Recruitment allowance as an employment recruitment instrument

When it comes to hiring new employees, provision of a recruitment allowance has become a new trend in the Slovak labour market.

When it comes to hiring new employees, provision of a recruitment allowance has become a new trend in the Slovak labour market. How to provide the allowance so it maximizes the intended incentive effect and concurrently protects the employer from speculators, whose only goal is to quickly reach the interesting amount of money offered by the employer at the beginning of employment, without a real intention to remain in this employment relationship? What model should be selected so that the allowance is refundable in the event of non-compliance by the employee and concurrently does not contravene the law? These and other questions are answered by labour law specialists from the law firm SOUKENÍK – ŠTRPKA, s. r. o. - senior attorney, Andrej Guba and junior associate, Andrej Rolfes.

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THE GOALS OF RECRUITMENT IN THE LABOUR MARKET IN THE 21ST CENTURY

The labour market situation has changed rapidly in recent years. High unemployment has been replaced by labour shortages. Demand for employees exceeding supply on the labour market has created a competitive struggle among employers. Some employers have embarked on a path of recruiting through headhunting agencies, others are attracting through various types of benefits. Extra holidays, work from home, shorter working hours and the thirteenth or fourteenth salary may, however, not always be motivating enough for new employees. On the other hand, the advantage of the recruitment allowance is that it is provided to the employee at the beginning or shortly after the employment. Employers most often reach for it where there is the greatest shortage of workers - especially in manufacturing, IT sector and healthcare. The amount of the contribution depends on the economic possibilities of the employer, usually ranging from a few hundred (for production workers) to several thousand euros (for doctors, nurses or IT workers). When providing a recruitment allowance, the employer’s goal should not only be to recruit new employees, but also to keep them in its employment. Does the employer have the possibility to adjust the conditions for granting the recruitment allowance in a manner to meet both of these objectives?

Under the current legislation, it is not possible to legally contract an employee to remain in the employment relationship for the period agreed by the participants in the employment relationship. Even if the employer and the employee would agree on such obligation, that agreement would be invalid because the employee waived his/her right to unilaterally terminate his/her employment at any time in advance. The Labour Code regulates the employee’s obligation to remain in employment for a specified period only in the provision concerning the agreement on increasing the employee’s qualifications. Based on such agreement, the employer undertakes to enable the employee to improve his/her qualifications by providing time off work, compensation for wages and reimbursement of other costs associated with the study, and the employee undertakes to stay with the employer for a certain period after conclusion of the study. If the employee does not comply with such obligation, he/she will reimburse the employer for the costs associated with the study, or more precisely their aliquot part. However, the analogous application of this legal regulation to the recruitment allowance encounters a problem - the recruitment allowance is not an increase in qualification. The application of the provisions of the Labour Code on qualification increase is therefore not possible for the recruitment allowance.

HOW DOES PROVIDING A RECRUITMENT ALLOWANCE WORK IN PRACTICE?

Nowdays, employers most often provide a recruitment allowance to employees on the basis of a written agreement concluded in accordance with the Civil Code (the so-called unnamed contract). When the agreed conditions are met, the recruitment contribution becomes a non-repayable financial contribution provided to the employee by the employer. Obversely, when the conditions are not met, it is customary to classify the agreements as a repayable interest-free financial loan. Employers have probably found inspiration in using this model of contractual regulation in the labour market of the Czech Republic, where the conclusion of such agreements constitutes a common practice, as in labour relations the Czech Labour Code waived the rigid perception of the number of types of contracts and enabled the conclusion of such contractual employment relationships that are not regulated as a contractual type in the Czech Labour Code. Slovak employers appear to have neglected that contract labour law in the Slovak Republic does not exercise the principle typical for civil or commercial obligations - “everything which is not forbidden is allowed”, but is governed by the principle of “numerus clausus of contract types” expressing the prohibition of conduct other than conduct assumed by the labour law norm (Labour Code). In other words, the Slovak contract labour law is governed by the principle of “everything which is not allowed is forbidden”. Plausible conclusion of an agreement on the provision of a recruitment allowance, i.e. agreement not regulated by the Labour Code, the control authorities (labour inspectorates) could therefore evaluate as an agreement concluded in violation of the Labour Code, and thus as absolutely invalid.

Moreover, the conclusion of such agreements with employers in the public sector could be contrary to the principle of economic efficiency of the institution in question. It is also questionable whether, on the basis of the non-repayable financial contribution provided under the civil law agreement, it would constitute a tax deductible expense of the employer.

HOW TO ACHIEVE THE LEGAL CONFORMITY OF THE RECRUITMENT ALLOWANCE, THE AIM OF WHICH IS NOT ONLY TO ACQUIRE A NEW EMPLOYEE, BUT ALSO TO RETAIN HIM/HER?

A legally compatible solution is the conclusion of a written agreement, on the basis of which the employer will provide a recruitment allowance to the employee in the form of a special remuneration (part of a wage) after meeting the agreed conditions. If the allowance is provided to an employee who immediately meets the qualification requirements for the performance of the agreed type of work upon taking up employment, the employer should condition the provision of the recruitment allowance by fulfilling the following conditions:

  • expiration of the probationary period,
  • duration of employment for at least the period stipulated by the employer (e.g. duration of one year).

If the allowance is granted to an employee who has to undergo training (increasing or deepening a qualification) on taking up employment, in addition to the aforementioned conditions a condition of successful increasement qualification of the employee will be added. Therefore, both categories of employees are entitled to the payment of the recruitment allowance only when the required duration of the employment relationship expires. However, the practice shows that the recruitment allowance achieves its effect only if the employer pays it to the employee at the commencement of the employment relationship. The question arises as to how the paid recruitment allowance may be recovered by the employer if the employee does not satisfy the agreed conditions.

The solution is to link the maturity of the recruitment allowance to the expiry of the required duration of the employment relationship, with the employer already providing the employee with an advance payment of 100% of the recruitment allowance when the employment relationship is established. If the employee meets the agreed conditions, the provided advance will be settled with the employee‘s due entitlement to the recruitment allowance. Otherwise, the employee will return the advance provided to the employer (possibly an aliquot part thereof depending on the length of abidance in the employment relationship). Therefore, in the agreement on the provision of the recruitment allowance it is ideal to negotiate with the employee also deductions from wages in the event that the employer claims against the employee the refund of the provided advance.

The only risk of this solution is that if the employee does not meet the agreed conditions and refuses to return the recruitment allowance back to the employer voluntarily, while after taking into account the inexecutable minimum of his/her last salary will be lower than the advance provided by the employer, employer will have no choice but to enforce the payment through court.

This article has been brought to you by SOUKENÍK – ŠTRPKA, s. r. o.

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