“Nemakachenka” is practically impossible to throw away. The Czech Republic needs a more flexible labor market, and the government is doing the opposite

This has been asked time and time again by companies and many experts, and now it is reiterated by NERV's government advisors. According to them, the labor law in the Czech Republic hinders the development of the market and places too much emphasis on the protection of employees at the expense of the protection of employers. Although some members of the government are now expressing themselves that change is needed, the government has done the opposite in the past year. The labor code was significantly strengthened and, according to some critics, the government again followed the Czech Republic's European directives. At the same time, there are other changes that indicate pressure on bureaucracy and employers.

Entrepreneurs and workers face tough working conditions and taxation this year. Further hardening will emerge, which has been sanctified by the current Cabinet Labor Code Amendment and Consolidation Package. Companies did not wait, by the end of the year some “contractors” began to target “entrepreneurs”, experts and business representatives warned in advance that this would be a significant increase in administration and costs, which would negate the meaning of the obligations. Especially affecting small entrepreneurs.

In terms of predictability of the business environment, government representatives are not very accommodating to entrepreneurs. Already at the beginning of the new year, Finance Minister Zbyněk Stanjura (ODS) started talking about the possibility that the tightening of conditions could change. At the same time, ODS paradoxically already stated during the approval of the integration package that reducing bureaucracy around the Labor Code was a priority for the party and that the party should focus on this. However, so far, even with the Kumbabhishek of ODS, the opposite has happened.

Even government advisers in the government's National Economic Council (NERV) are now taking note of this. According to them, the labor code should be modernized according to the evolving needs of the market. NERV proposes greater flexibility in hiring and firing employees, including termination without cause. This was unexpectedly supported by the Finance Minister. As long-term unemployment is low, employees and firms find it appropriate to quit employment more easily. In a case where an employee has been dismissed without giving a reason, according to Stantura, a discussion on the amount of severance pay is appropriate, he will not object to five months' salary.

NERV's experts point out that despite long-term low unemployment, companies are suffering from a shortage of qualified employees, which could be helped by changes in the labor index. Even according to NERV, it's currently more about employee protections and less about employer rights.

“In some developed Western countries, it is believed that the employer is primarily interested in skilled, productive and high-performing employees. They will be adequately paid for their work, which motivates them to work harder and come up with ideas that will lead to more profitable solutions for the employer and, therefore, for the country's growing economy. “Employees with non-performance problems or employees cannot be dismissed in the Czech Republic unless they have seriously violated work ethics,” NERV says.

According to experts, hard layoffs bind employees to less productive firms, thereby hampering the growth of more productive firms. “This fact is one of the factors that lead to a decrease in the productivity of the work of companies, and therefore a loss of competitiveness in global markets,” NERV experts add. At the same time, the burden of regulations in the area of ​​taxes is not taken into account. “Furthermore, labor taxation in the Czech Republic is one of the highest in the European Union,” the recommendations to the government state.

On the other hand, in the last year, in the Czech Republic, more safety elements of employees have been added or started to be produced. In addition, it involves additional bureaucratic burdens and legal risks, which, according to experts, in many cases fall mainly on small entrepreneurs. For example, since October, employers are obliged to provide contract workers with written work schedules in a timely manner, and they are entitled to additional payments for weekend, night or holiday work. From January, they will be entitled to a new holiday, so initially flexible working hours should gradually come closer to a traditional working relationship.

In the course of this year, controversial changes from the consolidation package, the introduction of compulsory registration of all contract workers and associated stricter taxation and other obligations for entrepreneurs, are set to come into force. “Although until now there is no obligation to pay insurance premiums up to an income of 10,000 crowns, from July 1, 2024 it will not be a fixed amount of participation in insurance premiums, but a limit of 25% of the average salary. However, this applies to cases where a given person works for only one employer. A person with different employers If several contracts have been signed to work, they will be added together and a limit of 40% of the average salary will apply,” explained BDO tax consultant Monica Lotroa. In practice, this means that the long-criticized 10,000 limit will not change in practice, although in the past there has been talk of efforts to allow part-time workers or pensioners to earn more under more favorable conditions.

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There is an increase in protection in the event of discrimination, with legislation on whistleblower protection already in place even for smaller companies. If the employee is accused of reducing their rights, the burden of proof must fall on the employer, for example, in the case of contracts on the performance of work, if they are entitled to a regular employment relationship thanks to the new job. Regulation. The debate was prompted by a change in a European directive to find out how workers fare compared to others in terms of wages in the future.

Submitted to Cabinet by National Economic Council of Govt Draft 37 measures, which will contribute to the high long-term sustainable growth of the Czech economy. The proposals concern the labor market, education, public administration, housing and investments. The government will now select some of the proposals that can be implemented or at least start to be implemented before the end of the term, the government office said in a press release.

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