Czech Republic: Latest working life developments – Q4 2016

Ongoing pressure for wage increases, the digitisation agenda, the controversial electronic tax evidence system and employee representatives on company boards are the main topics of interest in this article. This country update reports on the latest developments in working life in the Czech Republic in the fourth quarter of 2016.

Continued demands for higher wages

General pressure for wage increases continued into the final quarter of 2016. A large number of major employers have concluded collective agreements with union representatives that include significant wage increases. For instance, a 2.6% wage increase has been agreed for Czech Post employees after a strike over pay shortly before Christmas. Czech Railways agreed to a salary increase of approximately 3.4% and the brown coal mining company, Severočeské doly a.s., agreed to a flat monthly pay increase of CZK 1000 (€37 as of 23 January 2017).

Wage increases proposed by the Netherlands-based Ahold supermarket chain proved so controversial that the topic attracted considerable media interest. The Czech Prime Minister Bohuslav Sobotka became involved in the pay negotiating process, contacting the Dutch ambassador to the Czech Republic to ask him to intervene on behalf of Czech employees of the Ahold chain. The ambassador was asked to tell his government and the management of Royal Ahold Delhaize NV about low wages at the company’s Czech outlets. Agreement was eventually reached and Ahold employees, who work for the Czech supermarket chain Albert, were promised an average wage increase of 8.5% and their Christmas bonus was tripled to €37. A similarly exceptional case involved intercity bus drivers who, after extensive negotiations involving the government, trade unions, regional authorities and carriers, received a 40% pay increase.

Companies now appear to be more willing than in previous years to agree to wage increases because they are facing serious problems staff recruitment problems since there is a critical shortage of labour. Unemployment in the Czech Republic is the lowest in the EU (3.9% in October 2016). Companies that want to expand are being forced to offer higher wages. Lower paid occupations such as auxiliary staff in the manufacturing sector, assembly line workers, drivers and security staff make up the majority of vacancies that employers are having difficulty filling. 

Recent economic analysis also indicates that the general level of wages does not reflect the performance of the Czech economy. Eurostat data show that the Czech Republic has one of the cheapest labour forces in the EU, ranking ninth for the hourly cost of one employee (CZK 270, approximately €10).

Social partners act on digitalisation and the Society 4.0 agenda

In the last quarter of the year, discussion on the advanced digitalisation agenda continued. Employer associations were particularly keen to make progress and urged the government to be more proactive.

Recently, for example, at a round-table meeting to discuss the National Convention on the EU, organised by the Czech Chamber of Commerce (HK ČR) and the Office of the Government of the Czech Republic, a number of important steps towards taking full advantage of the benefits offered by Society 4.0 were discussed. It was concluded that establishing improved links between the academic sphere and the real world of work is one of the most important factors in addressing the new era of advanced digitalisation.

In November 2016, the Confederation of Industry (SP ČR) presented the findings of an extensive study that attempted to set out the skills and qualifications needed in a changing labour market (PDF). The authors of the study worked with the term Skills 4.0 (Dovednosti 4.0).

An important step was taken towards making the so-called dual education system (through the interconnection of the academia and business sphere) more effective. An agreement was signed by representatives of the main employer organisations, SP ČR and HK ČR, the Confederation of Employers’ and Entrepreneurs’ Associations of the Czech Republic (KZPS) and the Czech Agrarian Chamber (Agrární komora ČR) in October 2016. This agreement  defines the responsibilities of individual employer organisations for different groups of vocational education disciplines taught at secondary schools.

Employers’ object to restricted retail trading on public holidays

Large stores with floor space over 200 square metres were forced to close for nearly three days over the Christmas period (from noon on 24 December to 26 December inclusive) under new legislation that took effect in October 2016, aimed at ensuring workers could spend public holidays with their families. Business associations are determined to overturn the legislation. On 22 December 2016, HK ČR and the Czech Confederation of Commerce and Tourism (SOCR ČR) filed a constitutional complaint against the law which was also signed by 19 members of the Senate.

Small businesses protest at new tax system

The hotel and catering sector was the first to be required by law to join the electronic tax evidence (EET) system supported principally by the Finance Minister Andrej Babis and introduced on 1 December 2016. Retail and wholesale traders will be required to join the EET in March 2017 and other business sectors will follow later. Its basic principle is that entrepreneurs are permanently connected to tax administration servers and each receipt is registered in the system immediately after it is issued. Operators of smaller businesses such as pubs and restaurants are strongly opposed to the system, principally because of the high cost of new cash register systems needed to ensure a reliable internet connection and the demands made on business time. It is expected that many small operators will have to close down as a direct consequence of the introduction of the EET system. On 3 December 2016, hundreds of entrepreneurs took to the streets of Prague to protest against the new legislation.

Employee representatives on company boards

In November 2016, the Czech Parliament passed an amendment to the Business Corporation Act which obliges companies with 500 or more employees to appoint an employee representative to company supervisory boards. The current system of electing members to supervisory boards was also changed to ensure that one-third of supervisory board members are elected by company employees. The trade unions were satisfied with the new conditions but employer organisations, particularly HK ČR, are critical of the additional administrative costs involved.

Commentary

It is expected that substantial wage increases will continue into 2017. Indeed, the trade unions are resolved to seek further significant pay increases. They have asked members to conduct collective bargaining with the aim of achieving 5% growth in average gross salaries in 2017.

Important changes to the Labour Code are expected in the near future. An amendment to the Code was approved by the government in August 2016 and presented to Parliament on 9 September 2016. However, at the beginning of 2017 the amendment was still in the parliamentary negotiation phase.

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