Compensations for Employers in State of Emergency

On 1 April 2020, in an special issue of the State Gazette was promulgated a Decree No. 55 dated 30 March 2020 of the Council of Ministers laying down the conditions and procedure for payment of compensations to employers in order to preserve the employment of employees in state of emergency, announced by decision of the National Assembly of 13 March 2020 (the “Decree”).

The Decree regulates the right of employers to apply for and receive state support (in the form of compensations) to cover part of their employees’ salaries. Given the possibility of the state of emergency extending beyond 13 April 2020, the state support offered may be of great importance for maintaining employment in times of economic turmoil.

Below, we provide information on the state support offered, as well as a summary of the conditions and procedure for application.

 

I. State support (compensations)

According to the Decree, employers who meet certain requirements can receive compensation of 60 percent of the amount of the insurance income for January 2020 for any employee for whom there is a suspension of work or part-time work introduced and whose employment shall be retained for an additional period equal to the period for which the compensation is paid. In the case of part-time work, the compensation shall be paid in proportion to the off-hours, but for no more than 4 hours a day. Compensations from the state are paid to the employer for the whole period of validity of the Law on measures and actions during the state of emergency declared by the National Assembly on 13 March 2020, but for no more than three months.

With the above-described support, the government aims to promote preservation of employment in cases where by a decision of the employer or by order of a public authority work was suspended in the company, part of the company or for individual employees. In these cases, employees should continue to receive full employment remunerations, with the state covering 60% of the amount and the employer – the remaining 40%. In the case of part-time work for employees, the state pays compensation in proportion to the off-hours, for up to 4 hours a day.

The employer should pay the full amount of the employee’s remuneration for the respective month and the social security contributions due. The employer shall also not terminate the employment agreements on the grounds of closure of the enterprise, closure of part of the enterprise, staff reduction or reduction of the volume of work during the period for which the compensations are paid.

The Decree explicitly states that no compensations shall be provided for the following employees:

  1. Employees who have not been employed by the employer before the initial date of the state of emergency, namely 13 March 2020;
  2. Employees on temporary disability leave, pregnancy and childbirth leave, leave for adopting a child up to 5 years of age or for raising a child up to 2 years of age;
  3. Employees for whom the employer receives financing for salaries and social security contributions from the state budget, funds from the European Structural and Investment Funds or other public funds.II. Conditions for application

 

Employers who can apply for compensations are divided in two groups:

A. Employers whose activities are suspended by order of a minister or other government body, such as restaurants and fast food establishments, cinemas, sports centers, etc.;

B. Employers, which have suspended their activity or have introduced part-time work with an order at their discretion – they are eligible, if the revenue of their sales have declined as follows:

  1. For companies established before 1 March 2019 – by not less than 20% in the month preceding the month of submission of the application for payment of compensations, compared to the same month of the previous calendar year;
  2. For companies established after 1 March 2019 – by not less than 20% in the month preceding the month of submission of the application for payment of compensation, compared to the average income for January and February 2020.

The Decree also imposes additional requirements on employers, for example, employers should not have unpaid tax obligations and mandatory social security contributions to the state or municipality established by an effective act of a competent authority and for which the employer has not taken any actions for rescheduling, deferring or securing; employers must not have any violations of their obligations under the Labor Code or the Law on Labor Migration and Labor Mobility established during a period of 6 months prior to the issuance of the order for suspension of work.

According to the Decree, employers in certain economic sectors are excluded from applying. These include agriculture, forestry and fisheries, financial and insurance activities, government, education, human health and social work, household activities as employers; undifferentiated activities of households for production of goods and services for own consumption; activities of extraterritorial organizations and services.

 

III. Application procedure

To apply for compensations, employers must submit to the Labor Office Directorate servicing the territory at the place of employment of employees an application form, approved by the Executive Director of the Employment Agency. The application may be submitted in paper form, electronically or by registered mail with acknowledgment of receipt through a licensed postal operator. In view of the recommendations for social distancing, the Employment Agency indicates that the documents should be submitted electronically or through a licensed postal operator and only in the case of inability to use these two ways – by visiting the Labor Office. As per instruction from the Employment Agency the documents must be submitted no later than 21 April 2020.

The application must have the following attachments:

  1. a certified copy of the order of the employer for termination of employment or of the order for establishment of part-time work;
  2. a statement that the employers shall retain the employee relationships for the relevant term and will not terminate it on certain grounds;
  3. a statement of reduced revenue by at least 20 % (where applicable);
  4. a list of employees for whom compensation is being applied for;
  5. a statement containing details of the payment account of the employer.

The applications submitted are reviewed by a commission appointed by the Director of the Labor Office. The commission shall verify the circumstances and facts claimed. After carrying out the verification, the commission shall prepare a report. Within 2 business days as of preparation of the report, the Directorate of the Labor Office shall notify the employer whether it fulfills the criteria for receiving compensation.

In the case of resumption of work or cancellation of the part-time working time during the period of payment of the compensation, the employer shall notify the Employment Agency in writing, including electronically, within 3 business days of the date of issuance of the resumption order.

 

IV. Next steps

For further information on state compensation eligibility and legal assistance for application, please do not hesitate to contact Colliers International Legal Department at: [email protected] or +359 896 777 654.