COMMENTARY: New Employment Incentives Act
In response to five consecutive years of economic downturn in Croatia, coupled with negative trends on the labor market, the Parliament has recently adopted the Employment Incentives Act which introduces new rules regulating financial aid in order to preserve jobs and stimulate employment.
The new Employment Incentives Act features provisions aimed at encouraging employers to preserve jobs. Although some job preservation schemes are already available to Croatian employers, the idea behind this initiative is to encourage a wider use of such schemes in the future.
The Act contemplates aid of two different types: aid for shortening work hours, and aid for education and training of employees. Both aids may be used by employers facing a temporary drop of business and/or which have had a negative financial result in the previous financial year, provided that they have paid their taxes and contributions, and adopted a job preservation plan in cooperation with the workers’ council or a trade union representative.
The aid for shortening work hours enables employers to cut the standard total of 40 working hours per week by up to 16 hours. Employees would still be paid as if they worked the full hours. Employers would be subsidized for a portion of the salary for the cut hours, capped at the minimum permitted monthly salary (approximately €400). This aid can be used for up to 12 months within a 3 year period.
This solution represents a notable departure from the general framework for changing the duration of the work week set out by the Croatian Employment Act…