Our view is that the strict containment measures adopted by the Czech Republic are necessary not only to contain the spread of disease in order to prevent a breakdown in the healthcare system and consequent greater loss of life, but also to avoid the longterm economic damage a significant outbreak could cause. Therefore, we propose the government pursue immediate economic measures that will mitigate the damage of virus and its containment and then prepare regulatory changes that can make recovery swifter and more sustainable.
1) Pass some form of the Ministry of Social Affairs proposal by March 20.
2) Consider introducing renewable time limits and a salary cap for government contributions.
3) Consider moving from a kurzarbeit-style program to direct company payments if the containment period lasts more than a month.
Many, if not a majority, of companies which have closed or experienced a significant lose of revenue due to the coronavirus or government containment will need to make decisions by the end March about retaining staff. For this reason, we would ask the government to approve some form of the Ministry of Social Affairs Protection of Employment proposal this week for a 2-or-3 month period, since it is the only proposal now prepared for implementation. At the same time, the government could make clear that it may adopt a different system. We believe this will provide the security needed for companies to retain the maximum possible number of employees while giving the government time to design a program that could more efficiently address the temporary and severe economic situation.
Although we have not been able to obtain all similar measures proposed by other European governments, the kurzarbeit-type programs in other countries typically compensate wages at range of 60-90% for a set duration of weeks or months with the ability to renew multiple times. Some countries cap the program at a maximum salary level (for instance Denmark caps government contributions at DKK 23,000 monthly), and distinguish between employees and self-employed.
The Netherlands has switched from their existing kurzarbeit-style program to an emergency fund (https://business.gov.nl/subsidy/employment-bridging-emergency-fund-now/) because the administrative process required by a kurzarbeit program could not handle the demand when the entire economy is impacted. Some key advantages to this program: government contribution varies based on impact of crisis on company revenue, companies participating in the program cannot reduce employment levels for economic reasons, and program has a 3 month initial duration with the opportunity with one three month renewal.
14th October 2020
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