Amendments to social and labour law come into force

Amendments to the Czech Labour Code came into force on 1 January 2011, liberalising the labour laws and making it easier for businesses to hire and fire workers and scale back social welfare entitlements. Employment contract regulations have been tightened to stop employers avoiding welfare payments, and it was also hoped that the amendments would help cut public expenditure. However, the changes are less extensive than those originally envisaged by the government.

Key changes to the Labour Code

The most important changes include an amendment to Act no. 262/2006 Coll. (494Kb PDF). They mainly concern employment agreements, which the employer may offer to a worker for a maximum of 150 hours per year, and which require no health or social insurance payments. This type of contract must now be put in writing where, previously, a verbal contract was sufficient. This new requirement is intended to make it more difficult for an unscrupulous employer to misuse a verbal agreement and conceal the obligations of a more far-reaching employment relationship from the authorities.

In an amendment to the Employment Act no. 435/2004 Coll. (329Kb MS Word doc), unemployment benefit has been decreased for employees who choose to terminate their employment without a compelling reason. When an employee qualifies for severance payment, he/she will not receive unemployment benefit for the period corresponding to the value of the severance payment.

In addition, conditions have been made stricter for employment agencies. They must take out insurance in case the agency or one of its customers goes bankrupt to cover claims from employees affected by former employers going out of business. Employment agencies also now need a permit to operate from the Ministry of the Interior of the Czech Republic (MV ČR).

Other amendments to the Employment Act also cancel or reduce some state social support allowances (Act no. 117/1995 Coll., on state social support, as amended). The social allowance that was given to the lowest income families with children has been cancelled, although it continues to be paid to those with physical disabilities. The ‘birth grant’, a one-off benefit for each newborn child, has been significantly reduced. From 2011, the birth grant applies only to a first child and is means-tested against the family’s income.

Amendments to Act no. 187/2006 Coll. on health insurance, as amended, relate to sick pay. Employers will now pay sick pay for a period of 21 calendar days instead of 14 days, as they were formerly obliged to do. This measure will be in force for a period of three years, until 2013, when the compensation period will revert to 14 days.

Reactions to the changes

Although the changes are less extensive than those originally envisaged by the Government (CZ1007019I), trade unions are afraid that they will particularly affect temporary and casual employees, families with young children and low-income households. The Czech-Moravian Confederation of Trade Unions (ČMKOS) is very much in favour of the new amendment on agency employment and on moves to tighten the regulation of employment contracts. However, ČMKOS disagrees with the cancellation of social support allowances, and the changes to sick pay which they believe will encourage some employers to try to keep costs down by putting employees under pressure to neglect an illness or to deal with any health problems by using holiday or other leave entitlement. They also disagree with the cancellation of unemployment benefit for those who qualify for a severance payment. This could be, according to trade unions, dangerous in situations where a former employee, although entitled to a severance payment, is not paid because their former employer is insolvent. The unemployed may thus end up in a situation where they have no source of income.

The employers’ groups, the Confederation of Industry of the Czech Republic (SP ČR), and the Confederation of Employers’ and Entrepreneurs’ Associations of the Czech Republic (KZPS), have not commented on the new measures. However, they are traditionally less critical of strict changes to social and labour law which aim to liberalise the labour market.

Soňa Veverková, Research Institute for Labour and Social Affairs