||Social policy interaction with functioning of the labour market is a highly topical and often discussed issue; its practical impact markedly influences the economic performance of a country. Relatively high unemployment and low economic participation persisting in Europe is often attributed to institutional barriers. Many factors of influence may be included here – social policy instruments, system of taxing labour, collective bargaining on wages, employment legislation etc. To what extent may be relatively high unemployment in Europe caused by labour market rigidities? To what extent give different social policy institutions raise to labour market inflexibility? What is the current situation in the Czech Republic compare to other countries? Submitted research proposal’s aim is to answer these questions based on the results of economic research and consequently outline possible solutions of these issues.