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Coronavirus – Income protection – Europe

  • United Kingdom
  • Coronavirus - Workforce issues
  • Employment law

25-03-2020

The COVID-19 global pandemic has moved faster than anyone could have anticipated and governments across the world have rushed to shore up protection on two key fronts: the health of the public and the economy.

In the UK, measures were introduced by the Chancellor on 20 March 2020 to protect the wages of workers by way of the Coronavirus Job Retention Scheme: (see our briefing- Coronavirus Job Retention Scheme - UK).

The UK scheme introduces the concept of ‘furloughed workers’, putting employees on special leave due to the special needs of the employer. During this time, affected employees are able to keep their jobs and be paid 80% of wages by the government (up to a maximum of £2,500 per month) for a period of up to three months (with the possibility of extension).

Some countries have yet to determine what measures they will introduce – and the extent of such measures. In this briefing, we provide an overview of the types of actions being taken in some European jurisdictions to preserve jobs and to keep companies afloat pending a resumption in services.

The measures taken in some countries reflect the approach of the UK government – to furlough employees and maintain a proportion of their wages paid by the government for a specified period of time.

COVID-19: what income protection measures are available in Belgium?

It is also possible to reduce working hours in Belgium, [h2 tag] The right to furlough workers in Spain where there is risk of unemployment for economic reasons. Companies that cannot continue to employ their workforce because of COVID-19 can invoke the temporary unemployment due to force majeure system. Different conditions must be met depending on whether the worker is white or blue collar and if met, the employment contracts of white collar workers may be suspended for up to 16 weeks and the unemployment office will pay direct to employees 70% of salary (capped at €2.754,76 gross) until 30 June 2020 (65% thereafter). The suspension of contracts of blue collar workers can be for up to four weeks and the same indemnities are available as for white collar workers.

COVID-19: what income protection measures are available in Denmark?

In Denmark, too, there is no right to place employees on furlough but COVID-19 legislation states that where private companies are at risk of having to terminate 30% of or more than 50 employees due to the pandemic, a reimbursement scheme (running for three months) will ensure that 75% of salary is paid by the government, the remaining 25% to be met by the employer.

COVID-19: what income protection measures are available in France?

In France the existing ‘partial activity scheme’ is being adapted to take account of the pandemic. Under this scheme, an employer must pay 70% of gross remuneration to the employee and the contract of employment remains in force during a period of closure/ stoppage of production. The government will reimburse the employer €7.74 (for companies with fewer than 250 employees) and €7.23 (for companies with 250+ employees) per unemployed hour with a limit of 1,000 hours per year and per employee. In this way, whilst there is no lay off scheme as such the partial activity scheme can be adapted to protect pay in the event of a closure of the office or cessation of production.

COVID-19: what income protection measures are available in Germany?

German legislation allows employers to implement temporary closure but employees must be paid their normal remuneration. Temporary lay off without pay is only possible if the parties have provided for this in the employment contract or otherwise by agreement. It is also possible under German law to implement short-time working and thereby reduce working time and remuneration. But only where the reduction in working hours is significant and other conditions are satisfied; provided short-time working is permitted by the employment contract, applicable collective bargaining agreement or a works council agreement. In such a case, a public subsidy partly compensates the employee for the loss in earnings.

COVID-19: what income protection measures are available in Italy?

Italy has introduced legislation to provide that if companies suspend or reduce their operations because of COVID-19, employees are entitled to participate in the existing supplementary salary scheme for a period of up to nine weeks to be taken between 23 February – 31 August 2020. The allowance is a state benefit and corresponds to 80% of salary (with a maximum set annually) due for working hours not worked. The employer does not have to pay additional social security contributions. Italy has also introduced a temporary ban on dismissals on economic grounds which is in force until 16 May 2020.

COVID-19: what income protection measures are available in the Netherlands?

The Dutch government is introducing new measures (the Temporary Measure for Job Retention (NOW)) which will apply to employers who have suffered a loss of turnover of at least 20% since 1 March 2020. Under NOW, employers must pay 100% of salary and not terminate any contract for business/economic reasons. The employer can apply for a contribution to wage costs of up to 90% of salary depending on the extent of the loss of revenue for up to three months (with a possible 3-month extension). The loss in turnover is determined retrospectively.

COVID-19: what income protection measures are available in Spain?

Some countries, such as Spain, protect the wages of employees who are infected by COVID-19 by way of sick pay. However, they do not provide for a similar furlough or lay-off scheme whereby employees continue to receive pay during the suspension. In Spain, if a company is forced to close due to government measures to protect against the pandemic, the employer is only obliged to pay social security contributions, not remuneration. Whilst a decree introduced in response to the pandemic allows companies to temporarily suspend employment contracts for prescribed economic/organisational reasons or for force majeure. employees must rely on state unemployment benefit.

What income protection themes are there for businesses around Europe?

As might be expected, what an employee is entitled to be paid in the event that the business temporarily ceases operations varies considerably from country to country.

Governments are varied in their approaches, from introducing entirely new concepts (e.g. furlough in the UK) and free-standing legislation to adapting existing laws to meet the present emergency.

The approach of the Netherlands in determining the impact on the business retrospectively and reimbursing up to 90% of salary depending on the business’s loss of revenue is interesting but may find businesses struggling to pay staff in the meantime.

By contrast, employees in Spain are entitled only to state benefits in the event of a business closure and a suspension of employment contracts, leading to likely economic hardship for workers. In Ireland too, lay off is possible but entitlement to pay will depend on the terms of the employment contract. If an employee loses their job/is put on short-time working or laid off, they must rely on state benefits (and/or redundancy pay, where entitled). An emergency social welfare payment (COVID-19 Unemployment Pandemic Payment) may be paid for six weeks and thereafter an employee must rely on jobseeker’s allowance or a short-term payment.

Many countries have adapted existing legislation to take COVID-19 into account and to either increase the sums due to employees/businesses, simplify procedures and/ or deem coronavirus as a ground for suspending activity. Others have started from scratch. The Dutch NOW scheme is a free-standing scheme intended to be an emergency measure to protect jobs.

Contact an income protection lawyer today

We have attempted to give a broad overview of the sorts of measures that some countries are adopting to protect jobs; however, this situation is constantly evolving. Should you require further information about the arrangements in place in a particular jurisdiction, our Employment Law team will be happy to help you.

Diane Gilhooley
Constanze Moorhouse
Hannah Wilkins