ERTES IN SPAIN –Temporary redundancy COVID 19

Temporary redundancy schemes for companies and businesses and how they affect workforce

CPM LAWYERS 18-03-2020

ERTEs are likely to affect millions of employees in Spain during the Coronavirus crisis

The ERTE is a legal instrument that allows businesses and companies facing a temporary financial crisis to unburden themselves of staff costs by making the workforce redundant until conditions change and it is feasible to take them on again, while at the same time providing benefits to the workers so that they are not deprived of their income, receiving a significant part of their normal earnings from the State Social Security funds.

HOW THE ERTE WORKS

During an ERTE workers continue to be contracted to their employer but lose the right to be paid their wage or salary (as well as extra payments and holidays) directly by the employer.

As they are still employed, staff have no right to a redundancy payment. This is one of the main features which differentiate the ERTE from the ERE (a permanent redundancy scheme which is entered into when companies face insurmountable difficulties which oblige them to lay off the workforce).

In case of ERTE, when the temporary situation which has caused the ERTE is overcome, they are automatically taken on again under the same conditions as before.

The employer must justify the application of an ERTE by reference to “economic, technical, organizational or production reasons, or to situations of force majeure”. In the case of the coronavirus crisis it is the latter.

DURATION OF THE ERTE

It is, by definition, temporary, and no minimum or maximum period is established by law.

For as long as it lasts the time elapsed counts towards the calculations of length of employment and, if they become relevant, any eventual redundancy payment.

In addition, the application of an ERTE is retrospective: if a business files an application on 17th March it will be backdated to the date on which the cause of the temporary lack of business occurred, in this case the day of the declaration of state of emergency.

PAYMENT OF THE WORKFORCE

Usually, workers affected by and ERTE are entitled to claim unemployment benefit for the duration of the scheme if they have made Social Security Contributions at least 360 days in the last 6 years.

The Spanish Government has modified this and ALL workers will be entitled to claim for unemployment benefit even they do not meet that requirement.

The amount received is 70 per cent of their basic salary for the first six months and 50 percent form then on. The percentages are applied to the average of the last six months’ salary.

For those who continue to work under the terms of an ERTE but on a reduced timetable, the benefit will be applied to the part of a full salary of which they are being deprived. So if an employer reduces working hours and salary by 50 per cent, the employee will continue to receive half of his or her salary, and then 70 per cent of the other half in unemployment benefit.

How long does the unemployment benefit last?

In normal conditions unemployment benefit payments last for two years.

In the case of workers whose hours and pay are reduced rather than being scrapped, that period can be longer.

When can the worker claim?

Employees may claim their benefits the day after their suspension or partial suspension from work begins.

Claims must be registered within 15 days; but with the COVID-19 crisis the SEPE “ServicioPúblico de EmpleoEstatal” will register the applications automatically.

Social security contributions

The decree law, published by the BOE, specifies that employers with less than 50 workers with a temporary employment regulation file (ERTE) due to force majeure linked to Covid-19 are exempt from paying the payment of quotas to the Social Security of their employees. The rest of companies – with 50 workers or more – will have to pay 25% of contributions. Until now, during the ERTE, the affected employees received unemployment and employers paid for their contributions.

Can workers be made permanently redundant during an ERTE?

In theory, yes. But, in order to protect the workers’ interest, Spanish government banned the companies to dismiss

Thus, after filing the ERTE(which implies certain advantages for them) the employer is obliged, once the activity is recovered to maintain the previous workforce for a minimum of 6 months.

Can the self-employed benefit from these measures?

Yes, the royal decree contemplates that the self-employed with employees can present an ERTE just like the companies.

If you are a company or business in need of legal advice regarding this matter or wanting to file the ERTE in Spain, do not hesitate to contact CPM LAWYERS.