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Eastern Europe — Czech government proposes labour market reforms

01 September 2010

The new coalition government in the Czech Republic, consisting of the Civic Democratic Party (ODS), TOP 09 and the Public Affairs party (VV), has agreed on the need to reform the Labour Code in force since January 2007, the European Industrial Relations Observatory (Eiro) reports.

Proposed changes include liberalisation of employment for a determinate period, reduced severance pay for those working for an employer for less than two years, and enhanced opportunities for companies to employ people on a so-called 'contract for the performance of a work assignment'. Employee benefit changes are opposed by the trade unions.


The most radical change to the Labour Code will be the possibility for companies to offer a contract of employment for a set period without limitations. At present employers can offer fixed-term employment contracts for a maximum of two years.

"Tentatively, we agreed the employment contracts for a determinate period to be without any limit. This should motivate companies not to be afraid of hiring graduates," Jaromir Drabek, the TOP 09 negotiator, told the Czech daily newspaper Hospodarske noviny. This measure should increase flexibility in the labour market and help inexperienced graduates find a job more easily.

Another important change is a reduction in severance pay for employees who have been working for the same employer for less than two years. An employee working in the company for less than one year will receive one month's severance pay and an employee who has been with the company for one to two years will receive two months' severance pay. The previous entitlement to three months' severance pay will come into effect only after two years' of work with the same employer. "Severance pay reduction should motivate companies not to be afraid of creating new jobs," according to Mr Drabek.

The third radical change is a proposal that people who only work for a company occasionally could work for up to 300 hours a year on a 'contract for the performance of a work assignment'. No health and social insurance is paid under such contracts and at present no-one can be employed on such a contract for more than 150 hours a year. It was feared that employers would be allowed to dismiss workers without notice, but it is proposed that the current minimum of two months' notice remains a requirement of the Labour Code.

"These changes to the Labour Code will improve the business environment in the Czech Republic," said the negotiator and new Vice-Chair of ODS, Pavel Drobi

 

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