Billions to keep jobs in the COVID-19 era were also given by the state to companies whose profits and number of employees grew
Press release on audit No 22/28 – 4 December 2023
Support from the Antivirus programme, the main purpose of which was to mitigate the negative impact of the COVID-19 pandemic on employment in the Czech Republic, was also given to companies whose net sales and profits were growing and whose number of employees was increasing at the time of the spread of the disease. State aid was also provided to companies that were distributing profit shares at that time. In addition, in one of the three Antiviral schemes (A Plus scheme), the state bore almost 100% of the cost of maintaining jobs, which was contrary to the principle applied in other EU countries where the state shared these costs with employers and employees. If the partial compensation rule had been followed, the State would have saved up to CZK 4.4 billion. The SAO found this when it audited how the Ministry of Labour and Social Affairs (MoLSA) and the Labour Office of the Czech Republic (LO CR) handled state and EU funds earmarked for employment support in 2020 and 2021.
The SAO concluded that part of the state budget and EU funds earmarked for employment support were spent ineffectively. According to the auditors, the MoLSA and the LO CR violated the obligations set out in EU and Czech legislation and both institutions failed to monitor and evaluate the impact of the Antivirus programme.
Almost 71,000 companies and their 1.2 million employees received support from the Antivirus programme in the total amount of CZK 51.2 billion. A total of CZK 9.8 billion was drawn by companies in sectors where there was no decline in production. These included, for example, information technology companies. Meanwhile, in this sector, economic output grew by 17.5% in 2021 compared to 2019 and the number of employees by 9.5%. Support from the Antivirus programme amounting to CZK 48.1 million was also given to a business chain which expanded economically during the COVID-19 pandemic and continuously recruited new employees. Its net sales increased by CZK 10.5 billion in 2020 compared to 2019 and its profit by CZK 336.4 million. The company increased the number of employees by 11.1%.
The auditors have also found that the A Plus scheme of the Antivirus programme was prepared by the MoLSA in violation of the established principle that the cost of maintaining jobs should be shared between the State, the employer and the employee. Under this scheme, the State provided 100% of the wage replacement contributions to employers and paid them a total of CZK 21.1 billion. If the principle of partial compensation had been respected, the volume of contributions provided by the State would have been reduced to CZK 16.7 billion. In other EU countries, the burden of the costs associated with job retention was borne at least in part by employers or employees. Despite the pandemic emergency, the unemployment rate in the Czech Republic was around 3% and the supply of vacancies exceeded the number of job applicants.
The SAO audited 31 employers and their 47,871 employees in relation to the provision of wage replacement contributions from the Antivirus programme. The auditors have found that 7% of the supported employees, i.e. 3,363 persons, were subsequently registered as job seekers. Thus, a total of CZK 58.2 million did not lead to the retention of their positions. Ten of the 31 companies audited drew CZK 1.9 billion in state support to maintain jobs, although these companies paid profit shares in 2020 and 2021. The incompatibility of aid drawdown and dividend payments was enshrined by the MoLSA in the Employment Act with effect from July 2021.
In addition to the Antivirus programme, the auditors also examined the use of CZK 2.2 billion for three projects of the Operational Programme "Employment 2014-2020" (OPEm). For these projects, they found that part of the funds was spent ineffectively, as the assistance contributed to solving problems only to a limited extent. Of the funds earmarked to support job-sharing in the FLEXI project, the LO CR helped only 252 of the originally planned 3,000 project participants, i.e. 8.4%. In the PDU project, whose main objective was to increase employment and employability of long-term registered jobseekers, only 1,508 long-term unemployed had been supported by the end of 2022, i.e. 12.1% of the total number of 12,490 project participants. Although the third OPEm project ("Outplacement") helped 86.8% of the supported persons to find employment, the training courses offered did not match their interest and education. Thus, the expectation of the LO CR that 4,277 participants would obtain a certificate of completion of the training course was not fulfilled. In the end, only 50 project participants received it, i.e. 1.2% of the expected number.
The Czech Social Security Administration was audited by the SAO for the payment of crisis care allowances. The audit found no deficiencies in compliance with the rules. However, the SAO notes that the conditions set for the provision of the care allowance led to a high administrative burden for schools and applicants for crisis care allowance in spring 2020.
Communication Department
Supreme Audit Office