Government gives go-ahead on short time work scheme

After months of lobbying, unions and employers in the Czech Republic have finally got the Government to draft proposals for a deal called ‘kurzarbeit’. The scheme means that if companies reduce their workers’ hours because of a fall in business, the employees’ lost earnings are made up by the state. The company, in turn, must promise not to dismiss any workers. The arrangement was first included in a recovery plan agreed at a tripartite meeting with the Czech government in 2010.

Background

Trade unions and employers in the Czech Republic have, for more than a year, been calling on the Government to support the scheme to reduce working time with no loss of income for workers, known as ‘kurzarbeit’. The scheme was included in a 13-point plan for the Czech economic recovery, agreed at a tripartite meeting with the government of Prime Minister Jan Fischer in April 2010 (CZ1005019I).

However, in June 2011, representatives of the Confederation of Industry of the Czech Republic (SP ČR) and the Czech-Moravian Confederation of Trade Unions (ČMKOS), met and agreed to push more strongly for the introduction of kurzarbeit.

Jaroslav Hanák, President of SP ČR, said:

We were searching for an accord on how the government could speed up its actions. We have reached it with regard to the kurzarbeit issue. We want to appeal to the government to make an analysis of a rapid introduction of kurzarbeit.’

In September 2011 the Ministry of Labour and Social Affairs of the Czech Republic (MPSV ČR) decided to draw up a draft kurzarbeit proposal and submit it to trade union and employer representatives.

Support for scheme not unanimous

However, public opinion is divided over the benefits of kurzarbeit. There is appreciation of state compensation for reduced working hours, since it enables employers to retain experienced and qualified staff and, if they can, to restart production as soon as business picks up. It also means these workers will not swell the ranks of those drawing unemployment benefit. However, economic experts criticise the scheme because of its impact on public finances. They also point out that kurzabeit could be misused by employers, who might still dismiss workers when the scheme comes to an end. Experts also say that, in any case, many employers will not dismiss highly qualified workers in an economic downturn.

In spite of this, ČMKOS feels the state will benefit because it is still cheaper to compensate for a partial loss of wages than to pay unemployment benefit. Vít Samek, head of the ČMKOS legal department said:

This is an indisputable fact confirmed by all the countries which, unlike us, did not hesitate and have applied these systems. It is also proved by ČMKOS’ own model cost-benefit calculations of the effect of introducing the kurzarbeit system.

Trade unions calculate that while an unemployed person costs the state almost CZK 26,000 (€1,050 as of 7 November 2011) a month, the average monthly allowance for kurzarbeit workers would amount to CZK 8,000 (€323).

According to some economists, however, this measure is beneficial only when the economy is in a rapid and deep recession – not when it is beginning to recover. Pavel Sobíšek, Chief Economist of the Czech Republic’s branch of UniCredit Bank commented:

It is a sensible measure when demand in the economy slows down steeply and unexpectedly and companies face temporary problems of labour force utilisation. Currently, however, we are already in a growth phase of the economic cycle, entrepreneurs have already other problems, and kurzarbeit may do more harm than good.

Sona Veverkova, Research Institute for Labour and Social Affairs (RILSA)

Useful? Interesting? Tell us what you think. Hide comments

Eurofound welcomes feedback and updates on this regulation

Add new comment