Stricter rules on employment of foreigners on horizon
In connection with the preparation of the new Foreigners’ Residence Act, the Ministry of Labour and Social Affairs proposes to introduce into the Employment Act a verified employer concept.
Under the new rules, only employers with this status will be allowed to employ foreigners who need a work permit. Employers will be able to obtain this status by registering in a special register, after meeting several conditions. This is the second attempt by the ministry to tighten the conditions for employing foreigners. An earlier recognised employer proposal was not passed by legislators due to criticism from the government and the public. Should the ministry’s proposal succeed this time, employers employing foreigners will be subject to additional administrative obligations.
Conditions for inclusion in the register
Registration in the register of verified employers will be made upon an application submitted by the employer who will have to prove that they meet certain conditions which will have to be met throughout their registration period. Compared to the earlier recognised employer proposal, the conditions for verified employers will eventually be less strict in some respects. First, the employer will have to operate in the Czech Republic and be a Czech tax resident in the meaning of the Income Tax Act. If they are also registered in the Commercial Register, they will have to have filed all financial statements, annual reports and other documents as appropriate in the Collection of Deeds.
Furthermore, the employer must have employed at least one employee who has been participating in social security and health insurance for at least six months. At the same time, the employer must not be in arrears with the customs and tax authorities or with social and health insurance institutions.
The ministry also aims to prevent illegal work and disguised employment mediation. Therefore, another condition for inclusion in the register will be that the employer was not penalised by the labour inspectorate in the 24 months preceding the submission of the application. For offences consisting of allowing illegal work, failure to cooperate with inspection authorities or a repeated breach of labour obligations under other laws, a fine exceeding CZK 100 thousand will be an obstacle to the registration. For disguised employment mediation, it will not be possible to register the employer in the register regardless of the amount and type of penalty imposed.
Support for start-ups
At the same time, the Ministry of Labour and Social Affairs has proposed a more lenient approach to selected categories of employers - an exemption from the obligation to employ at least one employee. The exemption will mainly benefit foreign investors (subject to meeting the specified conditions), state-owned enterprises, commercial corporations established and controlled by municipalities and regions for public purposes, or other employers whose inclusion in the register is in the interest of the Czech Republic. The exemption will also apply to employers engaged in selected economic activities to be defined by the government.
Uncertain prospects
If passed, the amendment will fundamentally change the employment of foreigners. However, given the failure of the previous legislative proposal, the fate of the bill is not yet certain. However, as some controversial or unpolished changes have now been eliminated, we expect wider support for this proposed amendment.