Talks stall on temporary furlough scheme extension

Labour Minister Yolanda Díaz greets Antonio Garamendi of the CEOE employers federation. Photo: EFE via El Confidencial
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The coalition government has been forced to delay legislation to extend through end-September a special ERTE temporary work furlough program implemented to allow Spanish companies to temporarily lay-off employees in order to cope with the economic downturn caused by the coronavirus crisis.

Labour Minister Yolanda Diaz failed to convince representatives of the Spain’s CEOE and Cepyme employers associations in two separate meetings on Monday and Wednesday this week to agree to a three-month extension of the ERTE program under new conditions beyond end-June.

ERTEs, the Spanish acronym for Expedientes de Regulación Temporal de Empleo (Temporary Employment Norm Filings), are procedures whereby a company in an exceptional situation seeks authorization to temporarily layoff workers, suspend contracts or reduce working hours when experiencing difficulties that could threaten the company’s solvency.

As part of its response to the coronavirus crisis, the coalition government legislated a special ERTE program that allows Spanish companies to temporarily furlough employees through the 30th of June, during which time the employees are eligible to receive unemployment benefits paid out by Spain’s social security system. At the end of that period, the companies are to hire back the workers onto the company payroll if the ERTE program is not extended.

► News Sources: Público, El Confidencial and El Diario …

In its bid to secure an extension of the ERTE program, the coalition government has proposed changes to the program that would reduce available exemptions on requirements for businesses to pay into the social security unemployment fund and compel many businesses currently eligible under the program to hire back all their workers on at least a reduced-hours basis under the “new normalcy” period that is set to begin on 1st July.

The government’s finance and economic ministries say the social security coffers cannot sustain the blanket payouts of unemployment benefits until the government is assured of European backing of the ERTE program, which has been delayed in Brussels. In April, EU finance ministers agreed to a €540 billion euro package to support member states, companies and workers in the coronavirus crisis, including funding for temporary worker furlough schemes such as Spain’s ERTE program.

But the European financing has been delayed because the Netherlands, leader of the so-called “Frugal Four” group of countries, wants to leave the payments until the autumn, following a final agreement on how the funding is to be jointly financed and whether or not there will be restrictions on country’s ability to tap the funds.

Business leaders walked away from the talks this week without committing to the proposed changes to the ERTE program. The government says its cabinet-level Consejo de Ministros will not put forward legislation regulating an extension of the ERTEs until it secures the buy-in of both Spain’s major business associations and the country’s top labour federations.

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