Czech President signs welfare reform, believes the "superbenefit" will better target those in need and motivate people to work formally

As of October, the transformations will launch the reform of the social support system and have been signed into law by President Petr Pavel. His office announced the law had been signed on 16 May.

According to the Government, the new social aid system should be easier for everybody, more effective, more targeted, and should do more to motivate people to formally work. When signing the law and its accompanying amendments, the president said the principles of reform are a step in the right direction, unquestionably so, because currently the welfare system is confusing to both authorities and citizens.

“Today the welfare system is confusing for citizens and authorities. Households at risk frequently do not apply for welfare to which they are entitled because of the complexity of the system. On the other hand, even people with relatively high incomes or large assets currently qualify for some benefits. Moreover, the system today does not do enough to motivate people to formally work. The reform reduces bureaucracy by combining four benefits in one and will lead to better targeting of benefits to the genuinely needy and to more motivation to actively work,” Pavel said.

However, the president said he does perceive the questions in expert discussions regarding the possible impacts of the law on some groups in the population. “Those risks will show up once this is put into practice. It is necessary to carefully monitor them, and if they come to pass, I will ask the next Government to adjust certain parameters in the system. This especially has to do with the question of the definition of vulnerable persons, which currently leaves out, for example, single parents of older children, the amount of the subsistence minimum for small households, the impact on the labor motivation of indebted citizens, or the establishment of the normative payments for housing,” he said.

“Despite all that, I am convinced it is necessary to support reform. Czechia will now have a simpler welfare system that will be better targeted at the households most at risk, it can improve the drawing of welfare by those who genuinely need benefits, and as a whole it will motivate citizens into formal work more,” Pavel said.

The budgetary impacts of introducing the so-called “superbenefit”, according to calculations from the Labor and Social Affairs Ministry, range from reducing expenditures by about CZK 2.5 billion [EUR 100 million] to increasing them by about CZK 7.4 billion [EUR 300 million]. However, it is not known what the budgetary influence will be of the adjustments added to the law by the legislature.

Lower house members, for instance, expanded the group of vulnerable persons qualified to receive more support to include persons qualifying for widowers’ or widows’ pensions and to bereaved partners or spouses for one year. However, they also lowered the across-the-board contributions toward household energy bills.

The new welfare system will run for roughly half a year, until about March 2026. The Senate asked the Labor and Social Affairs Ministry to assess its impact at that time.

The new benefit will comprise four parts by law: money for subsistence, for housing, a per-child bonus, and a bonus for working or seeking work. Its amount is graduated according to income and labor activity.

The “tipping point” where a person loses state aid if their income exceeds the limit by just one crown [EUR 0.04] has been removed. Support will differ for households whose incomes are less than 1.43 times the subsistence minimum and those whose incomes exceed that.

A household will be able to own two pieces of real estate and still qualify for benefits as long as they sell one of them within three years. Each adult family member will be able to own a personal vehicle and still qualify for welfare.

The amount of savings will also decide eligibility for welfare. Depending on the number of household members, one would still be eligible for welfare with savings between CZK 200,000 [EUR 8,000] and CZK 400,000 [EUR 16,000].

Some of the subsistence support will only go to households whose members have incomes less than 1.43 times the subsistence minimum. Housing support will continue to be paid to those who pay more than 30 % of their income for an apartment or other accommodation.

The amount of the benefit will be based on normative costs and the across-the-board contribution to energy bills. That contribution was lowered by the Chamber of Deputies to a total of CZK 1.2 billion [EUR 48 million] annually with the aim of saving the state money.

The condition for receiving the per-child contribution will be that the adults in the household work or look for work and that the children attend compulsory education. The benefit overall will be increased through the work bonus, which people on parental leave will also be able to draw.

The Labor Office will be able to ask people who draw welfare due to long-term disability to have their state of health reviewed every 380 days. According to the previous rules, as many as 29 % of the Czech population were eligible for welfare, but only about 8 % actually drew benefits.

Now that the reform is underway, the circle of people entitled to aid from the state should be reduced, according to previous estimates, to about 22 % of the population.