Introduction

On 27 December 2024, Act No. 468/2024 Coll. on Integrative Social Enterprise was promulgated in the Collection of Laws. The purpose and goal of the Integrative Social Enterprise Act is to simplify the process of integrating disadvantaged persons into the labour market and thus better integrate them into the labour process. The Act responds to the current lack of legislation in this area.  Under the new law, businesses will be able to apply to the Ministry of Labour and Social Affairs for the status of integrative social enterprise, with the key condition for obtaining this status being the employment of a certain number of disadvantaged people. If the statutory conditions are met, the company will then be entitled to receive a contribution towards the costs of employing people with specific needs and also to receive an incentive contribution in the event of successful integration of the employee.

Persons with specific needs

The law provides a fairly detailed list of persons who are considered to have special needs. These persons can be divided into two groups. The first group consists of persons for whom it is crucial that they are registered as job seekers with the Czech Labour Office before entering into an employment relationship with the integrative social enterprise. This group includes, for example, people without a high school diploma or people granted asylum or subsidiary protection. The second group of persons does not have to meet the condition of being registered as job seekers with the Czech Labour Office and includes, for example, persons with disabilities or persons without shelter.

Status of an integrative social enterprise

The granting of the status of integrative social enterprise will be based on an application submitted by the applicant to the Ministry of Labour and Social Affairs on a prescribed form. The Ministry will assess the application and subsequently decide whether the legal conditions for obtaining the status of an integrative social enterprise have been met.

The law defines several conditions that a company must meet in order to be granted the status. These conditions include, in particular, the continuous performance of economic activity, employment of persons with specific needs in the number determined by law, good standing, the absence of arrears to the Financial Administration of the Czech Republic, the Customs Administration of the Czech Republic, the Czech Social Security Administration and public health insurance institutions, except for arrears for which deferral is permitted, and, last but not least, performing an activity project that meets the requirements set out by law.

The applicant may be an individual or a legal entity with a registered office or domicile in the territory of the Czech Republic or another Member State of the European Union or a State that is a party to the Agreement on the European Economic Area, the United Kingdom of Great Britain and Northern Ireland or the Swiss Confederation, if it performs its activities on the territory of the Czech Republic through a branch.

It is also necessary to meet the condition that the applicant’s business is not gambling, he is not bankrupt or in liquidation and has not been convicted of an offence under the Employment Act, the Labour Inspection Act, the Act on the Registration of Beneficial Owners or the Act on Certain Measures against the Legalization of Proceeds of Crime and Terrorist Financing.

The status of an integrative social enterprise automatically ceases upon the death of the individual or dissolution of the legal entity. The Ministry may also revoke the status, either on request or ex officio. Ex officio revocation can occur when a business no longer meets the criteria for status. This could be the case, for example, if the enterprise does not employ the prescribed number of persons with special needs in a calendar quarter or if it provides incomplete or false data in its activity report. It is also worth noting that if an enterprise uses the designation “integrative social enterprise” in its name or on its product, for example, and is not granted the status of an integrative social enterprise by the Ministry, the enterprise may be fined up to CZK 200,000.

The Ministry of Labour and Social Affairs will maintain a register of integrative social enterprises. The register will contain a public and a non-public part and will be available on the website of the ministry.

Obligations of an integrative social enterprise

One of the obligations of an integrative social enterprise will be to employ at least 30% of persons with specific needs out of the total quarterly number of its employees in full-time equivalent units. The company will also have several obligations towards people with specific needs, for example, it will have to provide assistance to these employees in integrating into the labour market and society by providing information on the current labour market situation, advice and accompaniment in dealing with the issues necessary for integration into the labour market and society.

Another obligation of the integrative social enterprise will be the obligation to record the total number of all employees and the number of employees who are persons with specific needs according to the period of their previous registration in the job seekers’ register of the Labour Office. The enterprise will also be required to record information on the average quarterly staff number in full-time equivalent units and the number of employees who are persons with special needs. Failure to comply with the registration obligation may result in a fine of up to CZK 10,000.

Each integrative enterprise will be required to establish an integration fund. This fund will serve as an insurance policy to finance activities related to the social support of employees. In the event of revocation of the status, the balance of the fund will be transferred to another integrative social enterprise or to the state.

Last but not least, the integrative social enterprise will be obliged to prepare an activity report and submit it to the Ministry of Labour and Social Affairs by 1 July of the following calendar year after the period for which the activity report is prepared. This report will include in particular data on the employment and the way in which social competences of employees who are persons with special needs are strengthened.

Cost allowance and incentive allowance

If the conditions set out in the law are met, the company is entitled to a contribution towards the costs of employing people with special needs. The allowance is granted for a maximum of 2 years from the start of the employment relationship. The amount of the contribution is CZK 1,000 or CZK 2,500 per calendar month per employee and will be provided quarterly in arrears on the basis of an application to be submitted to the relevant regional branch of the Labour Office.

The company may receive a reward for successful integration of an employee who finds stable employment with another employer after leaving the integrative company. The contribution is 17% of the employee’s annual assessment base and is paid retrospectively for each year up to a minimum of 120% of the average wage. The incentive allowance must be applied for at the relevant regional branch of the Labour Office by 30 April of the following calendar year at the latest. The allowance will be granted retroactively for the past calendar year for a period of 24 months from the conclusion of the employment contract.

Both contributions are covered by the state budget and are not considered subsidies.

Effectiveness of the Act 

Most of the law’s provisions are to take effect on 1 January 2025. Two provisions are exceptions, namely the provision on the right of an integrative social enterprise to use the designation social enterprise and the provision on offences, which will not come into force until 1 July 2025.

Conclusion

If employment of people with special needs concerns you or if your goal is to support them in the process of integrating into the labour market, please do not hesitate to contact us.