Reduced working week may stem unemployment growth

In an attempt to reduce unemployment, the Czech state is preparing an option for companies to introduce, under certain circumstances, a four-day working week. A working group, comprising representatives of the ministries of labour and finance, trade unions and employers, proposes that staff on compulsory leave should receive 60% of their salary from the employer and 20% from the state. This strategy would be cheaper than paying unemployment benefits.

Unemployment growth

The labour market situation in the Czech Republic has deteriorated in the course of 2009. The Confederation of Industry of the Czech Republic (Svaz průmyslu a dopravy ČR, SP ČR) – the largest of the national employer organisations – forecasts that the unemployment rate will reach a double-digit figure by the end of 2009. It bases its assumption on data from companies experiencing a sustained lack of production orders and which are therefore forced to reduce staff or to stop hiring new workers. This situation is confirmed by the decrease in job vacancies, the number of which, reported by labour offices, is lower by 108,477 posts compared with July 2008. It is assumed that the situation in the labour market will get worse in the autumn when graduates from secondary schools and universities will enter the market; moreover, significant dismissals are expected in the services sector and in public administration.

Details of proposed measure

The reduced working week or short-time work (Kurzarbeit), which has been successfully introduced in Germany (DE0904039I), represents a cheaper alternative than paying unemployment benefits. During free days, employees could, for instance, take part in educational courses or retraining sessions, which would be paid by the state. The employees on compulsory leave would receive 60% of their salary from the employer and 20% from the state. Kurzarbeit will be effective for a limited time and is intended for companies meeting certain requirements – they should not be in debt towards the state and their business should be viable in a long-term perspective. In other words, the reduced working week should not be their last chance of survival.

Views of social partners

Trade unions are urging both the government and employers to introduce the reduced working week. Starting from the autumn of 2009, the trade unions forecast a rapid growth in unemployment: it may increase to 10% at national level and, in some regions – such as Northern Bohemia – up to 20% of the labour force may remain jobless. The Chair of the Czech Metalworkers’ Federation KOVO (Odborový svaz KOVO, OS Kovo), Josef Středula, warns that the ‘negative turn of events in many companies with a scarce amount of jobs, lack of liquidity and frequently also production moved to other countries represents an actual, serious threat’.

Companies mostly welcome the possibility of the reduced working week; however, they want the plan to be introduced as soon as possible. They believe that it may help them in keeping their qualified staff and at the same time in cutting costs.

Tripartite working group to develop proposal

The proposal to introduce a reduced working week was greeted with some euphoria, partly due to several inaccurate pieces of information in the media. Thus, the Ministry of Labour and Social Affairs (Ministerstvo práce a sociálních věcí, MPSV) had to issue a statement in which it tried to moderate excessive expectations. The issue of the reduced working week was among the topics proposed for the meeting of a tripartite working group, comprising representatives of the ministries of labour and finance, trade unions and employers, which was held on 19 August 2009. MPSV had not yet considered the exact terms or form of the provision, including the option of adapting the German regulation of the working week to the circumstances of the Czech Republic. The ministry also had to decide on additional, more detailed conditions of the measure. The working group agreed that the proposal for introducing a four-day working week, filed by trade unions as their own initiative, would be further developed.  

Introducing a reduced working week will require amendments to the current legal regulations. Therefore, it may be assumed on the basis of the standard duration of the legislative process that this measure could not be enforced any earlier than mid 2010.

Jaroslav Hála, Research Institute for Labour and Social Affairs (RILSA)

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