The German job retention scheme known as "Kurzarbeit" is now coming to Slovakia. In response to the coronavirus pandemic, a draft law on support during periods of reduced working hours was prepared in early January of this year. Read more in the new article.
In response to the economic crisis triggered by the COVID-19 pandemic, and in order to remain competitive with most EU countries, the National Council of the Slovak Republic approved on May 4, 2021, a bill submitted by the Ministry of Labor, Social Affairs, and Family of the Slovak Republic, on support during reduced working hours, inspired by the German system designed to maintain employment, known as Kurzarbeitergeld. The proposed legislation is also based on experience from the temporary project “First Aid”, under which the state provides financial contributions to employers to cover employee wages and partially compensates for the loss of income of self-employed persons.
The draft law and more information can be found here.
What is Kurzarbeit?
It is an employment retention tool originating in Germany, under which employees are forced to work reduced hours due to a temporary restriction on the employer’s operations, while the state compensates employees for the portion of their wages lost due to the reduced working hours. The employer is thus not forced to lay off employees, and they remain available for further work once the crisis has passed. However, the effectiveness of the system depends on the temporary nature of the economic recession, as it places a heavy burden on public finances.
How will “Slovak kurzarbeit” be financed?
To support the maintenance of employment, the draft law provides for the establishment of a separate insurance fund, into which financial resources will be pooled, consisting of an employer’s contribution of 0.5% of the employee’s assessment base (as well as wage compensation during reduced working hours) in an employment relationship and for employees performing work in the public interest. At the same time, however, the unemployment insurance contribution rate will be reduced by the same amount, meaning that contributions will not increase for those paying unemployment insurance.
Who will be eligible to apply for the subsidy?
Under the proposed law, an employer may apply for a wage subsidy if their operations are restricted to the extent that they cannot assign work to at least one-third of their employees or assign work to a portion of the workforce amounting to at least 10% of the established weekly working hours. The employer is subsequently required to retain the jobs for which the subsidy was paid for at least 2 months after the state aid ends.
A prerequisite for receiving the subsidy is having no outstanding social insurance premiums and having paid the mandatory contributions to the old-age pension savings scheme.
To ensure the speed of the process for obtaining state aid, the entire process should be conducted electronically, and the relevant authorities will have a statutory deadline for deciding on the provision of aid.
What if the employer fails to fulfill the obligation to retain the job?
In such a case, they will be required to repay the assistance or a portion thereof based on a final decision by the assistance provider. The same procedure should apply in cases of unauthorized receipt of support, as well as if a self-employed person fails to fulfill the obligation to continue their business activities. The process of allocating the subsidy and deciding on its repayment will be an administrative proceeding and will therefore be governed by administrative rules.
What will be the amount of financial assistance?
The employer will receive a contribution from the insurance fund for each employee in the amount of 60% of the employee’s average hourly net earnings for each hour of work interruption attributable to the employer, but not exceeding 60% of 1/174 of twice the average wage of an employee in the Slovak economy over the past two years (today this would be approximately €7.66). The employer will contribute 20% of the wage costs, meaning the employee will receive 80% of their net wage, up to a maximum of 1,100 EUR.
How long will the support be paid?
The benefit will be paid monthly, but for a maximum of 6 months in total over the last 24 months.
Does the support also apply to self-employed individuals (so-called SZČO)?
Despite initial proposals that would have provided support to SZČO in the event of a decline in revenue of at least 40% in a calendar month compared to the same calendar month of the previous year, the approved version of the law does not apply to SZČO. According to Minister Krajniak, “the law will include a provision stating that whenever kurzarbeit is activated, an aid scheme for self-employed individuals will be launched simultaneously.”
When is the new law expected to take effect?
The law is expected to take effect on December 31, 2021, with the exception of certain provisions.
The law, as approved, is still awaiting the signature of the President of the Slovak Republic; therefore, it cannot be ruled out that the text of the Act on Support During Short-Time Work and on Amendments to Certain Laws may still be modified. This article reflects the legal situation as of May 4, 2021.
