Payroll Newsletter - Autumn 2015

Changes in Temporary Agency Work

As part of the amendment to the Act on Employment related to temporary agency work, the Ministry of Labour and Social Affairs proposed, among other things, imposing a 15% quota on companies to employ agency workers. In other words, the share of agency workers should not amount to over 15% of the total number of employees in a company.

By means of this proposal, the Ministry of Labour and Social Affairs intended to introduce a change in the manner employees are hired so that standard labour arrangements would be favoured. The amendment in question is expected to come into force in 2016 and can, to a certain extent, restrict the business activities of employment agencies and the flexibility of employers. The latter might face a situation in which they are not, on account of the quota, able to flexibly respond to seasonal, irregular contracts. A breach of the quota would be punishable by a fine of up to CZK 1 million.

The proposal of the Ministry of Labour and Social Affairs has prompted a surge of criticism and up until today, no final version of the proposal has been submitted to Parliament. The question is whether the amendment to the Act on Employment will indeed come into effect on 1 January 2016 and whether the controversial provision for the 15% quota will still be included.

Seizure: Extension of the Salary Areas from which Deductions are Made

Starting on 1 September 2015, major changes have affected the way salary deductions are made. Seizure-related deductions will newly be made also from the remuneration set out in contracts for work. As a result, the major difference that has existed up until now between seizure-related and -nonrelated deductions will be removed.

However, pursuant to the transitional provision of the act, if the payroll department has already been making seizure-related salary deductions or is about to start (ie the seizure-related ruling is enforceable), and if the ruling was made before 1 September 2015, the deductions do not apply to the remuneration set out in contracts for work. Therefore, it is not necessary to change anything in the manner in which the deductions in question are made. If this is the case, the amendment shall have an impact on the future seizure-related deductions.

Change of Health Insurance Provider, Newly Possible Twice a Year

Previously, it was only possible to change health insurance companies as of a single date in the year – 30 June, with the effective date on 1 January of the following year. Now it is possible to switch them by 30 September as well. If an application is submitted by this date, health insurance companies will make the change as of 1 January 2016. The implications for the coming years are that the first wave of re-registrations will have to be filed by 31 March, with the change of insurers taking place on 1 July of the same year. The second wave of re-registrations will have to be filed by the 30 September, whereby a person becomes the client of a new insurance company on 1 January of the following year. Therefore, do not forget to bring to your employees’ attention the fact that any change in a health insurance company must be reported to the employer without delay. However, it still applies that it is not possible to change health insurance providers more than once every 12 months.

Notice and Immediate Termination of Contract for Work

Another major change following the amendment to the Labour Code effective as of 1 October 2015 is the manner in which contracts for work (“dohoda o provedeni prace”) are to be terminated. Rules governing the termination of a work activity agreement (“dohody o pracovni cinnosti“) will newly apply to contracts for work. As a result, if no means of terminating the contract have been determined, it is possible to cancel it on an agreed date as arranged by the contractual parties. The contract may be terminated for any reason or without stating a reason with a 15-day notice period, which starts on the day the notice is delivered to the other contractual party. An immediate termination of a contract can be agreed on only in the event that it is possible to terminate the employment arrangement immediately. What still applies to the termination of an employment arrangement established by means of a contract for work or a work activity agreement is that it has to be made in writing, otherwise the notice or immediate termination shall not be taken into account. 

Minimum Salary Increase as of 1 January 2016

Starting on 1 January 2016, the minimum salary will increase by CZK 700 to CZK 9,900 and the minimum hourly wage will rise to CZK 58.70. Following this, upward adjustments also apply to the lowest guaranteed salary of employees whose salary is not agreed on in collective agreements and to the salary of public service or administration employees.

The minimum salary will also increase for the disabled to CZK 9,300 (from the original amount of CZK 8,000).

Kurzarbeit

As of 1 October 2015, the government can make contributions to the salary of employees who work in companies that do not have work for their full-time employees. The system is referred to as “Kurzarbeit” and is currently applied in Germany. If, on account of a lack of engagements or a natural disaster, the company cannot give work to their full-time employees in the scope of at least 20% of a week’s working hours, it will pay 50% of the salary and 20% will be paid by labour offices. In total, the employees will receive at least 70% of their salary. However, each application for a contribution must contain a detailed description of the reasons for the lack of work, a list of employees or a plan to overcome the crisis situation. The company must pledge, in an agreement with the labour office, that it shall not dismiss the employees in question, and each agreement must be approved by the government. Given the high administrative burden, it is expected that the practical impact of Kurzarbeit will be limited.