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News

What are the consequences (in the Czech Republic) of late wage payments via cashless transfer?

13.12.2021
Company: bnt attorneys-at-law s.r.o.

Payments via cashless transfer may have become the utterly mundane standard, but the devil is in the detail, so it’s best to painstakingly follow the rules, especially in labor-law relations. Falling behind pay day may expose employers to claims for damages.

A vast number of payment operations today does not involve any cash changing hands. The Labor Code, too, allows for wages (salaries, remuneration, substitute pay) to be paid via cashless transfer, subject to a mutual understanding between the employer and the employee (cf. Sec. 142 and 143 of the Labor Code).

What is the respective meaning of the maturity of wages, as opposed to “pay day”?

The maturity of wages is stipulated by Sec. 141 of the Labor Code, and set to a time after the corresponding work performance was rendered, namely, the calendar month following the month in which the employees become entitled to their pay. The wage is thus due for payment on the last day of that calendar month. (The law anticipates that employers and employees may agree on, or the employer may stipulate in an internal policy, also an earlier due date.)

The same statutory provision orders the employer to stipulate (or agree with staff upon) a fixed day within the month on which wages will be paid. Determining a specific pay day in this manner by way of an administrative unification means that wages will become available to their earners on a concrete day of the month.

When does default occur, and what are the consequences?

Default with the payment of wages is triggered only if and when the employer fails to pay the wage (or any part thereof) before maturity, i.e., the last day of the calendar month following the month in which the employee became entitled to payment of their remuneration.

Employees must assist the employer e.g. by timely notifying any change of their bank account for wage payments, or else the employer will not be in default

If the employer were to disregard pay day, it is conceivable that an employee might bring a claim for damages, e.g. because the belated payment causes the employee herself to be unable to honor her own obligations (such as the payment of mortgage instalments) as they fall due, resulting in penalties imposed by the employee’s service providers or suppliers.

However, failure to observe the due date for wage payments has rather more serious consequences:
– The employee is entitled to seek payment of the outstanding amount in court, including default interest,
– The employee is entitled to terminate the employment without prior notice as per Sec. 56 (1) (b) of the Labor Code, along with the right to demand from the employer continued pay in lieu of their wage for a period corresponding to the regular notice period (whereas the employee’s right to give notice is limited by the time periods set out in Sec. 59 of the Labor Code),
– The Labor Inspectorate may possibly impose a fine on the employer, on grounds of a misdemeanor related to the remuneration of the workforce.

When is a cashless payment considered made?

The employer has fulfilled the claim for payment as of the moment in which the transfer to employee’s bank account takes place. Note that this need not necessarily mean that the corresponding amount will actually be credited to the target account on the same day.

 

Source:
“Mzdová účetní” (The Payroll Accountant), professional monthly, Vol. 2021, Issue 09, ANAG, pp. 9 – 17

Author:
JUDr. Radim Marada (autor článku)

AUTHOR

Tags: Law | Finance |

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