Tuesday, 11 August 2020

Czechia to introduce German-style public unemployment insurance

Prague Daily Monitor |
28 July 2020

PRAGUE - Spurred by the coronavirus pandemic, the Czech Coalition Council will consider a proposal by the Minister of Labor and Social Affairs, Jana Maláčová, to permanently adopt a German-style public unemployment insurance scheme, known as “Kurzarbeit” or “short-time working,” reported Seznam Zpravy on Monday.

“Kurzarbeit” is a form of public insurance where in times of crisis, employers can reduce hours instead of laying off large numbers of employees, while the government provides funds to replace the income of workers, for example, 60 to 80 percent of an employee’s average wage. The program would extend up to nine months from the onset of a crisis. According to the International Monetary Fund, the scheme is one of the best available tools to combat economic shocks. Workers’ incomes are protected, while employers save on the hiring and rehiring process.

Seznam Zpravy notes that the proposed scheme may be needed in the fall, especially in the hard-hit manufacturing sector in Czechia, and could be implemented as early as September. The program would become effective immediately at the onset of a significant economic shock, such as a recession or a viral pandemic.

Prerequisites for the use of the public insurance law would include that a given employee must be employed for at least one year. Furthermore, the activation of the law would require extraordinary economic circumstances, “For example, in a situation where unemployment in the whole country will rise by 15 percent,” according to Maláčová.

Due to the temporary unemployment policy measures taken by the government amid the coronavirus pandemic, about 750,000 jobs have been protected by a similar policy. The proposal would make such measures permanent in Czech law if adopted.