Temporary lay-off or 'furlough' scheme renewed until January 31

A meeting between the government and the Spanish Business Organisations Confederation (CEOE) led to a unanimous agreement – albeit after a wide and heated debate – to continue with what is known in Spain as the 'ERTE' scheme until January 31, 2021 inclusive.

Some new provisions have been included: As well as 'furloughs' being justified by force majeur, where virus conditions mean temporary closure or significant loss of earnings, an 'ERTE' can be declared because of 'impediment or limitations in activity'.

This means any company is eligible, in any sector – not just those considered 'non-essential' and not obliged to stay open even in the event of a lockdown, locally or nationally – and applies not only to those affected by Spanish authorities' restrictions, but also those imposed by foreign governments.

As an example, firms which live off international tourism may be able to take advantage of the temporary lay-off scheme if quarantine measures and other limitations abroad prevent holidaymakers from visiting Spain.

The 'furlough' scheme means companies which successfully apply will be exempt from paying Social Security contributions on behalf of employees until they fully reopen, or until the end of January if this is sooner.

Where the firm has 50 or more members of staff, it will be exempt from paying 90% of Social Security contributions – the payments made by employers for their workers which cover State benefits and their eventual retirement pension.

Companies whose normal activity is limited rather than completely curtailed will get exemptions ranging from 100% down to 80% of their Social Security payments between now and the end of January if they need to 'furlough' employees, and those which have 50 or more staff members can apply for reductions of between 90% and 70% of these payments.

Staff who have been temporarily laid off are entitled to dole money, even if they have not accumulated enough in the 'pot' to claim this normally.

Dole money is 'built up' through working – four months of employment accrues one month of jobseekers' benefits, up to a maximum of two years.

The amount payable, normally, is 90% of the employee's gross salary for the first six months, and currently, 50% of it thereafter, although the government has stated it is in favour of returning this figure to 70%.

For the 'furlough' scheme, employees receive 70% of their gross salary from day one until they are back at work.

The idea behind Spain's dole system in general is that a worker who suddenly finds him- or herself out of work has time to deal with the shock before thrusting themselves on the job market when they are not yet mentally prepared, to search for the right job, and to retrain or study if needed.

As the benefits are capped at two years and, once they expire, need to be built up again through working before the employee can claim again, this removes any incentive to 'live off the State' and avoid seeking a job on the basis that they are earning nearly the same as they did through working.

The high, but finite, amount payable means money worries are lessened during the search.

Temporary lay-offs mean firms whose income is reduced, meaning they cannot afford wages, or whose activity shrinks to the point where they do not need their full quota of staff, will not have to make anyone unemployed, nor be forced to shut for good due to running out of money by continuing to keep their workers on a full wage.

Initially, the government wanted to exclude bars, restaurants, nightclubs and retail from the extension until January 31, but the CEOE persuaded negotiators that these make up some of the most vulnerable traders, as they are frequently small, family-run entities rather than chains.

The main debate was over the percentages of Social Security payment deductions, which Spain's major unions were pushing to be as high as possible.

'ERTEs' on this basis are only permitted where the reasons for them are directly related to the pandemic, and those classified as being 'especially affected' by the Covid-19 crisis will have their 'furlough' schemes automatically renewed until the end of January.

The same applies to businesses or industries which rely upon those directly hit by the virus for at least 50% of their income – in this case, they will be entitled to 85% off their Social Security payments, or 75% if they have 50 or more employees.

Spain's government has agreed with the CEOE and unions that, as before, dole money claimed by temporarily laid-off workers will not affect any they have already accumulated, and an 'extraordinary' version of dole payment will be set up for people on what is known as a non-continuous fixed job contract – where an employee is in a permanent position with a company, but is drafted in and sent home again according to workload; a situation in which hotel workers or teachers at private academies, for example, may be in.

'Furlough' payments are compatible with part-time working in some, specified cases, the government has ruled, and temporarily laid-off employees will be given priority when accessing professional training courses.

Extending the scheme means most of the existing features continue to apply: Redundancies are not permitted, firms whose workers are on 'ERTE' are not permitted to pay dividends to shareholders, and they are required to guarantee a 'furloughed' employee's job for a minimum of six months after they return to their post.

Although, at present, the scheme has been given an end date of January 31, this does not mean it will not continue – it has already been renewed several times when it was considered the need arose.

Minister of work Yolanda Díaz said earlier this month in a TV interview: “It would be absurd to put dates on it...they should remain in place for as long as they are necessary, and they're here to stay.”