The amendment to Act No. 435/2004 Coll., on Employment (hereinafter referred to as the “Amendment”), which was approved at the end of last year, brings significant changes in the area of substitute performance and employment of persons with disabilities (hereinafter “PWD”). These changes came into force on 1 January 2025 and are primarily aimed at increasing employment opportunities for PWD and promoting their inclusion in the free labour market.

In general on the obligation of employers to fulfil employment of PWD in the mandatory proportion

Currently, employers with more than 25 employees are obliged to employ 4% of PWD. Employers can fulfil this obligation in three ways, namely:

• by directly employing PWD;
• by substitute performance (by taking products, services or contracts from employers in the sheltered labour market); and
• by paying a levy to the state budget.

Until the adoption of the current amendment, all of the above options for fulfilling the mandatory proportion were considered equivalent. However, the amendment introduces changes that aim to motivate employers who have not yet been employing PWD directly to consider this option and to give employers who already partially meet their obligation to employ PWD an advantage over the current situation.

Gradation of the amount of the contribution to the state budget when meeting the mandatory proportion of employed PWD

Under the existing legislation, compliance with the obligation to contribute to the state budget was set at 2.5 times the average monthly wage for each PWD that the employer should be employing.

However, under the amendment, employers who continue not to meet their mandatory share by directly employing PWD will now pay up to 3.5 times the average monthly wage, which may become significantly more expensive for some of them. Employers who do employ PWD at least partially, on the other hand, may save money from this year onwards, depending on how close they come to the statutory obligation of PWD representing 4% of their employees.

The amount of the levy to the state budget is now gradated depending on the performance in the form of direct employment, as follows:

• 1 time the average monthly wage if the employer meets the mandatory share of at least 3% through direct employment;
• 2 times the average monthly wage if the employer meets the mandatory share of at least 1% through direct employment;
• 3.5 times the average monthly wage if the employer meets the mandatory share of less than 1% through direct employment.

The changes described above do not apply to the levy to the state budget for 2024, which is due by 15 February 2025.

Limitation of substitute performance

The amendment also introduces a limitation that will prevent fulfilling the substitute performance obligation by taking products or services from persons connected under the Income Tax Act (i.e., e.g., from a parent and subsidiary company, but also from a company connected by capital). According to the explanatory memorandum, this is to prevent situations where employers allocate PWD to a purpose-built company on the protected labour market, through which they then purchase products or services.

The changes described above represent a major modification of the Employment Act, which is intended bring better conditions for the employment of PWD and ensure that substitute performance actually supports their employment.