Covid-19 | Update temporary lay-offs and short-time working (ERTE)

The Spanish government announced additional measures for companies that apply the temporary termination of employment contracts or the reduction of working hours as a direct consequence of the COVID19 crisis (ERTE Force Majeure). Here is a summary.

Additional measures

  • The ERTE Force Majeure is no longer dependent on the duration of the current state of emergency but will automatically continue until 30/06/2020;
  • Companies can maintain the ERTE until that date and in the meanwhile still gradually reinstate partially or fully some or all of the employees;
  • For employees returning to work, there is an exemption on employer contributions of 85% in May and 70% in June for companies with less than 50 employees (for companies with more employees, this is 60% and 45% respectively);
  • For those workers who do not yet return to work, there is an exemption from employer contributions of 60% in May and 45% in June for companies with less than 50 employees (and 45% and 30% for companies with more employees);
  • Companies that remain completely inactive will benefit from the current exemptions (100% and 75% respectively);
  • Companies with more than 50 employees applying an ERTE Force Majeure are not allowed to pay dividends regarding the current tax year;
  • Companies from severely affected sectors may be able to extend the ERTE Force Majeure after 30/06/20 (the government will decide on this later);
  • Companies that are not in these severely affected sectors and wish to extend the ERTE after 30/06/20 must agree an ERTE for productive, organisational or technical reasons with their employees (without exemption from employer contributions).

Maintaining workforce

One of the conditions of the ERTE Force Majeure was that the workforce must be maintained for 6 months after the ERTE ended. This caused a great deal of unrest among the entrepreneurs, as there was no clarity as to how this was to be carried out. Some clarity will be given now:

  • Companies that have made use of an ERTE Force Majeure are not allowed to dismiss employees for 6 months after the end of the ERTE;
  • Dismissal for disciplinary reasons, voluntary resignations, death, retirement, incapacity for work and the expiration of temporary contracts are allowed;
  • The period of 6 months begins to count from the moment the first employee returns to work;
  • In the event of non-compliance with this condition, the exempted employer contributions of all employees must be repaid (plus a surcharge of 20% and interest);
  • An exception is made for companies that can demonstrate that they are at risk of bankruptcy.