit?
If the part-time work allowance is not activated, or if the employer is not entitled to draw the allowance for another reason, it is and will still be possible for the employer to apply the procedure under Section 209 of the Labour Code, which regulates the so-called obstacles to work on the part of the employer during partial unemployment.
In such a case, employees who, due to a reduction in the sale of goods or a decrease in demand for the services provided, are entitled to wage compensation of at least 60 % of the employee’s average earnings. In such a situation, however, the wage is not compensated to the employer by the state, and it may be difficult for employers to retain jobs in the long term.
Alternatively, it may be possible to proceed by using other labour law institutes so that the employer can effectively organise and manage its employees and utilise their labour power.
Conclusion
The legislator has enacted the possibility of relatively rapid and targeted assistance to enterprises affected by emergency situations. The measure in the form of a temporary work allowance will help both employers who may have to resort to redundancies to maintain their business and employees whose jobs will be maintained and who will be compensated with a wage replacement of 80 % of their average earnings. The maximum duration of the kurzarbeit allows for the allowance to be used for up to 12 months, a period long enough for businesses to adapt to the new conditions.
The new institute, as introduced, is largely dependent on the will of the state executive – the Government of the Czech Republic, as it is the Government that must activate the kurzarbeit and determines its scope and applicability to employers. We see this as potentially problematic, as after the experience with crisis decision-making and measures of the Government of the Czech Republic, this role of the executive may cause considerable (not only legal) uncertainty on the part of employers, but also employees.
Now, we can only wait for the eventual activation of kurzarbeit and the practice itself, which will surely provide valuable guidance in the actual use of the new institute. However, in the longer term, it can be assumed that the conditions and the legal regulation of the allowance will change or be modified to better suit the current situation.
If you have any questions about this topic, we are at your disposal. Please do not hesitate to contact us.
JUDr. Daniela Chvátalová, junior lawyer – chvatalova@plegal.cz
Mgr. Jakub Málek, partner – malek@plegal.cz
30. 07. 2021