Kurzarbeit – a crisis cure?

5. 8. 2015

Czech companies have a new tool which will help them during difficult economic times to avoid letting employees go. At least that is the aim of the amendment to the Employment Act which was recently approved by Parliament and which should soon come into force.

Up until now how have businesses been able to proceed in the event of a difficult economic situation? A common solution has been partial unemployment where employees stop being allocated work to their previous extent – and while they are inactive the employer pays them 60 % of their original salary.

However, the current amendment introduces “kurzarbeit” (“short time work” in German) – a sort of “improved” mechanism which consists of the government being able to decide during a crisis to provide a contribution to businesses that do not have full-time work for their employees, and especially due to a bad economic situation. During downtime an employee is entitled to 70 % of his original salary – 50 % is paid by the employer and the remaining 20 % is made up from this contribution provided by the state. Therefore, compared to conventional partial unemployment this is an improvement for the employee, who receives 10 % more out of his original salary, and also for the employer who, on the other hand, pays only 50 % of the original salary, instead of 60 %.

The contribution, however, is limited both in terms of its amount – the state will not provide more than 12.5 % of the average salary in the Czech Republic – and in terms of time – it can only be provided for a period of 6 months and this period can only be extended once.

How do you get a kurzarbeit contribution? Employers must apply to the Labour Office and show that there are no other solutions (for example, by taking holiday en masse) and then the application is passed on to the government. The catch is that employers must simultaneously undertake in writing, while the contribution is being provided, not to dismiss employees for organisational reasons, i.e. due to a lack of work – if they violate this undertaking, they can no longer apply for a contribution during the following three years.

It is certainly recommended to anyone that is interested in applying for this contribution that they should not underestimate keeping proper documentation of their personnel issues or their tactics of negotiating with the Labour Office when making an application.

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