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Omnibus bill – Second package of measures

14 Apr Omnibus bill – Second package of measures

Newsletter COVID-19. Number 9

Escaldes-Engordany, April 13th

The health emergency situation caused by the pandemic of SARS-CoV-2, also called COVID-19, continues to pose large challenges for the Principality that, due to the sudden prolongation of the confinement of the citizens and the border blockade of the country, must take economic and labour measures in order to be able to face this unprecedented situation.

In this sense, on April 12th, the Government presented the actions foreseen in the second package of measures on the new Bill of exceptional and urgent measures for the sanitary emergency situation caused by the SARS-CoV-2 pandemic.

That second package, with the administration’s words has the following objectives:

  • To protect the maximum number of jobs,
  • To preserve the production,
  • The application of measures based on shared responsibility and proportionality,
  • Guaranteeing the state of well-being.

 

The newest measures in this second package are the temporary Suspensions of Employment Contracts (hereinafter, STCT), or also called temporary regulation files (or ERTOS) and the reduction of the working hours.

The figure of the ERTO ” file for temporary regulation of employment“, is being used in the Spanish State under the name of  “issued by temporary regulation of Employment (ERTE)“, a mechanism foreseen by the Statute of workers in the neighbouring country, and whose purpose is to be able to disassociate workers from their work for a period of time due to the economic arrest caused by the COVID-19.

The intention of the mechanism is to reduce the expense burden of the companies affected by the pandemic and at the same time to preserve the employee’s workplaces for when a return to normality takes place.

With regard to the Principality, similar figures are foreseen in article 41 of Law 31/2018 on Labour relations, however, the validity of it has been suspended by the application of Law 30/2020 of Urgent measures or Omnibus Law and from what is specified in this new bill, will continue to be suspended creating a specific figure in this regard to deal with the current situation.

The set of new measures for the second package, in accordance with that presented by the Andorran Government are the following:

  1. LABOUR MEASURES

This second package of measures related to labour, is composed by two large blocs: the blocs of measures of continuity and the bloc of new measures.

The main features are the following:

ASPECTS THAT ARE MAINTAINED FROM THE FIRST PACKAGE OF MEASURES

Among the labour aspects referred to in the new bill, there are those that come from and remain from the first package passed on March 23rd.

  • Continuity of employment contracts despite the suspension of the business activity by the health emergency situation.
  • Non-application of the procedure of suspension of employment contracts by fortuitous case or force majeure envisaged in the Law on Labour relations, in the event of temporary suspension of business activity by the health emergency situation and the fact that they are considered without effect if they have been requested.
  • The non-application of the early warning deadline for modifying work schedules, as well as the company’s ability to change the roles and tasks of workers to reorganize for the COVID-19 situation.
  • The paid leave in case of absence to take care of the dependent children, while educational centres and extracurricular activities remain closed, with the same requirements as in the previous law. In this respect, however, given that the new law enters into force as early as May, and as activities open, there will be an increasing number of people who will be eligible for it, it is established that compensation by the Government cannot exceed the minimum wage.
  • In addition, the regulations give continuity to the unpaid time compensation system approved in the first package of measures and extends it not only to companies that have suspended their activity, but also those that have remained open and have had a decrease in business due to the health emergency situation. In addition, the hourly compensation for future work is still limited until December 31st, 2020 but without the limit of 3 months for each month of activity suspension.

NEW MEASURES: STCT OR ERTO AND REDUCTION OF WORKING HOURS

The bill includes the possibility of temporary suspension of employment contracts and reduction of working hours based on all cases in the principle of co-responsibility and proportionality.

This measure, applicable to salaried employees and assimilated workers may affect part or all the workforce, if they have been incorporated into the company prior to the Declaration, on March 13th, of the health emergency situation. In the case of self-employed workers, they must have initiated the activity before that date.

WHO CAN BENEFIT FROM THE “STCT “OR “ERTO” AND THE REDUCTION OF THE WORKDAY:

The figure of the “ERTO” or reduction of day can only be applied by the following companies:

  • Companies that have suspended their activity in a mandatory manner, as established by law or because they have voluntarily done so.
  • Companies that maintain a guard schedule.
  • Companies that, although open with authorization, can justify a decline of their turnover equal to or greater than 50%, comparing data with the month of April of the immediately preceding year.
  • Companies that, despite not being able to prove a decline of 50% or more of their turnover, can prove that the decrease of registered activity “makes it impossible” to maintain the social burden of wage-earners.
  • Companies with pending debts with the public administration and those of the winter season will be excluded.

APPLICATION PROCEDURE BY THE COMPANY

The initial applications for the STCT or for the workday reduction will be understood as authorized by the competent authority in labour matters if they are presented by the following companies:

  • Companies that have suspended their activity, either by force by the Government’s decree as well as voluntarily.
  • Companies that are subject to a guard schedule or permanence by decree of the Government.

 

On the other hand, they must be expressly authorized (considering the previous consultation period) the initial applications presented by companies that are open and authorized to open by the Government’s decree. This must be approved within a maximum period of 5 working days or it will be understood as approved by administrative silence.

Both types of applications must be made by providing a temporary employment contract suspension or workday reduction file to the competent labour authority, the following documents must be included:

  • File requesting any of the following modalities: temporary suspension of contracts, workday reduction not exceeding 75% of the time, or both at the same time.
  • Documents justifying the specific causes for the suspension of employment contracts or reduction of working hours.
  • Financial information for the previous full year.
  • Non-nominative relationship of workers affected by measurement.
  • The statement responsible for compliance with the requirements and conditions necessary so that the company can receive the temporary suspension.
  • Anticipated or estimated suspension schedule.

Likewise, the company must communicate any deviation on the present plan and supply the documents bi-monthly for the entire duration of the suspension or reduction of the workday.

Once the application for STCT or reduction of the workday has been tacitly or expressly authorized by the Ministry of Employment, the company must notify each of the employees affected.

IMPLICATIONS FOR THE EMPLOYER

The company or employer making a STCT or reduction of work hours will pay only 25% of the salary resulting from the reduction that applies to employees that have been subjected to such measures.

The Government will assume 75% of the remaining salary.

One thing that is clear, is that the percentage that depends on the company to pay, it will have to do so, even if they have to resort to the zero-interest rate credit financing program.

Therefore, the full salaries of workers who are subject to this temporary suspension or reduction of working hours are no longer paid, thus reducing the cost that this implied for the company.

IMPLICATIONS FOR THE WORKER

In this sense, we distinguish between:

STCT or ERTO

In the case of the STCT, in accordance with the draft of the bill, the person who is concerned about the temporary suspension of his employment contract is a matter of perception as follows:

  • The amount equivalent to the minimum interprofessional salary (€1,083.33) for the ordinary legal day or the proportional part.
  • In the case that the fixed wages of the is the salaried employee, bearing in mind the average for the last twelve months, is between the minimum inter-professional wage (1,083.33 €)  The average wage (€2,129.44)  and  double the average salary (€4,258.88),  the scale between the minimum wage and the fixed wages received by the salaried person will be reduced by 30%, 40%, 50%, 70%, 80% and 91%, respectively.

With regards to the direct involvement of the employee, the minimum wage is guaranteed, depending on the salary before the STCT or the reduction, which can raise the salary received in this circumstance to a maximum of €2,129.77 per month.

Considering the aforementioned, the law for example will contemplate a reduction of 20% in workers who have an average salary of (€2,129.44) and this figure onwards, the amounts of reduction can reach up to 50% for wages of €4,258.88.

From this amount on it is indifferent what is earned, the amount to be received will always be 2,129.77 euros. That is to say, if a person earns €4,258.88 and he gets an STCT or an ERTO he will receive €2,129.77 and if he earns €8,000, also.

Therefore, the maximum salary that a person can earn if he/she has been subjected to a STCT or ERTO is of €2,129.77.

In order to facilitate this complex calculation, below is the example of a salaried person who earned €1,600 and is affected by a STCT or ERTO:

  • Govenrment benefit: € 1,071.15 (67%).
  • Employer remuneration: € 357.05 (22%).
  • Salary and % earned: € 1,428.20 (89%).

Therefore, according to this example, the worker will end up earning 96% of their salary. Of the salary that he/she will end up receiving, the Government assumes 75% and the employer, the 25%.

That is to say, the worker receives 96% of the salary that was received before the STCT or of the reduction of workday and  of this  reduced salary  that will be received, 75% of the total will be  paid by the government (72% of the €1,536.64) and the 25% remaining will paid by the employer (24% of the €1,536.64).

Also, during the time the worker is under suspension of the employment contract:

  • He will be exonerated from going to his workplace while the suspension lasts, unable to be dismissed definitively during the application of the STCT.
  • Non-reception of the full salary during the period of the suspension.
  • The right to re-join the previous workplace with no loss of rights once the temporary suspension has expired.

Reduction of working hours

In the event of reduction of the workday, the benefit for the part of workday which is not worked is calculated in the same way that it has been exposed by the STCT and afterwards it is proportionally reduced.

However, in the event of a reduction in the workday, the employer will continue to pay the business part of the salary contribution, both to the General branch (7%) the retirement branch (8.5%), and the price the employees will retain, both in the General branch (3%) and the retirement branch (3.5%).

In addition, the regulations stipulate that people with reduced working hours may not perform extraordinary hours or work on compensation of the hours generated by the measures of the Omnibus Law of the past month of March. It is also foreseen that the periods of temporary suspension of employment contracts and the reduction of the workday will be taken into account for the purpose of calculating the seniority in the company, but they do not compute for the purpose of generating the payment right for the paid holidays.

APPLICATION OF THE MEASURE – STCT and reduction of working hours

The application of the measure is between the 1st of May and until 180 calendar days following the declaration of the Government, by decree, of the end of the situation of the sanitary crisis. In any case, this temporary situation cannot go beyond December 31st.

The Government foresees it will incur an expense of between 90 and 120 million euros between May 1st and December since they must assume part of the cost of this measure.

SUBSIDIES FOR SELF-EMPLOYED WORKERS

Subsidies will be granted to those self-employed workers who have their activity suspended, and whose quota is in accordance with the bases of 50%, 62.5%, 75% and 100%, a benefit of 1,012.91 euros monthly by the government that will be paid directly by the CASS.

Excluded from this benefit are self-employed workers with a 25% quota, people who are self-employed and at the same time during the previous month, were salaried employees; pensioners who receive a pension or a global salary similar to or greater than the previous benefit; directors of companies and those with a quota between 125 and 137.5%, because they receive a net income or an important business figure that does not justify the benefit.

On the other hand, the Government will also assume the payment to the CASS of the quota to the General branch (10%) of the benefits of self-employed workers.

  1. ADDITIONAL PROTECTION MEASURES FOR CITIZENS – leases and mortgages

RENTS and MORTGAGES – for persons affected by the STCT or reduction of working hours

At the same time, the bill aims to protect citizens who are negatively affected by these measures and in vulnerable situations.

In this regard, any person who suffers an STCT or reduction in the workday will have the right to the following:

  • A 20% home rent reduction.
  • Right to request a grace period in the payment of the mortgage quotas if the cost of this and the basic services exceed 5% of the money deposited by the family unit.

All these actions will be applicable for the duration of the contract suspension, or until December 31st, 2020.

ASSISTANCE IN RENTS – For businesspeople and the self-employed affected by the economic halt

In relation to the rents of commercial premises, both companies and self-employed workers will be able to continue having a series of discounts for the duration of the closure and during the reopening.

So, if the activity is open, the discount will be of 80% and if it is on duty it will be 100%. At the time of reopening, the activities that have been suspended the first month will continue with 100% of the bonus, the second 50% and the third 25%. If you have been on duty, the month of opening you will receive an 80% discount and the second a 40% discount. Finally, if it has been open, the reduction in the first month will be 50%.

  1. MEASURES IN THE AREA OF SOCIAL SECURITY

The measures contemplated in the regulations concerning social Security, are those that were already taken in the first package of the omnibus measures approved last March. Thus, the economic benefits for temporary disability due to isolation or diagnosis of SARS-CoV-2 will continue to be paid for both employees and self-employed workers and equating to benefits for the purpose of work-related injury or occupational disease (66% of the salary from the first day).

In parallel, based on the entry into force at the beginning of May of this Act,  it will only pay 100% of the salary to those who have interrupted their activity by isolation or contagion of SARS-CoV-2 if they work in the sanitary or socio-sanitary field, since the concept of essential services on the principle of the sanitary crisis as they gradually open up activities, ceases to make sense.

It gives continuity to the quota reduction measure for people that carry out a self-employed activity. Thus, it will be possible to continue hosting the contribution base equivalent to the minimum wage for freelancers who declare that they have a significant reduction in the activity until the end of the health emergency. The temporary suspension of the contribution of people performing an activity on their own, may continue to be made effective for self-employed workers who have suspended their activity in the period decreed by the Government.

Finally, the financing of the business part of the salaried people’s contributions will extend to all the people who have stopped working due to the health emergency situation, while the government does not declare the end of this situation, whether the activity has been suspended or not, totally or partially.

  1. CONCLUSIONS

From this perspective we understand that these measures have been taken with the intention of alleviating the economic crisis associated with this Health crisis of the COVID-19.

We understand that the measures are aimed at tackling the crisis, trying to avoid the destruction of both the employment and business fabric, which would entail, a prolongation of the departure of the present crisis with the next stages of deconfinement and recovery.

The team at ANCEI will continue to keep you informed, in order to assist you in everything related to the exceptional measures resulting from the pandemic COVID-19.

The professional advisory team and economists of ANCEI are at your full disposal to resolve any doubts regarding the ERTOs or labour reductions.

Cordially,

Jaume Torres Segura

Partner at ANCEI