6. Cost-Reduction Strategies

To what extent can employers implement the following cost-reduction strategies as a result of COVID-19, and what are the primary limitations on each? 

• Furloughs.

In general, employers may apply for state support if their employees cannot work as a result of obstacles imposed for the prevention of COVID-19 (decreased demand for goods and services, quarantine, etc.) and related restrictive measures adopted by the government (e.g. closure of stores, prohibition of certain business activities). The actual link to the prevention of COVID-19 does not have to be justified (e.g. it is sufficient to declare or document the decrease of demand for goods and services during the relevant period from 12 March 2020 until the end of August 2020). Employers are entitled to state benefits in amount of 60% or 80% of the salary compensation paid out (i.e. the compensation paid to employees for the time they could not work), and up to CZK 39.000 or CZK 29.000, depending on the types of obstacles imposed.

• Salary reductions.

The employer can unilaterally reduce the salary to 80% if it suffers from a shortage of materials or other resources, and up to 60% in case of decrease in demand of products and services. Other salary reductions depend on how the salary was determined: if it was stipulated in the salary statement or through an internal policy (unilateral document), it can therefore be changed without the employee’s consent, but such a reduction is limited. On the other hand, if the salary was established in an agreement (employment agreement, salary agreement, etc.) a reduction of any kind can only be done with the employee’s consent.

• Redundancy.

The employer may dismiss the employee for redundancy. In this case, the employee is entitled to receive a severance payment at least in the amount stated by the Czech Labour Code (one to three monthly earnings depending on the length of employment).

• Facility closure.

In such cases where the decision to close is made by the employer, the employer is therefore obliged to pay the employees’ full salary.