Employers in the Czech Republic have been accused of exploiting their employees by hiring them as contract or “self-employed” workers in order to avoid paying taxes and other social contributions. This practice has been dubbed the “Švarc system” after the Czech building contractor Miroslav Švarc fired all off his employees in 1990 only to re-hire them again on a self-employed basis, to avoid paying for social and health insurance taxes.

Although the Czech Government has made this practice illegal to give workers more protection, a local news provider claims that Parliament and ”tens of thousands of companies and ‘self-employed’ contractors continue to rob the state of tax revenue in this manner with little fear of reprisal.”

It is being claimed that “hundreds of Czech teachers” are yearly dismissed during the summer holidays and reemployed when school starts although repeated fixed-term employment is at variance with the Labour Code. In order to overcome this seemingly prevalent practice, the Czech parliament has now approved tighter labour regulations in January that will penalise employers with higher fees for using the “Švarc system”.

However, the weekly newspaper Týden now reports that Czech legislators themselves are violating the labour code by hiring their parliamentary assistants on a self-employed basis.

Senator Zdeněk Škromach of the Social Democratic Party (ČSSD), told the newspaper that the matter had been investigated before and “no violation of the law” was found — this, however, was carried out before the stricter Labour Codes came into force in January. One assistant named the practices going on in Parliament as “the Švarc system with everything.”

Meanwhile the Government has denied the allegations that accuses Czech lawmakers of “being intimately familiar with the laws that they pass (and) know(ing) how to exploit the loopholes”.