Czech Republic: Social partners involvement in unemployment benefit regimes

  • Observatory: EurWORK
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  • Published on: 20 Prosinec 2012



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Disclaimer: This information is made available as a service to the public but has not been edited by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.

In the Czech Republic, the system of material security in unemployment does not belong among the questions in the focus of social partners. Social partners cooperate particularly at the national tripartite level, aiming to champion common interests of employers and employees. Regarding the national employment policy, social partners mostly play an informational, consulting and advisory role.

1. The characteristics of the UB system in the country

Table 1: Types of Unemployment Benefit and Social Assistance programmes
 

Benefits

Main qualifying conditions

Funding

Unemployment Insurance (UI)

earnings-related

involuntary unemployment - employment record - actively looking for work

contributions from employer and, sometimes, also employees, often topped by government payments

Unemployment Assistance (UA)

social minimum, partly means-tested

unemployment insurance expired or not eligible for it - (often) a short employment record - actively looking for work

contributions from employer and employee and/or government payments

Social Assistance (SA)

social minimum, comprehensively means-tested

unemployment insurance expired or not eligible for it - (for most categories of claimants) actively looking for work

taxes

1.1. Recent changes/transformations of the UB system in your country:

1.1.1. In the last 10 years, has the country’s UB regime been modified? Have new forms of interventions been introduced?

  • Regarding the UI:

In the Czech Republic, the system of earnings compensation at the time of unemployment is represented by benefits from potential unemployment insurance (benefit in unemployment and during re-training). In the period under review, the eligibility criteria for unemployment benefits, their amount, duration of the support period, the age limit in connection with different support periods have been modified.

  • Regarding the UA:

Not relevant. Subject for the Czech Republic, the UB system covers only the area of unemployment insurance.

  • Regarding the SA (if relevant):

Not relevant. As stated above, the UB system in the Czech Republic covers only the area of unemployment insurance. In case of insufficient income, additional financial support can be granted via the system of benefits assisting in material need. Granting these funds depends on the family income level and is not necessarily conditioned by a job loss.

1.1.2. For each of these changes/innovations indicate:

Changes in UI:

  • date of introduction:

2004.

  • who took the initiative (government, unions, employers’ associations, other organisations):

Government.

  • the content of the change / of the new programme:

Change 1: Since 2004 the duration of the period when the unemployment benefit is paid is linked to the job applicant’s age.

Change 2: In 2004, the unemployment benefit starting from the fourth month of unemployment was increased, specifically from 40% of the average monthly net income of the job applicant to 45%.

  • the aim pursued:

With regards to the change 1, that measure was taken in view of the fact, that older applicants usually need longer time to find a new job.

The aim of the change 2 was to keep living standard of the unemployed.

  • date of introduction:

2007.

  • who took the initiative (government, unions, employers’ associations, other organisations):

Government.

  • the content of the change / of the new programme:

From the beginning of 2007, there has been change to the method of calculating the maximum unemployment benefit that can amount to not more than 0.58 multiple of the average wage in the national economy. In case of the re-training benefit, it is a 0.65 multiple of the average wage calculated this way. Until the end of 2006 the maximum limit for unemployment benefit was set to be a 2.5 multiple of living minimum, in case of re-training a 2.8 multiple. The level of unemployment compensation has not changed substantially, the maximum amount of unemployment benefits before the change made in 2007 was CZK 11,050 (about € 442), after the change in 2007 CZK 11,389 (about € 451).

  • the aim pursued:

To take into account the wage level attained in the national economy when setting the amount of unemployment benefit.

  • date of introduction:

2008.

  • who took the initiative (government, unions, employers’ associations, other organisations):

Government.

  • the content of the change / of the new programme:

As of 1 January 2008 benefit entitlement ceased to exist for such an applicant whose employment contract had been terminated by the employer in recent 6 months before the applicant’s registration in the job applicant registration if the labour-law relation had been terminated due to an extremely severe violation of legal regulations related to the job performed.

  • the aim pursued:

The aim was not to allow any potential drawing of benefits by the applicants who lost their job through their own fault.

  • date of introduction:

2009.

  • who took the initiative (government, unions, employers’ associations, other organisations):

Government.

  • the content of the change / of the new programme:

Change 1: As of the beginning of 2009 the benefit entitlement ceased to exist for such applicants who in recent 6 months before their registration in the job applicant register repeatedly terminated, for no serious reason, employment arranged by the labour office.

Change 2: From the beginning of 2009, the unemployment benefit in the first two months of the support period has been increased, specifically from 50% to 65% of the average monthly net earnings from the last employment or of the last self-employment basis of assessment. In subsequent two months of the support period the job applicant is entitled to a support amounting to 50% and in the remaining time to 45% of the average monthly net earnings from the last employment or of the last self-employment basis of assessment.

Change 3: Since the beginning of 2009 the support period has been reduced for job applicants of all age categories by one month.

  • the aim pursued:

The aim of change 1 was to prevent a calculated behaviour of the unemployed who, despite their starting in the labour-office-mediated job, terminated it immediately and re-entered the labour office register. The aim of the second change was to deepen motivation of the unemployed to look for a job during the support period, third change was intended to depening motivation of job applicants to look for a new job.

  • date of introduction:

2011.

  • who took the initiative (government, unions, employers’ associations, other organisations):

Government.

  • the content of the change / of the new programme:

Change 1: As of 1 January 2011 the unemployment benefit has been cut to 45% of the average monthly net earnings from the last employment or of the last self-employment basis of assessment if the employee terminates employment (by himself or by agreement with the employer) without any serious reason. Reasons considered serious are e.g. a necessary personal care for a child up to the age of four, but also health preventing the person to perform his or her job. Among serious reasons we can also find a situation when the employment contract was immediately terminated by the employee on grounds of not being paid a wage.

Change 2: Until the end of 2010 the legislation allowed to draw the unemployment benefit and perform a part-time job concurrently unless the monthly income from that job exceeded one-half of the legal minimum wage (“non-colliding job”). Since the beginning of 2011 this concurrence of the benefit and income has been ruled out.

Change 3: Starting from 2011, the unemployment benefit is provided only after a lapse of the period for which the employee is entitled to a severance pay from the employer. The benefit entitlement is not reduced.

  • the aim pursued:

First change had a motivational purpose.

The aim of the second measure was to prevent abuse of system. Sometimes the possibility to draw the unemployment benefit concurrently with performing a “non-colliding” job led to a calculated conduct of some job applicants and their employers, resulting in evasions of taxes and social and health insurance. When employers could not assign employees work in the extent of the prescribed weekly working hours, they agreed on employment termination and simultaneously concluded an agreement outside an employment contract for the same type of work. The employees then registered themselves with the labour office.

The purpose of the third change was to motivate applicants to look for a job during the time they are entitled to the severance pay.

  • date of introduction:

2012.

  • who took the initiative (government, unions, employers’ associations, other organisations):

Government.

  • the content of the change / of the new programme:

Change 1: Since the beginning of 2012, conditions have changed for the unemployment benefit entitlement. The time has been reduced in which the job applicant must meet the requirement of the necessary duration of pension insurance (at least 12 months in total), specifically from three to two years.

Change 2: For job applicants who have been registered with the labour office continuously for more than 2 months, they are offered, newly since 1 January, 2012, a community service in the extent of up to 20 hours a week. Job applicants, who take part in this comjunity service, do not receive any remuneration (other than the unemployment benefit). Job applicants, who refuse the offer for no serious reason, are excluded from the labour office register.

Change 3: Since 1 January 2012, requirements have been tightened for job applicants’ registration with the labour office. If the labour office mediates employment for the applicant who terminates it for no serious reason, he may re-enter the job applicant register only after 6 months from the day of commencement of the said job. This also applies to the applicant for whom the labour office mediated a job, however, the employer terminated employment on the grounds of a serious breach of occupational duties.

  • the aim pursued:

The purpose of the first change was to motivate applicants to look for a job. The aim of the second change is to tighten the requirements of the benefit eligibility, the purpose of the third measure is to avoid a misuse of the benefits.

1.1.3. For each of these changes / innovations please indicate from the main SP who was in favour or supported and who was against or resisted to it, and why:

The aforementioned innovations in their particular form were initiated by the government and at the general level they are primarily a result of agreement among government political parties in the effort to save public funds, strengthen personalisation of benefits and eliminate their misuse.

Most of these innovations made to the system since the year 2008 (ie at the time of right-wing governments) are the subject of criticism from the Czech trade unions. The reason is that these government measures usually make access to benefits more difficult for unemployed. On the other hand, unions support the government steps to tighten conditions for sanctioning of illegal work.

Employers generally support government's restrictive measures against the misuse of benefits, among other things, because of savings of public funds expended. On the contrary, they criticize stricter penalties on illegal employment.

The role of social partners remained limited to submitting opinions within the discussion, a consulting and advisory role at the national tripartite level, The Council of Economic and Social Agreement of the Czech Republic (Rada hospodářské a sociální dohody ČR, RHSD ČR). The real impact of social partners on the legislative development in the field under review was minor.

1.2. The main characteristics of the UB system as it is now

1.2.1. Unemployment Insurance.

  • Coverage:

The system of material security in unemployment is governed by the Act No. 435/2004, on employment, as amended.

Unemployment benefits are paid to job applicants. A job applicant is a natural person with a residence in the Czech Republic who applies for a mediation of a suitable employment and, while complying with legally prescribed requirements, is included in the job applicant register maintained by the labour office. The job applicant can be only such a natural person who is neither in a labour-law relation/service, nor the self-employed, with no foreign income, nor a pupil or student preparing for future occupation, etc. A natural person cannot become a job applicant at the time when the person is recognized as being temporarily incapable to work, under jail sentence or in custody, draws maternity benefits, is a disabled person, etc.

There are no special programmes for specific categories of workers.

  • Eligibility:

Eligible for the unemployment benefit are citizens with a residence in the Czech Republic, who in 2 years before their registration in the job applicant register got at least 12 months of pension insurance, asked the regional office of the Labour Office, where they are registered in the register of job seekers, for the provision of unemployment benefits and are not a beneficiary of old-age pension to the day, when the unemployment benefit should be granted to them.

On the contrary, a job applicant is not eligible for the unemployment benefit if the labour office mediates a job for him/her, but the applicant terminates it for no serious reason or leaves it upon agreement with the employer (in such a case he or she may be included in the labour office register only after 6 months from the day of the job commencement). The same applies to applicants with whom the employer terminated employment due to a severe breach of occupational duties or who performs a “non-colliding” job (monthly earnings from the employment activity does not exceed a half of the minimum wage), or is eligible for a legal severance pay, pay-off or a leaving allowance.

  • Duration:

The maximum duration of time for drawing the benefit is 5 months if the applicant is under 50 years of age, 8 months if the job applicant is from 50 to 55 years old and 11 months for applicants 55+.

  • Replacement rates:

The amount of the unemployment benefit and the re-training benefit is determined via a percentage rate based on the average monthly net earnings of the most recent terminated employment and is provided for a limited support period. The maximum amount of the unemployment benefit is 0.58 multiple of the average wage in the national economy in the year quarters 1-3 of the year previous to that in which the unemployment benefit application had been filed. In case of the re-training support, the maximum limit is a 0.65 multiple. The minimum amount of unemployment benefits has not been defined.

The level of unemployment benefit for the first two months is 65% of the assessment base, for the next two months it is 50% and for the remaining period of support it is 45% of the assessment base. In the case of candidate, who terminates employment without good reason himself or by agreement with the employer, the unemployment benefit is reduced to 45% of the average monthly net earnings or the basis of assessment for the entire period of support. Support during retraining is 60%.

If the employer failed to pay employee statutory redundancy payment, Czech Labour Office pays compensation amounting to 65% of the severance and then it will enforce a claim to the employer by legal action.

  • Financing:

The system of material security in unemployment is financed from contributions of the national employment policy. The contributions are paid by employers and the self-employed. The employer’s insurance is calculated from the total of bases of assessment of his employees. As for the self-employed persons, the base of assessment for the insurance is an amount they define; however, that amount must be at least 50% of their tax base. Insurance rates for employers and the self-employed represent 1.2% of the base of assessment.

  • SP involvement:

No.

1.2.2. Unemployment Assistance. Are forms of UA present?

No.

The Czech system of income compensation in unemployment only includes benefits in unemployment and at re-training.

1.2.3. Social Assistance. Are SA programmes with a direct relationship with the UB system and/or SP involvement present?

No.

In case of insufficient income, additional financial support can be obtained in the form of benefits in the regime of assistance in material need, the provision of which, however, depends on the family income and is not necessarily conditioned by a job loss. Benefits in material need represent assistance to persons with insufficient income. They are granted based on social necessity, guaranteeing the minimum income level, while not representing a compensation of lost income from gainful employment. Moreover, the amount of the benefit is not defined based on the previous wage level. The basic support in material need, the “subsistence benefit”, is derived from the subsistence minimum and the amount of the benefit increases alongside the efforts made by the person in material need to increase income by his or her own efforts.

2. SP involvement in the UB regime

2.1. The development phase

2.1.1. In your country, did SP participate in the development phase of UB programmes over the last decade?

The impact of social partners on the national employment policy is primarily limited to their participation in discussions of government legislative bills in RHSD ČR. Conclusions of those tripartite meetings are not of a legally binding nature, with the role of social partners in the development of the national employment policy being mostly advisory.

2.1.2. If yes, please provide detailed information on the SP involvement in the development phase of UB regimes with respect to the following dimensions, distinguishing between UI and UA and reporting any important changes during the decade.

No.

2.2. The implementation phase

2.2.1. Distinguishing between UI and UA programmes, please describe the SP' role in accomplishing specific functions related to UB schemes (such as selecting the officials in charge of UB’ services, collecting contributions, etc).

Social partners’ involvement consists only in the participation in the national tripartite negotiations, where potential changes to the field under review can be discussed (if the government initiates or accepts a negotiation regarding the given topic).

2.2.2. Furthermore, please analyze such SP involvement in terms of:

  • degree and institutional relevance of their involvement (mandatory, advisory or voluntary presence):

Advisory.

  • incidence of their involvement in the implementation process (at the beginning, throughout and/or at the end of the process):

Throughout of the process.

  • the strategic positions possibly held by SP:

Social partners do not have any strategic position in the unemployment benefit regime.

2.3. The management phase

2.3.1. In this case, distinguishing between UI and UA programmes, please describe SP’ role in terms of:

Social partners do not have any role in the management of the unemployment benefit regime nor at the management of public employment services.

2.3.2. Distinguishing between UI and UA programmes, please describe the role of SP in case they are engaged in the financial management of the UB funds.

Social partners do not participate in the financial management of the unemployment benefit regime.

2.3.3. Distinguishing between UI and UA programmes, please answer to the following questions:

  • is the SP’ role in the organisation and provision of UB programmes linked to the organisation and provision of other programmes/services (for instance, related to education and training)?

No.

  • if there is some kind of organisational relationship/integration among different labour market policies and programmes, does it lead also to an administrative/operative relationship between the SP and the Public Employment Service, or with private employment agencies?

No.

2.4. The monitoring phase

2.4.1. SP involvement in monitoring/evaluating the UB performance

Are the SP involved in the monitoring and evaluation of the UB system?

No.

From time to time, social partners comment upon the topic of benefit misuse, drawing attention to the issue. However, this is not a systematic process of monitoring and evaluation. It is a response to potential or real topical weaknesses of the system functioning, with the aim to point out existing problems.

2.4.2. monitoring the SP involvement in the UB system

Is the SP role within the UB system subject to evaluation and monitoring?

No.

3. Final observations

3.1. Public debates and policy discussion:

Trade unions voice their criticism against administrative measures tightening requirements for becoming (and staying) eligible for the unemployment benefit. On the other hand, they promote steps aiming to prevent provable misuse of unemployment benefits and to implement consistent sanctioning of illegal work. Trade unions’ criticism of some legislative changes in the unemployment support received a rather wide support. E.g. the ombudsman criticised a legislative amendment based on which job applicants who terminate their most recent employment themselves or upon agreement with the employer for “no serious reason” are entitled to the lowest level of the unemployment benefit only. He highlighted the fact that some employees leave an employer on serious grounds that are not obvious as seen from outside, such as bullying, exerting extreme pressure by the employer to terminate employment, etc. The employee who does not wish to take the employer to court accepts the agreement on termination of employment and as a job candidate his or her unemployment benefit is curtailed, whereas e.g. applicants who were dismissed by their most recent employer for a repeated minor breach of work discipline receive, by contrast, the unemployment benefit at the non-reduced percentage rate.

Employers generally support the government's austerity measures in the unemployment benefits regime. But the economic crisis has significantly increased the demands of employers for new employees. Employers require a ready work force, sufficiently flexible, creative and resilient to stress. In this situation, the tool used by the state employment policy, especially in relation to the employment of disadvantaged people in the labor market (eg the disabled job applicants, applicants over 50 years, and other groups) are not from the perspective of employers - as shown by the carried out investigation - sufficiently motivating. The reason is the lengthy administration, demanding documentation of necessary documents and uncertain outcome.

Employers representation formulates opinions on government employment policy and enforce employers´ demands, not only in the national tripartite. Eg. representatives of the largest employers' organization Confederation of Industry of the Czech Republic (Svaz průmyslu a dopravy ČR, SP ČR) met in mid-May 2012 with the Ministry of Labour and Social Affairs and discussed some partial urgent measures on the labour market. It has been agreed that the ministry completes legislation on short-time working arrangements (Czech equivalent of the German measure "Kurzarbeit" to support maintaining employment in times of economic difficulty, CZ1110019I), will solve the problem of qualified blue-collar workers on the labour market (eg, toolmakers, machinists, founders, welders, mechanics) in order to carry out these activities by foreigners from third countries. Also discussed was the possibility to simplify the rules for chaining of fixed-term employment contracts and return to the current legislation the serious operational reasons that would justify re-negotiation of these fixed-term contracts.

3.2. Research:

No information on a relevant research is available.

3.3. Other issues:

Please indicate if there are any other issues of importance in your country which are related to SP involvement in the UB system and have not been covered above.

No data.

4. Commentary

4.1. Assessments and comments:

Social partners cooperate mainly in RHSD ČR with the aim to champion common interests of employers and employees. They can take part in discussions on systems of social security and national employment policy if the government accepts the given topics for tripartite meetings. However, measures of the national employment policy do not belong among frequent economic and social topics discussed at tripartite meetings.

4.2. Perceived strengths and weaknesses:

Strengths: Potential for tripartite meetings at the national level with the aim to identify and formulate mutually acceptable solutions of problems at hand.

Weaknesses: Social partners’ little influence on the field under review.

Helena Vychová, Jaroslav Hála, Research Institute for Labour and Social Affairs

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