COVID Furlough ERTE Spain Update
During this COVID crisis companies in Spain of all sectors and sizes are turning to furlough or ERTE procedures (“Temporary Employment Regulation Files” or furloughs) to face the situation. Almost four million employees got furloughed under these procedures until the first half of April according to data released by the Spanish Government. This post provides an Update on the COVID Furlough ERTE Spain procedures.
Through an ERTE the company suspends the employee’s employment contract or reduces his workday (with the subsequent proportional salary cut) because of force majeure or for economic, technical, organizational or production reasons. The employee is not fired, but the employment contract is temporarily suspended, i.e. furloughed.
How does that affect the employee? How much and when will he earn? Will he be entitled to vacation? Here are some questions and answers for those affected, employers and employees alike.
What makes an ERTE related to Covid 19 different?
Given the state of alarm to deal with the corona virus and the closure of many businesses, the Spanish government approved the Royal Decree of March 17. This Decree established exceptional measures for the ERTEs. It streamlined the procedure and made its requirements more flexible.
The reasons for justifying an ERTE for Covid 19 are the suspension or cancellation of company activities, the closure of establishments, restrictions on public transport, the lack of essential supplies or extraordinary situations due to contagion of the workforce or the application of preventive social distancing.
This type of ERTE can be maintained during the state of alarm. It has advantages for the employee, for example that it will not be necessary to have a minimum contribution time to be able to apply for unemployment payments. In a normal situation it is necessary to have at least worked 360 days in the last six years previous to the dismissal. However, during the alarm state this requirement has been removed.
Furthermore, the time in which the unemployment benefit is received will not count for the purposes of consuming the maximum benefit period established for the employee. It will not count or be deducted for future benefits.
During the ERTE related to Covid 19, employees will not be deregistered from Social Security, and according to the exceptional measures approved, the company may be exempt from paying social security contributions.
These furlough measures related to the health crisis, with the aforementioned benefits, can be divide into two types:
- Force majeure, for businesses closed because of the state of alarm (this type requires administrative authorization from the local labor authority or the Ministry of Labor if the company operates in more than one Spanish community); or
- ERTEs for organizational, technical, economic or production reasons, but also related to Covid-19. This last type of furlough is the one that companies generally used until before the crisis. But now the application periods have been shortened and their procedures have been made more flexible. Furthermore, these do not require administrative authorization but are negotiated with the employees’ representatives (if they exist or an ad hoc commission created, which has also been regulated).
What is the difference between a suspension of employment and a reduction in working hours within the ERTE procedure?
The ERTE may involve suspending the contract or reducing working hours. In the first case, the employee’s obligation to (go to) work is suspended and for the employer, his obligation to pay the salary is suspended. From the moment the ERTE takes effect, the employee will not collect salary but will access the unemployment benefit.
In case of a reduction in working hours, the employee will work less and earn less and receives unemployment benefit for the hours not worked. The reduction in activity can be between 10% and 70%.
Once the state of alarm ends, the employee should resume his usual daily working hours and salary.
As of when collects the employee unemployment benefits from the ERTE? Do I need to request it?
In the case of ERTE due to force majeure, the date when work stopped as a result of the situation caused by the Covid 19 is the effective date. In any case, the affected employees must receive a certificate from the company stating the cause and the date of effect of the ERTE.
The State Public Employment Service (SEPE) has established a procedure that allows the processing of unemployment benefits in the Covid 19 ERTE for all staff applied for by the company (thus not by the employee as normal). In this case, the employees affected by the ERTE of the state of alarm do not have to submit any application, the company will provide the necessary information to the employment service for the payment of benefits. This is another difference with the ordinary, standard ERTE.
How much does the employee earn in a suspension ERTE?
The unemployment income is the same as in the ordinary ERTE, that is, the affected employee will receive an amount of 70% of the regulatory base (taking as a reference the 180 days prior to the ERTE date). In ordinary ERTEs, the employee receives 70% of the base for the first six months and, from the seventh, 50%.
Covid 19 ERTEs are not expected to last as long, since in principle they will only remain during the state of alarm. However, minimums and maximums are set, which vary depending on whether the beneficiary has children or not.
The minimum without dependent children is 501.98 euros per month and, if with one or more children, that amount increases to 671.40 euros per month. The maximum benefit is, without children, 1,098.09 euros per month; with a dependent child, 1,254.96 euros per month and with two or more children it amounts to 1,411.83 euros.
How much do I earn if the ERTE is a reduction in working hours?
In the event of a reduction in working hours (a few hours a day or for a few days a month), the employee will receive part of the salary and also part of the unemployment benefit, equivalent to the reduction. For example, if because of the ERTE the working day has been reduced by 50%, the amount of the benefit will be 50% to what it would have corresponded in case of full-time unemployment. It the ERTE would have affected the month of March 2020, the affected employee would have the right to receive the unemployment benefit for 16 days (15.5 days, equivalent to 50% of the 31 days the month has). The unemployment service usually rounds up the benefits, so that fractions equal to or greater than 0.5 give rise to an additional day, while those equal to or less than 0.4 are rounded in reverse.
How does the procedure work?
The company must submit a request to the competent labor authority with a report indicating the loss of activity as a result of Covid 19 and must communicate the ERTE request to the employees. The decision of the labor authority will be issued within five days from the request (instead of the 7 days established in the normal procedure) and is limited to verifying the existence of force majeure.
How long can an ERTE last?
The ordinary ERTE has no specific duration. ERTEs because of Covid19 are to last during of the state of alarm.
Can the company apply for an ERTE that affects only part of the workforce?
Yes, it can. Take fast food companies for example. By allowing home delivery during the alarm state, the company can carry out an ERTE that affects the part of the staff that serves food within the establishment.
If I am affected by an ERTE, do I still get holidays? And what about my extra pay?
During the time that the employee is furloughed he does not generate holidays, nor does he generate the proportional part of the extra payments.
How does an ERTE affect the employee who had already reduced his workday for other reasons?
The employee with already reduced working hours for childcare and who are further reduced in working hours because of furlough, will have the right to have the unemployment benefit calculated as if they had been working a full workday.
If you have any further questions or remarks with respect to this “COVID Furlough ERTE Spain Update”, please do contact us by calling 0034 610 739 364 or write an email to email@example.com