The short-time work system (Kurzarbeit) in the Czech Republic
09 October 2020
Following lengthy negotiations, the Czech Government reached an agreement and published a draft law on employment and its amendment, which contains the much-anticipated modification of the short-time work system. According to the ideas of the Ministry of Labour and Social Affairs, the law is to replace the expiring Antivirus Programme, which businesses can draw from for the last time in October. However, the question is whether the change in the law will be adopted by the Chamber of Deputies in such a short time. While the Antivirus Programme was only a temporary support for employers during the coronavirus crisis, the Short-time Work Act is intended to be a permanent solution. The government was inspired by the German Kurzarbeit law. In my article, I will therefore focus on comparing the two legal regulations. Judge for yourself how it worked and whether the search for Czech originality serves any purpose.
- The activation of support is determined by the government due to the occurrence of an event such as a natural disaster or epidemic, cyberattack or other emergency situation, which is an intervention of force majeure. The regulation may be limited to part of the country or an economic sector. In Germany, the decision is the responsibility of the local employment office. It can react flexibly, for example, to the situation of a large regional employer, while the government is unlikely to deal with these regional employment shortfalls with its decision.
- According to the draft amendment to the Act, the employer must inform the employee in advance that there has been an obstacle to work on its part and that the employee will therefore be entitled to support during part-time employment. A priori consent of employees is not required, unlike in the German legislation.
- The state will contribute to employers for a so-called support period, which is a maximum of 12 months. Here we agree with the German regulation, and at the time of coronavirus this period was extended to 24 months in Germany. The support will be due to the employee for the entire calendar month, unless the employer assigns them work in the range of 20% to 80% of their weekly working hours. The support amounts to a maximum of 70% of the average hourly net earnings, while the ceiling for payment is set in the draft amendment to the Act at one times the national average wage. This is currently slightly over CZK 34,000. This restriction will be a complication for employers when using the short-time employment scheme to maintain a skilled workforce. An employee in Germany receives support amounting to 60% of their lost net salary; for employees caring for children the support is set at 67%, with the support amounting to 80% from the seventh month (calculated from March 2020) and 87% for parents with children. The maximum amount paid in Germany as aid is around EUR 2,900 and corresponds to a salary in excess of EUR 6,900. The specific amount of support then depends on the tax class to which the employee belongs.
- Employers' contributions to health and social insurance will vary during the period when support is drawn. The employer will pay health insurance from the original unreduced average amount of the employee's gross salary. Social insurance will be paid only from the settled gross wage of the employee increased by the paid partial unemployment benefit, in the month in which the employer receives it at the Labour Office. An employer in Germany must continue to pay health and social insurance both for the employee and its share for the employer. However, the amounts paid will be returned to the employer in a lump sum, limited to the end of 2020.
- A separate chapter deserving of attention is in the draft amendment to the law limiting the payment of profit shares and dividends. The draft amendment requires the employer to declare that within 24 months of submitting the notification it will not pay its shareholders extraordinary profit shares, distribute equity and provide them with other extraordinary benefits, including early repayment of loans. It is a question of what extraordinary profit shares means according to the draft amendment to the law. Is it possible to start from the distribution of profit for the previous year or from any average pay-out for the last three or five years? What if the company did not make a profit last year? Will the payment of profit in the current year be considered extraordinary? Another question is the time for which profits cannot be distributed. The state will pay the support for a maximum of 12 months, so why is the employer limited to 24 months when paying profit shares? Restrictions on the payment of dividends during the period when Kurzarbeit is drawn in Germany do not apply. However, it was subject to political discussion as to whether the state should not regulate the payment of dividends in any way, as is the case in France or Denmark.
The amendment to the Employment Act will certainly be the subject of a heated debate in the Chamber of Deputies, and I assume that the final wording of the amendment to the Act will change. We will inform you about the final form on our website or in other issues of our newsletter.