Part-time allowance: "Kurzarbeit"

Part-time allowance: "Kurzarbeit"

In September 2020, the first proposal was submitted by the Ministry of Labour and Social Affairs, kicking off a rather complicated legislative process to introduce support during periods of partial unemployment, known as "Kurzarbeit". The final proposal was not passed by the Senate until June 2021, signed by the President and implemented in the Czech legal system by the amendment to the Employment Act No. 435/2004 Coll. effective from 1 July 2021.

This amendment introduces the "part-time work allowance" ("PWA"), which is regulated by the new provisions of Sections 120a - 120f of the Employment Act. These provisions determine the conditions for activating this allowance, its amount, the range of beneficiaries or the details of its use. The previous legal regulation of the partial unemployment allowance (Section 115 of the Employment Act as amended on 30 June 2021) proved to be cumbersome and inadequate in terms of the amount of the allowance for situations such as the coronavirus crisis. Under the previous legislation, each individual application by a particular employer was subject to prior government approval. At the time of the coronavirus crisis, around 57,000 employers applied for support and it was not possible to deal with each application individually at the government level. A further limitation was the amount of the initial grant, which was set at 20% of the employee's average earnings, with an upper limit of 0.125 times the average wage in the national economy. This currently amounts to CZK 4,784, which would hardly motivate an employer threatened by economic losses to keep employees employed even when they do not have work for them and at the same time have to pay them wage compensation.

Therefore, new legislation was adopted for the PWA, based on the experience with the Antivirus programme, which was widely used by companies during the crisis. The provision of the new part-time allowance effective from 1 July 2021 is always subject to a government decision. The latter, after discussion in the Council of Economic and Social Agreement, will issue a regulation activating the provision of the PWA in cases where the Czech economy or a sector thereof is seriously threatened for economic reasons, due to a natural event, epidemic, cyberattack or other event of force majeure. A government regulation may limit the provision of the allowance during the period of part-time work to a part of the territory of the Czech Republic or to a sector of the economy. It may also be limited to a certain range of employers by setting binding employer indicators.

Further parameters and conditions of the revised part-time allowance are set out below:

  • Duration of the allowance

The allowance can be granted for a maximum of 12 months. For the first time, the duration of the allowance is set at a maximum of six months, and thereafter it may be extended for a maximum of three months at a time, up to a maximum of 12 months.

  • Amount of allowance

The allowance will be provided up to 80% of the employee's costs (the employee's wage compensation under Section 120c(1)(a) and the social security and public health insurance premiums calculated on this part of the wage compensation, which the employer is obliged to pay).

The maximum amount of the allowance is limited to 1.5 times the average monthly wage in the national economy in the reference period (first to third quarter of the calendar year preceding the calendar year in which the employer's statement was submitted). For the year 2021, the maximum allowance would be CZK 51,916 per month per employee in the case of activation of the PWA.

  • Conditions under which the allowance is granted

If employees were unable to work in a given month because of any of the employer's work-related impediments, provided that such impediments occurred in direct connection with any of the grounds based on which the government decree applying the PWA was issued, the employer is entitled to the PWA for the entire month, provided that

  • the employer pays workers wage compensation equal to at least 80% of their average earnings; and
  • it does not assign work to employees of at least 20% and no more than 80% of their weekly working time. This condition must be assessed cumulatively for all employees.

At the same time, the allowance can only be claimed for employees who have been employed at least three months on the date of the employer's notification.

  • Who cannot benefit from the allowance

Employers listed in Section 109(3) of the Labour Code, i.e. contributory organisations, state funds or the state, will not be able to apply for the allowance. The allowance is intended mainly for employers in the private sector. However, there is still a restriction if the employer uses a working time account. No allowance is payable for the period when the employee's working time account is used.

  • Application for the allowance

The employer must apply for the allowance by means of a written notification submitted electronically to the relevant branch of the Labour Office (according to the employer's registered office in the case of a legal entity and according to the employer's residence in the case of a natural person). Before submitting the notification, the employer must inform the employee in writing of the obstacle to work on the employer's side.

Each month, employers will then electronically submit a summary of their workers' compensation costs, known as a statement of account. The deadline for submitting the statement is the 20th day of the month following the month for which the allowance is provided. Within eight days of receipt of a complete and proper statement, the Labour Office will transfer the PWA to the employer's account.

Unlike the Antivirus programme, the award is not contingent on the employer having already paid compensation for a given month, and employees can apply for the PWA in advance. However, to file a claim, it is necessary to already have the previous month's payroll data and then the Labour Office has eight days to pay the allowance. In practice, many companies will not receive the PWA until after the payroll deadline.

Although the part-time allowance is often referred to as "Kurzarbeit" recalling its inspiration by German legislation, the Czech and German solutions are not identical. In addition to how the state reimburses the costs or the amount of the allowance, how the allowance is activated also differs. Regardless, both are designed to protect jobs, enable employers to retain skilled workers and deal with economic losses beyond the control of the companies themselves. But it will only be possible to assess the practical functioning of the part-time allowance when it is activated. Only time will tell whether this institution will be widely used, for example, in the event of a regional emergency or a crisis in a particular sector, and whether it will become a flexible tool for combating the crisis.