Social entrepreneurship and other models to secure employment for those most in need (Croatia, October 2013)

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1 Social entrepreneurship and other models to secure employment for those most in need (Croatia, October 2013) Czech Republic 1 Petra Francová P3 People, Planet, Profit, o.p.s. Pavel Dudek Ministry of Labour and Social Affairs, Labour Market Department Lenka Laubová Ministry of Labour and Social Affairs, Department for Social Inclusion and Equal Opportunities 1. Social entrepreneurship The situation in the Czech Republic The Czech concept of the social enterprise is broad, with great emphasis placed on equilibrium between the economic and social goal (business and social mission); good intentions are not enough: social entrepreneurship is still business as such and this is perceived as a precondition for a successful enterprise. There are currently around 136 social enterprises in the Czech Republic registered in the P3 database of social enterprises, doing business in just about every area of the economy. The scope of their activities is very broad but according to the survey made by P3 People, Planet, Profit in December the most common areas of their activity are: 1) restaurant services; 2) gardening, cleaning services and real estate maintenance; and 3) food production and retail. More than 90% of existing social enterprises in the Czech Republic are work integration social enterprises that employ people with disadvantages. From the total number of WISEs, 80% employ people with disabilities. This is influenced by tradition, the relatively clearly defined instruments and status of this kind of disadvantage compared to other types. The second most common group of disadvantaged employees are long-term unemployed with 21%, the third place with 14% is occupied by Roma people, followed by 11% of socially disadvantaged young people. However, enterprises employing socially disadvantaged categories are on the rise. As regards regulatory framework, there does not exist any specific legal form for social enterprises and there are not any specific financial advantages. Thus, social enterprises in the Czech Republic take various legal forms and this always depends 1 Prepared for the Peer Review in Social Protection and Social Inclusion programme coordinated by ÖSB Consulting, the Institute for Employment Studies (IES) and Applica, and funded by the European Commission. ÖSB Consulting, All the statistical data about social enterprises in the comments paper come from the survey made by P3 People, Planet, Profit in December

2 on the specific conditions, the type of services/products and the founders approach. Specifically, according to the above mentioned survey, 45% are limited liability companies, 24% publicly beneficial companies, 16% citizens associations, 8% natural persons based on a trading license (self-employed people), 5% cooperatives and 1% joint-stock companies. Limited liability companies slightly prevail over NGOs but many of them were in reality founded by NGOs. A new legal form specific for social enterprises a social cooperative will come into force in 1 st January 2014 but there will not be any advantages linked to this legal form. In general, the main problem with creating a social business in the Czech Republic is to gather the necessary capital to start it. A good incentive to the increase of social enterprises came in 2009 from the Ministry of Labour and Social Affairs, with two calls for proposals targeting support for the social economy. As regards other funding instruments, it is still very difficult to obtain a loan since most of the banks consider social businesses as very risky assets and thus, the chances of getting money for this initiatives is usually low. Social entrepreneurship is perceived both by public authorities and general public as work integration social enterprises and it is expected to fulfil a work and social integration function for disadvantaged people. Social enterprises can use like any other employer the tools of active labour market policies. Extra costs related to their integration function are partly covered for people with disabilities from active labour market policies and not at all covered for people with social disadvantages. There is a growing need to have a legal recognition and support for social enterprises, esp. for those who employ people from socially disadvantaged target groups. P3 People, Planet, Profit works recently on a draft of legal support for WISE, based on analyses of legislation in other EU countries. The outcomes will be offered to the central government and political representation. Support structures for social entrepreneurship There are organisations that offer various types of support (training, consultation etc.) to social entrepreneurs, help raise awareness of this topic or try to garner support for this idea from major firms on the market (e.g. from banks). The most important support organisations in the social economy undoubtedly include the Union of Czech Production Cooperatives (cooperatives were historically the predecessors of social enterprises), the VIA Foundation (which operates the Academy of Social Entrepreneurship for NGOs), NESsT (which provides consulting and training combined with financial contributions for NGOs), Fokus Praha (which supports the social firms model adapted from the UK) and last but not least P3 People, Planet, Profit, o.p.s. (which provides consulting and training to start-ups and widely promotes social entrepreneurship). Unfortunately, there is still a lack of support organisations for social enterprises, especially those free of charge. The development of a network of regional support centres for social enterprise start-ups was highly recommended by experts in 2008 when the Ministry of Labour and Social Affairs prepared two interlinked grant schemes financed from ESF and ERDF. Most of the social enterprises exist due to the Structural Funds financial support but an increasing number of these start-ups close because they lack finances when their grant finishes. If they are offered advice, mentoring or coaching support, their sustainability would increase. Another support that is missing should be focused on social enterprises that exist already a few years and need aftercare to safeguard their functioning. According to the agreement from December 2012, responsibility for social entrepreneurship at the central level stays at the Ministry of Labour and Social Affairs, resp. its employment department. Another ministry responsible for this area 2

3 is the Ministry of Industry and Trade that has incorporated social entrepreneurship into the Strategy of SME Development and will promote it together with CSR. Even when there is an official assignment, in practice there is a lack of cooperation at the central level. Social entrepreneurship is going to be supported in the new programming period and it is recently incorporated into 5 operational programmes (OP Employment, Integrated OP, OP Prague, OP Industry and OP Agriculture). Even when social entrepreneurship in the Czech Republic lacks a political support, there is a growing interest of municipalities and regions. A strategy for social entrepreneurship at the national level is badly missing and its development is not at the agenda of any ministry or political party. A decision for the development of the strategy should be made what aims have to be fulfilled primarily by social entrepreneurship whether it is employment, social inclusion, local development or their combination. This prioritisation would enable to develop appropriate legislation and support mechanisms. The basic problem at the level of government is that the state lacks the definition of a status of a social enterprise that would justify the use of support from the state, as well as it lacks the guarantor, the bearer of this recognition. Experience from other countries shows that this definition should rather come "from below" - from the reality of social enterprises in the Czech Republic than from the state administration (or in a close cooperation). For official purposes, a system of certification, which would clearly say who is entitled to the support, would be most appropriate. The Union of Czech Production Cooperatives recommends that besides the definition of a status there was also (a regularly updated) list of certified subjects, not only for control and other official purposes, but also for the credibility and transparency of the sector. In order to optimally provide the state support to social enterprises, it is also necessary to establish a monitoring mechanism to carry out its supervision role by which bodies were given support and how do they develop. Concerning the activities at the ground level, there exists since 2009 the Thematic Network for Social Entrepreneurship TESSEA, its predecessor being the EQUAL thematic network for social economy. TESSEA has more than 260 members, both legal persons (organisations) and natural persons (individuals). It is focused mainly on raising awareness, disseminating information and communication with policymakers. A club for social entrepreneurs has been created in Both TESSEA and club have not its own legal entity and are coordinated by a public benefit organisation P3 People, Planet, Profit that coordinates also a network of ambassadors for social entrepreneurship. To sum up the situation in the Czech Republic, social entrepreneurship is on the rise with growing interest of public authorities and civil society. Systemic support structure with regional branches is badly needed because it would help to stabilise the existing social enterprises and help with the development of the new ones. 2. Other programmes for employment of disadvantaged groups (using the example of youth unemployment) Youth unemployment in the Czech Republic The youth unemployment rate in the Czech Republic is not so high as in other EU countries, but this problem has grown in the last 5 years. In 2008 the youth specific unemployment rate (younger than 25) was 9.9 %, in %. 3 3 Youth specific unemployment rate = the proportion of young unemployed economically active group in the same age group. 3

4 This high rate is due to the vulnerability of young people in the labour market and their low economic activity. The most significant problems on the labour market faces the group of graduates, especially those who are leaving upper secondary schools. This aspect of youth unemployment in the Czech Republic is caused by a high number of jobseekers and low number of jobs. Employers prefer to recruit persons with higher qualification. Jobseekers college graduates have lowered their work demands (especially wage) and they are willing accept worse jobs. The main disadvantage of young people in Czech Republic lies in a lack of practical experience and lack of working skills. The Czech education system is not able to provide students with working skills, there is lack of practical training, etc. On the other hand, it is often a problem of career choice, especially when choosing the appropriate school specialisation. This fact leads to a surplus of graduates in the field of low demand for labour force and vice versa shortage of young workers in technical fields. Solving the problem of the high youth unemployment rate is very important. It is essential that young people acquire work habits as soon as possible after leaving school. Otherwise, their ability to work highly decreases. In future the Czech Republic will concentrate on: 1) consistency of initial education and labour market needs; 2) the acquisition of work skills at schools; 3) cooperation among schools and employers and labour market services. Support youth employment through social enterprise As mentioned above, we can see the main cause of youth unemployment in a lack of their working experience and mismatch between their skills and skills needed by employers. In the major population this problem should be eliminated by optimal settings of education system and social enterprises can be used only for limited initial training. The role of social enterprises in the promotion of youth employment is growing with the accumulation of disadvantages of young people. Especially the youth from disadvantaged sociocultural environment have problems with integration into the labour market. They have problems with qualifications as well as with working skills and habits. For young people from unemployed families it is often difficult to accept a job as the main financial resource and perceive work as a social value. So they need more than to reconcile their education skills with labour market demands. We can see a great opportunity to use social enterprises as a tool to eliminate sociocultural disadvantages of young people, especially for those who come from socially excluded background. Social enterprise in addition to getting a job can also provide them with social therapy and chance to get and keep a basic work and social habits. Two examples of current measures to promote (youth) employment Practice for young people up to 30 years This measure combines contribution on wages for the employer who has employed young jobseeker with contribution to cover costs of initial training of young employers. It is provided by the Labour Office. Wage contribution can be provided for one year, if the employer employs a jobseeker who is younger than 25 years or is a college graduate under 30 with no working experience. Initial training contribution is intended to cover wage costs of a worker who teaches the young 4

5 employee ( mentor ). To ensure the fulfilment of the objectives a plan of practise is created with description of each step and skills that young people should get. This measure provides young people with practical experience directly in the work place in the standard employment relationship. We believe that it is very important that the young people get work habits (including wage) that he/she didn t received at school, in the real labour environment. Because there is no restriction on the legal form of the employer (moreover social enterprise is no special legal form in CZ), this measure can be used as a support for the social enterprises. This measure started in July 2013 and suitable employers are currently being selected. The measure is of great interest. Sharing jobs This measure is being prepared in these days. It will have the same schema as the measure mentioned above with some differences. The main difference is the goal of this measure. Sharing jobs aims at three target groups that are disadvantaged at the labour market. At first, mentor will be a person who approaches the retirement age only, so he/she will be able to retire after the end of the intervention. The new employee will be recruited from unemployed young persons or from a group of persons who have been out of the labour market for a long time (e.g. parents). On one hand, this measure strengthens the job security of older persons, on the other hand it provides a job practise to the youth or parents entering the labour market. 5