1. Partial unemployment
The amendment of Act No. 435/2004 Coll., on employment (hereinafter “EA”), which comes into force on 1 October 2015, introduces the new institute of a contribution at times of partial unemployment or during natural disasters.
An employer may be entitled to such a contribution at times when the employer cannot assign employees work due to a fall in sales of products or services, or due to a disruption of work as a result of a natural disaster.
However, even before the amendment, the Employment Act allowed the employer to cease assigning employees work and paying full wages, and to only pay employees part of their wages for the period work was not assigned, in the amount agreed with the unions, or as prescribed by internal regulations (in the absence of a union), though not less than 60% of their average earnings.
The amendment introduces a state contribution in these cases to cover part of employees’ wages. This contribution is intended to allow the employer to continue to employ employees at a reduced wage, whereby the state saves on unemployment benefits (the contribution at times of partial unemployment is lower than the contribution in case of full unemployment), and the employer saves part of wage costs thanks to this contribution.
2. Conditions for the provision of a contribution
A total of five conditions must be met for entitlement to a contribution at times of partial unemployment or natural disaster:
1) the employer must enter into an agreement with the Labour Office, following the government’s prior approval; the government must approve each individual agreement;
2) the employer cannot assign work to employees to the extent of weekly working hours under their employment contract (usually 40 hours) due to a fall in the sale of goods or services or due to a disruption of work caused by a natural disaster; in layman’s terms, therefore, the employer does not have enough work for employees for the entire working week, but only part, or none at all, and this due to a fall in the sale of goods or services (for example, due to a decline in demand for ski equipment during summer) or due to a natural disaster, such as floods;
3) the employer cannot assign work to employees equal to at least 20% of their weekly working hours; if, for example, the employee has an agreed working week of 40 hours, the employer must not have work for the employee for at least 8 hours a week. In this case, for example, the employee could work four days for eight hours a day at full pay, and stay at home for one day, for which he would be entitled to wage compensation of at least 60% of his average earnings;
4) the employer already pays the employee wage compensation due to one of the above obstacles to work, under the conditions and in the amount stipulated by the Labour Code (i.e. a minimum of 60% of average earnings, see above) and, following the conclusion of the agreement for a contribution with the Labour Office, the employer will provide wage compensation in the amount of at least 70% of average earnings;
5) in the agreement for a contribution, the employer undertakes not to terminate the employment of the employee receiving the contribution for the reasons specified in § 52 a) to c) of the Labour Code, i.e. the windup or transfer of the employer or the employee’s redundancy, during the agreed period of the contribution.
If the employer meets the above conditions, it may apply for the provision of a contribution. Together with the application, however, the employer must also submit the following documents to the Labour Office:
1) an agreement with the union on the amount of wage compensation, or the internal regulation, if there is no union on the employer’s premises (see above),
2) a detailed description of the reasons for which the employer is applying for the contribution (in particular, the reasons for which sales of goods or services have declined or a description of the damage caused by the natural disaster and how this damage prevents employees from doing their work) and measures already implemented by the employer to resolve the situation, including measures relating to working hours, using working hour funds or taking leave,
3) a list of the employer’s establishments to which the application applies, including the number of employees concerned,
4) a description of the outlook for overcoming partial unemployment or the natural disaster.
The contribution amounts to 20% of the employee’s average earnings, up to a maximum of 0.125 times the average wage in the national economy, which currently means up to approx. CZK 3,150 per month per employee. The contribution may be provided for up to six months, and this period may be extended once by up to another six months.
3. Conclusion
Conditions for the provision of this contribution are therefore quite strict, especially the requirement for prior government approval of the contribution, which may involve excessive delays and effectively frustrate the purpose of the contribution in practice. At the same time, the government has no obligation to approve the provision of the contribution.
The amount of the contribution itself is likewise not staggering. If the employer does not apply for a contribution, it must provide employees with wage compensation of at least 60% of average earnings. If the employer applies for a contribution and it is granted, it must provide employees with at least 70% of average earnings, following which it will receive a contribution of up to 20% of average earnings, but currently no more than approx. CZK 3,150. The employer’s saving would thus effectively amount to a maximum of 10% of average earnings per employee.
Thus, although this is undoubtedly a positive step by legislators with respect to employers, it will only be possible to assess the extent to which this institute is used and whether it actually fulfils its objectives with time, i.e. especially whether it helps employers overcome short-term crises and reduces unemployment.
For more information, please contact our office’s partner, Mgr. Jiří Kučera, e-mail: jkucera@kuceralegal.cz ; tel.: +420604242241.