Confronted with the prospect of economic collapse in response to both the pandemic and restrictions put in place to protect citizens (e.g. quarantines, shop closures, and restrictions on travel), governments across Europe and elsewhere in the world are introducing special measures to keep businesses and their employees afloat. The following is a rundown of some of the measures European countries are enacting:
Austria has introduced temporary short-time working arrangements amounting to between 10% and 90% reductions in working hours on average that are supported by reimbursements from the state, and the option for a partially funded additional three-week holiday for certain workers in need of childcare.
In Belgium, in companies suspended for force majeure reasons workers are eligible receive 70% of their wages or approximately EUR 2,750 a month until the end of June.
In Bulgaria, companies can now ask workers to use up half of their annual entitlements for leave.
The Czech Republic is providing support to unemployed workers amounting to between 60% and 100% of their salaries. Measures have also been passed to assist the self-employed.
France has mandated paid leave, sick pay and short-time working arrangements.
Germany has extended its widely emulated short-time working programme and is now offering subsidised leave amounting to about EUR 2,000 a month for parents who cannot work due to school closures.
Italy is providing support to workers in businesses particularly hard hit by the pandemic amounting to 80% of their wages and comprehensive childcare support.
Businesses in the Netherlands that have suffered business losses of 20% or more can apply for compensation of up to 90% of the wages for their workers.
Polish businesses are able to reduce employee salaries by up to 50% or reduce working time by 20%.
Portugal allows businesses that have suffered revenue decreases of 40% or more the ability to suspend or shorten the working time of employees and receive state compensation for up to two-thirds of its costs.
Romania has introduced a similar compensation plan for companies and a paid leave entitlement for parents. In Russia, companies that have suspended operations must provide full pay to employees who cannot work remotely.
In Ukraine, employers can instruct staff to use up banked holiday time or to work remotely.
Spain has allowed companies suffering closure due to force majeure to cancel employee contracts, and employees can collect benefits as compensation.
Turkey has broadened its policies on short-time working and simplified the ability of unemployed workers to receive state benefits.
The UK has implemented a job-retention scheme that allows employees – who would otherwise be laid off – to be placed on "furlough". British companies can also claim 80% of wage costs or up to GBP 2,500 a month, and similar benefits are being offered to the self-employed.
Although these measures are positively affecting thousands of businesses and millions of workers across Europe, many businesses are still facing tough decisions. The most obvious option for many companies is implementing mass layoffs or redundancies.
Collective redundancies with an emphasis on Central Eastern Europe
Companies operating in the European Union that need to dismiss a large group of employees within 30 days must follow a specific procedure set down in an EU Directive, explains Katarzyna Dulewicz, a Partner in CMS Poland and Head of CMS's CEE Employment Group.
What type of companies does the Directive apply to? Generally, firms with 20 employee or more must adhere to the procedure, Dulewicz states, although companies should be sensitive to the following thresholds – firms with less than 100 employees who need to dismiss ten people or more; and firms that hire between 100 and 300 people, but need to dismiss 10% of its staff.
For larger companies of more than 300 employees, the procedure must be followed to layoff 30 or more people. In some cases , however, the procedure must be followed if you need to dismiss 20 people or more within a three-month period.
Also, companies should note that any recently signed compromise or mutual agreements with employees must also be added to the number of redundancies. Once the redundancy process gets underway, it can be lengthy. In Poland, for example, the process can take up to five months.
One reason is that companies must consult local authorities. But more importantly, they are obliged to consult and negotiate with staff and works council representatives. The timeline for these consultations do vary. In Poland, talks with employee reps need not last any longer than 20 days, and the failure to reach an agreement will not stop the redundancy process.
There are other differences in the ways that individual countries handle collective redundancies. In most jurisdictions, statutory severance pay amounts to three months salary, but in Hungary companies must pay up to six months; and in Slovakia, five months salary.
Outside of the EU and Central Eastern Europe, Russia and Ukraine recognise the concept of group redundancies, but each in their own way. Ukrainian law requires that a special procedure be followed if a company wants to dismiss 10% or more of its staff; and another process is used for dismissing 20% of a company's workforce within three months. In Russia, special procedures kick in for layoffs of 50 people within 30 days, 200 people within 60 days, and 500 people within three months.
Although redundancies are inescapable in some situations, Caroline Froger-Michon, a Partner with CMS France and Global Co-head of the CMS Employment Group, points out that in the current crisis many EU companies have turned to support measures to try to prevent business failures and mass layoffs.
Italy, for example, issued an absolute ban on dismissals for 60 days. Suspension procedures initiated after 23 February must be stopped, although this does not apply for dismissals for disciplinary reasons.
Netherlands created an employer-support instrument known as NOW that is only eligible for companies that agree to prohibit dismissals while receiving compensation. Portugal boasts a similar programme and in Poland companies receiving state subsidies are prohibited from dismissing staff. Spain has prohibited terminations until 9 April.
Short of issuing an official decree, France has made it clear that it highly recommends companies postpone any layoffs and will closely monitor companies that follow through with redundancies at this time. But even in countries that have not banned layoffs, pandemic-related hardships (e.g. quarantines, restricted postal and courier services) make it extremely difficult for companies to fulfill the necessary notification requirements for letting employees go.
Other countries are weathering the crisis by neither banning nor discouraging staff reductions. Germany, for example, has issued no such ban, reports Dr. Christopher Jordan, a Partner with CMS Germany and Global Co-head of the CMS Employment Group. Instead, Jordan explains, German companies are accepting state subsidies to implement shortened working time, the policy known as "short-time work". Remarkably, these subsidies do not carry the condition that a company must refrain from firing staff.
There are no restrictions regarding dismissals due to the corona situation. Therefore, only the general rules must be followed. The EU Directive requires that each country implement consultation ahead of any firings, and Germany's laws requiring works council input on any planned restructuring is even stricter than the EU standard.
If during its consultation, a company fails to receive confirmation from its works council over planned dismissals, the employer must then implement a statutory arbitration procedure. If the works council is not willing to participate in such arbitration procedure, the employer's last recourse is the labour courts.
that these procedures (works council consultation, statutory arbitration, and going to court) usually require physical meetings and access to a smoothly function judiciary that are impossible in the current crisis. In short, the COVID-19 pandemic make it nearly impossible for German companies to implement major restructuring.
However, there are options, explains Jordan. For example, the German Employment Secretary recently tendered the opinion that works councils can operate and render valid decisions virtually – that is to say, via a digital process or video conferences.
This opinion is not binding the labor courts. However, due to the current situation with business closures and social distancing, "virtual meetings" and "digital works council decision-making" might well be the only options at the moment. In this regard, Jordan recommends that the meeting occur over video conferencing (as opposed to a telephone conference call); that all standard rules for conducting these meetings are followed, such as the invitation process and so on; that the technology used allows for all participants to join in simultaneously and conduct discussions in real time; that all participants formally agree to this process and the technology being used; and that the technology offer security so that the proceedings cannot be observed by third parties.
Lastly, as with a physical meeting, this virtual consultation should result in a document that records the results of the negotiations and can be put into action.
Alternatives to mass redundancy
According to Katja van Kranenburg, a partner in CMS Netherlands, many companies are already looking to the end of restrictions and the worst of the current crisis and are anticipating a time when they will need their employees to seize opportunities in the post-pandemic economy. In short, many companies are willing to do whatever necessary to weather the crisis along with their employees.
In some countries, government subsidies are making it easier to keep staff in place. The Netherland's NOW programme, for example, which begins accepting applications on 6 April, will offer some companies subsidies of up to EUR 9,000 a month per employee to keep these workers on the books.
But if state largesse is unavailable, what can companies do to preserve their staff in the face of restrictions and plummeting profits? One answer is workforce adjustments, which includes temporary layoffs where employees are released under the proviso they will be rehired once the current emergency is over.
Companies can counteract diminishing revenues by temporarily lowering wages, which ensures workers a steady, if decreased income, and helps cash-strapped companies reduce overhead. Workers can be placed on various types of leave or asked to use banked holiday time for part of the emergency period. The ability of companies to get employees to use current holiday time will depend stipulations in the employment contract and whether employees have already made concrete plans for their 2020 vacations.
In addition, companies may be able to keep employees on the job by assigning them different roles (e.g. having warehouse employees perform administrative tasks that can be completed remotely), but this strategy depends on the versatility of both the company and the staff members concerned.
The short-time work strategy
An extremely viable alternative to redundancies, however, remains the tactic widely practiced in Germany at the moment: short-time work. According to CMS Germany's Christopher Jordan, short-time work refers to a "state-subsidised reduction in working time." In practice, it requires companies to reduce the amount of time employees are required to work and to pay these employees only for the work completed with competent authorities (i.e. the state) reimbursing the employer to some extent.
Short-time work is now implemented in many countries across the EU, although it is a German invention that was applied with great success as early as the 1920s. The EU embraced the policy after Germany's use of "short-time work" during the 2008 crisis, which kept German unemployment rates impressively low. Some EU countries have adopted the German model. Others have created an alternative that can be better described as "temporary unemployment". (In these countries, employees are laid off temporarily and supported by state assistance).
To qualify for short-time work, in many countries a certain percentage of a company's workforce must be affected by an unpreventable temporary loss of working hours that makes it impossible for the company to sustain wage levels. To prove their case, each employ must formally report this information to whatever government office that is responsible for the programme. In addition, in much of the EU, for short-term work to be adopted at a company, either the employees or the works council must agree. During the current crisis, in some countries it has been decided, that this consent can be arranged digitally.
If a company has no council or employee reps, it may need to appeal directly to employees. Consent is a must in these countries since a company that implements a short-term working arrangement could still be liable to pay its workers their full salaries if there is no formal employment agreement formalising the altered working conditions.
Lastly, it should be noted that European companies, particularly in Germany, opting for short-time working arrangements, can arrange to have social contributions for employees paid for by the state. There are currently many cases in which sufficiently hard-hit companies have reduced short-time work to zero hours with the state responsible for paying their employees both wages and contributions.
Also, in Germany and France short-time working arrangements can be secured for up to 12 months.
The nations of Central Eastern Europe lack Germany's tradition for short-time work, but in response to the current crisis versions of the programme have been introduced in Bulgaria, Romania, Poland, Czech Republic, Russia, Turkey and Ukraine.
Remote work and employer duty of care
Short-time work is slowly catching on across Europe, but other forms of working strategies have also been embraced. Remote work, for example, is currently being practiced around the world with literally millions of employees now operating from their homes. But just because workers are now using their residences as an office, t companies are not relieved of their responsibilities to provide employee care.
An employer is still responsible for the well-being of a worker even if that worker is at home. But what possibly could happen to a homebound employee? Like in any work place, remote workers are vulnerable to accidents, but these risks may involve stress and mental health, which employers need to find ways of addressing. Remote employees also face the danger of social isolation, and because their workplace is also their abode, overwork and burnout must also be prevented.
For an employer, establishing healthy remote conditions for work is not as difficult as it might seem. By ensuring that employees are properly equipped (laptops, wifi connections, business phones) and given clear and fair guidelines on their duties and timetable, companies can establish a positive remote framework. Employers can do themselves a service by trusting employees to adhere to this framework, but also encourage them to use the technology at their disposal (e.g. Skype, Zoom) to reach out to superiors and collaborate with colleagues. Social media can also be used for virtual staff social gatherings that can go a long way in improving morale.
Lastly, employers are advised to make sure that their homebound staff is not saddled with too many tasks and an unreasonable workload. Once again, people labouring at home do not have the luxury of leaving the office when the workday is over.
If an employee cannot work remotely, the company faces a new set of protocols for employer care. In this case, employees required to visit a jobsite must be fully versed on hygiene and self-care recommendations. The workplace must be kept clean and disinfected. Working conditions must be arranged so that contact between employees is limited, if not avoided completely. Workers must be provided with protection and safety equipment to safeguard them from infection.
Many workers – like healthcare professionals, grocery store employees, warehouse workers and messengers – have found themselves on the frontline of the pandemic performing critical duties, and are now the focus of special consideration.
In France, a healthcare worker who contracts the virus is considered to have undergone a work-related accident. In Italy, employees involved in critical work are now receiving special state-sponsored bonuses.
Lastly, there is a third category of employee: workers who cannot work from home because they must care for children forced home by quarantine and the closures of schools and daycare centres. Germany has issued a regulation guaranteeing special compensation for these employees. In France, a law has been passed enabling parents in this situation sick-leave type compensation. In Italy, parents can take leave for 15 days and receive 50% of their salaries. In Austria, employers may grant certain parents additional three-weeks leave at full salary and have a third of their costs refunded by the state. In Spain, parents are able to reduce their working hours, which they are obliged to make up at a later date.
In other countries lacking specific compensation, parents who are unable to work are accepting unpaid leave and using up holiday time.
The situations of these workers may change as government's enact regulations and laws to meet the challenges of this changing crisis. What the crisis and the employment landscape of Europe will be in the coming weeks are not clear. What is clear: the world is now undergoing a crisis that is certain to change how we live and work in the future.
The pandemic, for example, has taught developed societies that it is possible for certain types of employees to work efficiently and productively from home. CMS Germany's Christopher Jordan states that after the pandemic there will be many discussions on formalising this type of work.
Discussions will also continue, he states, on formalising the ability to use videoconferencing for certain types of labour conferences. Clearly, the current crisis will change the world, and in some ways for the better.
For more information on state-sponsored relief for businesses and employees in your country, contact your regular CMS advisor or any of these CMS experts: