Czech Republic: Latest working life developments – Q1 2017

Employers requesting government help in hiring foreign labour, plus government attempts to deal with the fourth industrial revolution and the digitalisation of the economy, 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 first quarter of 2017.

Ukrajina programme revised after pressure from employer associations

The first quarter of 2017 saw a further decline in the unemployment rate (to 5.1% in February 2017) according to data from the Labour Office of the Czech Republic (PDF), with offers of seasonal work joining the job vacancies list. A year-on-year comparison reveals that the number of job-seekers registered with the Labour Office is at its lowest level since 2008, which is causing considerable problems for employers in terms of filling  vacancies.

Employers are attempting to resolve the situation by hiring foreign workers, usually from Ukraine. The government’s Ukrajina programme was designed to accelerate this process, but employers say the process of granting work permits is ineffective and that the limit on the number of permits is too low.

On 6 February, the main employer organisations – the Confederation of Industry of the Czech Republic (SPČR), the Confederation of Employers’ and Entrepreneurs’ Associations of the Czech Republic (KZPS ČR) and the Czech Chamber of Commerce (HK ČR) – sent a joint letter to the government requesting help in resolving the shortage of workers (PDF) in the Czech labour market.

Faced with this pressure, the government decided to gradually increase the number of work permits issued under the Ukrajina programme from 5,000 to 9,600 per year (with effect from 15 July). The unions unions expressed disappointment that they were not consulted on either the establishment of the Ukrajina programme or the changes to it. Their main concern about foreign workers is potential wage dumping. Employers, however, argue that the lack of workers is also affecting sectors with above-average earnings, such as the automotive industry.

Labour shortages lead to rise in fraudulent forms of work

The lack of labour, and the use of non-EU labour is also leading to the use of so-called fraudulent forms of work. The arrest of 85 workers at online grocery retailer Rohlík.cz sparked debate on 9 March in the Czech media and social networks on the appropriate regulation of temporary agency work and the continuing lack of a solution to the issue of employment of non-EU foreigner workers.

Most of those arrested were Ukrainian nationals who, according to the owner of the company, were working legally under employment visas issued in Poland. He said the workers had been sent to the Czech Republic on the basis of section 98(k) of the Employment Act.

Immigration officers, as well as the State Labour Inspection Office (SUIP), however, argued that the nature of the work and the work methods (the foreigners were working as warehouse staff) did not meet the requirements of this Act. (It stipulates that foreigners do not require work permits if the work concerns the provision of services by an employer established in another EU Member State.)

The behaviour of the Polish agency that supplied the Ukrainian workers was provisionally classified by the Czech authorities as disguised agency employment. The owner of Rohlík.cz, nevertheless, remains convinced that the police acted illegally. It is probable that the case will be resolved through the courts.

The increasing use of similar practices is evident from SUIP statistics which, last year, showed for the first time that the number of illegally employed foreign nationals exceeded that of Czech citizens.

Addressing the digital economy

Several initiatives were implemented to prepare for the changes which are expected to accompany the increasing trend towards the digitalisation of the economy. On 13 February, the European Affairs section of the Office of the Czech Government presented the document Sharing economy and digital platforms (PDF), as part of the work of the Sharing Economy Working Group. This analysis is expected to be complemented by an economic analysis in the summer.

The government is searching for ways in which to institutionalise the phenomenon of the sharing economy, facilitated by digital platforms. It has a wide range of options. The starting point is the zero option, which maintains the status quo, but with the risk that some platforms might be perceived as being on the edge of the grey economy. Other variants propose either minor modifications within existing trade or civil legislation, or extensive modifications in the form of parallel legislation targeted specifically at the issue of the sharing economy.

Society Alliance 4.0 was established on 15 February to connect and coordinate the various agendas associated with the fourth industrial revolution. It has until the end of June to submit its action plan for Society 4.0 to the government, which will include initiatives from specific areas of industry, education and the labour market.

Another significant development was a discussion on the updating of the Action Plan for the Development of the Digital Market in the context of a tripartite discussion on 20 February.

All these activities fully involved social partner and government representatives.

Commentary

Although disguised agency employment is perceived as a serious problem by State institutions and by associations representing legally based employment agencies, the expected legislative changes in agency employment will probably not address this issue adequately.

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