Coronavirus pandemic – Summary of the main rules of the “Kurzarbeit”
In the followings we summarize the main rules of the reduced working hours. The Government Decree 105/2020 (IV.10.) (hereinafter: decree) was amended by the Government Decree 141/2020 (IV.21.) (hereinafter: amendment decree). The rules are composed of the merger of these two decrees. Under the decrees, in the event of several economic difficulties caused by the pandemic – in order to prevent the lay-off of the employees and protect the workplaces – the employer and the employee may have a mutual agreement on reduced working hours by the amendment of the employment contract (like the German Kurzarbeit). In these terms, the employer shall pay wage for the working hours and for the so-called performance improvement time as well, and the employer shall undertake to work and to remain available during the term of the performance improvement. Upon the fulfilment of the conditions, the government provides subsequent subsidy for the employee. The subsidy is not normative nor automatic, it must be requested.
The amendment decree on one hand has made several requirements clear and has extended the opportunity of the application for the subsidy, but on the other hand it brings subjective elements to the system by not establishing the legal remedy against a possible rejection of the application and by the requirement of the “credible demonstration” of the national economic interest.
The amendment decree entered into force on the 29th of April 2020.
- reduced working hours: means a part-time work,that has a duration of - on a three-month average - at least 25% and not more than 85% of the original working hours stipulated in the original employment contract,
i.e. for the subsidy, the working hours shall be reduced by at least 15% and not more than 75% of the original working hours. Therefore, it is possible to apply for the subsidy in the event of a reduction from 8 working hours to 2 working hours.
- performance improvement time: during the subsidy or within 2 years after it the employee shall be exempted from the duty of work in an amount of 30% of the lost working hours, i.e.
the particular education or training can be organized within 2 years of the granting of the subsidy.
- lay-off prohibitions: employers are prohibited from laying-off the subsidized employees;
- base wage: base wage due on the submission of the application.
The requirements of the subsidy
The competent government department shall ascertain the subsidy upon the mutual application of the employer and the employee in the event of the performance of the following requirements:
a) The employer and the employee shall undertake to
- agree in reduced working hours and
- in a performance improvement time at least for the duration of the subsidy, if the reduced working hours exceed 50% of the original working hours stipulated in the employment contract;
- can agree in performance improvement time, if the reduced working hours do not exceed 50% of the original working hours stipulated in the employment contract.
I.e. the performance improvement time is obligatory only if the reduced working hours exceed 50% of the original working hours of the employment contract. Practically it means that if an employee – who was employed originally in 8 hours – becomes employed in 5-6-7 hours, it is obligatory to agree in performance improvement time for the duration of the subsidy (3 months). On the other hand, if an employee, who was originally employed in 8 hours becomes to be employed in 2-3-4 hours, it is only an option to agree in performance improvement time, but not an obligation.
For example, if the employer reduces the working hours from 8 hours to 4 hours and decides to implement a performance improvement time to the 30% of the reduction (4 hours), it shall pay wage after it. I.e. the paid performance improvement time is 1,2 hours, so the employer shall pay wage after 5,2 hours in total, not only after 4 hours.
b) The employee
- is not entitled for any other subsidy regarding the same employment;
- has already an employment with the employer at the time of the declaration of the emergency and is not under termination;
- to work in reduced working hours which comes with a loss of income, and
- that the establishment of a new employment in addition to the employment specified in the application will not hinder him from returning to the original working hours, which have been reduced,
- to remain available during the term of the performance improvement time;
- does not have any payment obligation towards a public employment body.
c) The employer
- employs the subsidized employee in reduced working hours – including remote work and home office as well – in order to prevent the lay-off of the employees;
- has been operating at least for 6 months, and
- is not entitled for any wage subsidy with regard to the subsidized employee;
- undertakes by the application for the subsidy
- the prohibition from laying-off the subsidized employees for the duration of the subsidy and for one more month,
- the prohibition from ordering extraordinary working hours for the subsidized employees, and
- that the amount of the salary together with the subsidy reaches the employee’s base wage during the time of the subsidy – except if the reduced working hours do not exceed 50% of the original working hours –,
- that he pays wage for the performance improvement time – except if the reduced working hours do not exceed 50% of the original working hours.
This means that generally during the time of the subsidy, the wage counted together with the subsidy must reach the original base wage stipulated in the employment contract. However, the original base wage must be reached only if the rate of the reduction of the working hours is not more than 50%. I.e. if the working hours are reduced from 8 hours to 3 hours, the wage does not have to reach the original base wage.
- is not involved in final accounting, liquidation process, bankruptcy proceeding, nor any other termination proceedings ordered by a final order, and
- presents that the economic reasoning of the reduced working hours is directly and closely in connection with the emergency, and credibly demonstrates that the avoidance of the lay-off is considered as a national economic interest in the context of his continuous economic activity;
- undertakes that in the event of any breach of the prohibition from the lay-off of the employees, he shall pay to the National Employment Fund proportionately to the non-performance.
Duration and rate of the subsidy
- the subsidy shall be provided for the following period of the submission of the application;
- its duration is 3 months;
- its rate is 70% of the net base wage due for the reduced (lost) hours.
For example, if the employee works in 30% reduced working hours, the rate of the subsidy is 70% of the base wage for this 30%. Accordingly, if the employee works in 40% or 50% reduced working hours, the rate of the subsidy is 70% of the base wage of these lost hours.
- when specifying the monthly amount of the subsidy, the maximum net base wage to be taken into account shall not exceed the twice rate (HUF 214.000) of the net lowest compulsory wage (HUF 107.000) in force on the day of the submission of the application;
- the subsidy is paid monthly and subsequently to the employee;
- the subsidy shall not be paid for the period of unpaid vacation;
- the subsidy is free from taxes.
- the application shall be submitted by the employer during the emergency or within 1 month after the end of the emergency on the regularized electronic form on the webpage of the National Employment Service;
- it is not necessary to amend the employment contract prior to the application, because under the decree – regarding the reduced working hours and the performance improvement time – it becomes amended automatically on the day of the decision on the acceptance, according to the content of the application;
- there is no legal remedy against the decision of the government department, and it can not be challenged in front of the court;
- in the event of the rejection of the application, the employer and the employee may submit it again only once more.
Should you need further information or assistance for compiling the application (form), do not hesitate to contact us.