What does the extension of Spain’s ERTE furlough scheme entail?

After several days of negotiations, the government, unions and employers agreed on Thursday to extend the ERTE furloughing scheme for companies affected by the coronavirus crisis until September 30.

Under the system, companies suffering losses from the Covid-19 pandemic and the confinement measures can temporarily send home workers or reduce their working hours. Thousands of businesses have filed for ERTEs since the Spanish government introduced a lockdown in mid-March.

This is the second time that the scheme, which was due to end on June 30, has been extended.

Although the state of alarm has come to an end, businesses will continue to be given exemptions and most of the conditions of the current scheme will remain in place, such as the ban on hiring new workers. During the next three months, companies will not be able to lay off workers for objective reasons nor lift the suspension on temporary contracts. What’s more, workers on an ERTE will continue to receive unemployment aid.

The Spanish Cabinet is set to approve the extension of the ERTE scheme on Friday.

What does the extension agreement entail?

Under the agreement, the ERTE furloughing scheme, which was approved under the state of alarm, will be extended until September 30. This means that ERTEs requested for reasons of force majeure by companies that have not yet reopened will remain in place. The agreement also opens the possibility of extending the scheme to companies that are forced to close again due to a fresh coronavirus outbreak.

What exemptions will businesses receive?

In the case of total ERTEs for causes of force majeure, where all employees have been sent home, companies with fewer than 50 workers will receive tax exemptions of 70% in July, 60% in August and 35% in September. If a company has more than 50 workers, it will be relieved of paying 50% of employer contributions in July, 40% in August and 25% in September.

In the case of partial ERTEs, where some workers have returned, exemptions also apply. In businesses with fewer than 50 workers, companies will receive exemptions of 60% for employees who have returned to work and 35% for those who remain suspended. In businesses with more than 50 workers, the rate is 40% and 25%, respectively.

Do the exemptions apply to active businesses?

Yes. Companies that are back in business but have to close again as a result of a coronavirus outbreak, will not only be able to apply for an ERTE for force majeure, they will also be relieved of paying 80% of employer contributions, if they have fewer than 50 workers, and 60%, if they have more than 50 staff members.

Does the agreement apply to ERTEs for objective reasons?

Yes. For the first time, companies that declare ERTEs for objective reasons (technical, organizational, economic, or relating to production) will receive exemptions. The goal is to transition companies on ERTEs for force majeure to ERTEs for objective reasons, given that the state of alarm has come to an end. This means that companies will have to begin to reincorporate workers. The objective is to prioritize reduced working hours over temporary layoffs.

Will workers on ERTEs continue to receive unemployment support?

Yes, the unemployment aid associated with the scheme will remain until September 30, with the exception of permanent seasonal workers, for whom unemployment benefits will be extended to December 31.

What are the limits on businesses?

Companies on an ERTE will not be able to do overtime, and will only be allowed to hire new staff or outsource work if their staff members cannot do it themselves for justified reasons. Failing to meet these conditions will result in fines. What’s more, businesses that are headquartered in a tax haven will not be able to apply for an ERTE for objective reasons.

Do businesses have to maintain jobs?

The agreement extends the commitment to maintain employment for six months for companies that have declared an ERTE for objective reasons. For businesses that are receiving exemptions associated with this type of ERTE for the first time, the six-month deadline is calculated from the date the new decree comes into effect.

Can workers be laid off for objective reasons?

No. The agreement maintains the government’s veto on layoffs for objective reasons until September 30.

What will happen with temporary contracts?

The end date of temporary contracts, including training, handover and substitution contracts, will remain on hold until September. In practice this means that these contracts are being extended to that date even if the employer does not wish to do so.

English version by Melissa Kitson.