Following the Act of 3 October 2022 on various provisions relating to employment, known as the Labour Deal Act, article 39ter of the Act on Employment Contracts was amended. This article provides the legal basis for employability-enhancing measures. Since 1 January 2023, employees, who have a notice period of at least 30 weeks, are obliged to follow employability-enhancing measures, whereby the notice period is converted into a package of dismissal measures consisting of two parts. A new Act to reform the financial aspect of these measures is approved by the Federal Parliament on 8 May 2024 (but still needs to be published), which deals with the value and financing of the measures and the procedure for repayment of the measures. What follows in this article is an explanation of what has changed since the modifications by the Labour Deal Act and what will change with the current reforms by the new Act.
1. What has changed since the Labour Deal Act?
Before the modifications by the Labour Deal Act, an employee who is dismissed with at least 30 weeks' notice or corresponding severance pay received a severance package that includes employability-enhancing measures, such as, e.g., additional outplacement assistance, career counselling, training or retraining. It was up to the sectors to elaborate the scheme. However, the sectors have neglected this with impunity for years and the legislator has delayed the entry into force several times. Consequently, article 39ter of the Act on Employment Contracts remained inapplicable in practice until before 1 January 2023, with the result that this article was amended by the Labour Deal Act. The aim of these measures is to better train the employees and increase their chances of finding new jobs.
Since the amendments by the Labour Deal Act, the employee is entitled to a severance package consisting of two parts. The employee is entitled to this only (i) in the case of dismissal by the employer and (ii) when the employee is entitled to at least 30 weeks' notice or severance pay (+/- 10 years' seniority).
Thus, the notice period is divided into two parts, of which:
- The first part of the severance covers 2/3rd of the notice period with a minimum of 26 weeks, during which the employee will simply perform his notice period with the employer or what can be paid out as severance pay (in proportion to that 2/3rd).
- The second part of the severance package is 1/3rd of the notice period (or the remainder of it). This part can be spent on employability-enhancing measures such as training for specific professional skills, coaching or additional outplacement.
In case of a dismissal with notice, the employee has the right to be absent from work with pay from the beginning of the notice period to follow employability-enhancing measures. The employee should not wait until the last 1/3rd part of the term.
In case of dismissal with payment of severance pay, the employee must make himself available to follow employability-enhancing measures. This obligation expires when starting a new activity as an employee or as a self-employed person, but it is not clear whether the obligation expires equally after the hypothetical notice period expires (we assume it does).
The new system has also struggled to find its way into practice. So far, it has been almost entirely ignored by both employers and employees, rendering it effectively not implemented in practice. This is likely due to the lack of implementation measures that would further clarify the system.
2. What will change with the current new Act?
Employability-enhancing measures were initially funded by employer contributions on the second part of the notice period. This implied that high wage dismissed employees received greater funding for their employability-enhancing measures.
However, these measures proved practically difficult to implement in financial terms. Consequently, there is currently a new Act that will allow better concretization and implementation of employability-enhancing measures.
As a result of this new Act, article 39ter of the Act on Employment Contracts will again be completely modified. Thus, the value of employability-enhancing measures will no longer correspond to the amount of the employer's contribution on the second part of the notice period, but will consist of a one-time budget. Specifically, employees who are dismissed with at least 30 weeks' notice will be entitled to employability-enhancing measures for a one-time budget of 1,800 euros.
The one-time budget is financed through employer contributions due on the first part of the notice period that exceeds two-thirds of the notice period. The NSSO withholds these employer contributions and forwards them to the National Employment Office. The employee who wishes to claim the one-time budget must apply for it to the National Employment Office. In addition, the reimbursement of these employability-enhancing measures can be requested from the National Employment Office.
A number of issues such as the period during which the employability-enhancing measures must have been followed, as well as the procedure for reimbursement to the National Employment Office, will still be determined by royal decree.
Furthermore, the new Act does not change the conditions of application or operation of the employability-enhancing measures.
The new rules will come into force on the date to be determined by royal decree and no later than 1 April 2025. They will apply to dismissals occurring from 1 April 2025.
The recent changes raise critical questions. It remains to be seen whether these measures will finally be implemented in practice. There is still much uncertainty regarding the practical aspects. As a result, it is uncertain whether the new policies will achieve the desired effects and bring about the intended improvements.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.