Labour reform
Business 10/11/2021

Companies and unions reject Spanish government's proposal for permanent furlough mechanism

Employers and trade unions describe the measure as "complex"

2 min
Sánchez, Díaz and Calviño deal with the substance of the labour reform

MADRIDThis Wednesday's meeting between business leaders, unions and the Spanish government to address labour law reform did not end well. The executive has put a proposal to the negotiating table on the design of the future permanent furlough mechanism (ERTE), also known as RED. The main unions (CCOO and UGT) and employers have rejected it as "complex" and have asked the Spanish government to "reconsider" its proposal, ARA has learnt.

The government's proposal is to create a permanent furlough mechanism which would help avoid layoffs. In this way, if a company has financial or production difficulties, workers could be furloughed instead of laid off until normality returned. The 27-page text the Spanish government has put forward on Wednesday, to which ARA has had access, includes two types of furlough: on the one hand, due to structural causes, and, on the other hand, due to cyclical causes.

In both cases, companies could either reduce workers' working hours by between 10% and 70% in order to adjust to their needs, or opt to suspend contracts. While this scenario is in force within the company, workers will not be able to work overtime and the company will not be allowed to hire workers nor outsource its business.

This plan is being drawn up between the Finance Ministry, the Labour Ministry and the Social Security, which take on essential roles authorising furloughs in the proposal: the Finance Ministry will be responsible for establishing "the objective parameters from the analysis of a broad set of indicators" to decide whether it will go ahead. As for the duration, this mechanism may be extended for a maximum of twelve months if there is an agreement between workers and the company, and six months if instead it has been backed by the authorities. In the case of structural cases, two extensions of six months each may be requested.

In turn, the government also details how companies could benefit from bonuses and exemptions in contributions in exchange for training, and explains how to promote the relocation of workers (together with training measures and vocational guidance) if they cannot return to the company, as well as the creation of the fund that would feed these permanent furloughs.

Rejection by unions and businesses

The first to publicly reject the proposal has been the president of the employer association CEOE, who has branded it as "interventionist" and inflexible.

On the other hand, union UGT points out that due to "technical issues we do not believe temporary mechanisms should be used to regulate structural matters" and demand more union presence in the decision process. "We believe that generalized restructuring decisions by the Council of Ministers ought to be accompanied by a prior negotiation process," union sources point out. Union CCOO warns that the proposal "hinders the development of the collective bargaining" and makes a possible agreement less likely.