Based on the new Act on Support During Short-Time Work, also known as Kurzarbeit, the employers’ new permanent support scheme will apply as of January 1, 2022, in Slovakia. The basic aim of the new regulation is to compensate employers financially for temporary loss of working hours and thereby preserve employment. Kurzarbeit can be applied if an employer is forced to reduce its operational activities due to temporary external factors beyond its control that have a negative economic impact on its business, particularly the declaration of a state of emergency, state of crisis, or force majeure. Furthermore, the Kurzarbeit allowance applies only in case at least one-third of the employer’s workforce is not assigned work for at least 10% of their working hours.
The Kurzarbeit allowance will be funded from social insurance contributions, at a rate of 0.5% from the assessment base, which reduces the insurance rate for unemployment (currently 1%). Therefore, the amount of the employer’s social security contribution burden does not change due to the introduction of Kurzarbeit.
Kurzarbeit was adopted in reaction to the developing economic crisis caused by the COVID-19 pandemic, and the complicated, yet not very effective, state aid system provided to employers within the First Aid contributions project. Under that system, the employer had to undergo a demanding administrative process, and the contributions were paid only two months after applying. Finally, the contribution amount per employee was capped relatively low.
Another reason for introducing this scheme was the gradual implementation of the Kurzarbeit system in all member states of the EU, which thus becomes a benchmark for the country’s competitiveness, as well as the EU’s pressure to introduce a permanent tool to maintain employment and compensation for loss of income.
During the law-making process, the legislator was inspired mainly by the applicable legislation in Germany and Austria, where the system had been in place for some time. Consequently, it has transplanted most of the conditions under which the aid is granted in those countries. Such a procedure is by no means exceptional but should not be applied without considering the specifics of a particular country.
As an example, we consider it unjustifiable that the conclusion of an agreement with the employees’ representatives or the individual employees concerned (in case there are no employees’ representatives) on activation of Kurzarbeit is required to claim the support. Under current legislation, a trade union may operate at an employer without proving any minimum level of representativeness towards the employees it formally represents. Therefore, in Slovakia, we often see so-called ‘quasi trade unions’ (with minimum membership), whose primary aim is not to defend employees’ rights. As quasi trade unions often set out to torpedo employers’ activities, we consider this requirement a significant obstacle in fulfilling the conditions for the allowance. In addition, we believe that such requirements are superfluous, as one of the conditions for granting the support is the payment of social insurance contributions for at least 24 months before the employer applies for the allowance. Thus, the employer prepays any potential future allowance.
If the employer fails to receive the respective consent to activate the allowance (without the necessity of being notified of any relevant reason), it is forced to ask an arbitrator to resolve the dispute. This process, including the time limit for the arbitrator’s decision, may result in a deadlock situation where the employer misses the deadline for allowance application and, consequently, loses its entitlement thereto. As a result, both the employer and, in the end, the employees themselves would be negatively impacted as the employer will likely be forced to proceed with employment terminations, despite fulfilling all other conditions for the activation of the Kurzarbeit scheme.
Despite the several shortcomings of the new legal regulation on Kurzarbeit, it is generally welcomed. Slovakia needs such a stable and foreseeable system of support that can help employers mitigate the consequences of abrupt external negative circumstances, without a long-lasting impact on their business and workforce. The devil is in the details, however, and only the practical implementation of the Kurzarbeit system will show its potential flaws or prove its effectiveness.
By Radovan Pala, Partner, and Radoslava Lichnovska, Head of Employment, Taylor Wessing