Covid-19: Government approves extension of "lay-off" until July and new support for companies

The measures were foreseen in the Economic Stabilization Program

The Government approved today the extension for one month of the simplified 'lay-off', until the end of July, and new support for the resumption of activity that will be in force from August until the end of the year.

The measures were foreseen in the Economic Stabilization Program (PEES), created in the wake of the Covid-19 pandemic and approved two weeks ago by the Council of Ministers.

The simplified 'lay-off', which provides for the suspension of the employment contract or the reduction of working hours and the payment of two-thirds of the normal gross remuneration, financed 70% by Social Security and 30% by the company, ended initially in June but was extended until the end of July.

From August, the simplified 'lay-off' will continue to be possible only for companies that remain closed due to legal obligation.

For the remaining companies in difficulties due to the pandemic, new support is foreseen as of August, with a view to the progressive resumption of activity, without the possibility of suspension of the contract, but only a reduction in working hours.

Thus, for companies that have a turnover break between 40% and 60%, working hours can be reduced by up to 50% between August and October, rising to a maximum of 40% from then on until the end of the year.

If the invoicing break is greater than 60%, the company can reduce workers' hours by up to 70% from August and up to 60% from October.

The employer pays all hours worked and the State guarantees 70% of those not worked.

With this new regime and taking into account the hours worked, from August onwards, workers will receive between 77% and 83% of their wages and, as of October, between 88% and 92% of their wages.

The measure that replaces the simplified 'lay-off' has as its main assumptions "the progressive convergence of the worker's remuneration to 100% of his salary" as well as "payment by the company for all hours worked", it can be read in PEES.

In turn, companies that have benefited from the simplified 'lay-off' regime may have an extraordinary financial incentive to normalize their business activity, choosing one of two modalities: a minimum wage (635 euros) paid once or twice minimum paid over six months.

The new regime approved today by the Government also provides for the progressive reduction of the Single Social Tax (TSU) exemption.

From August, large companies in 'lay-off' will pay the TSU in full, while micro, small and medium companies will maintain the exemption and, from October, they will pay 50% of the fee until the end of year.

The extension of the simplified 'lay-off' and the new support will cost 2,5 billion euros, said the prime minister, António Costa, in the presentation of the PEES, two weeks ago.

The Council of Ministers also approved the stabilization complement, with the aim of providing extraordinary support to workers who had a reduction in income as a result of the pandemic.

This is a measure to be paid in July, in the amount of the loss of income of one month of 'lay-off', in an amount that can vary between 100 and 351 euros, to all workers with February income up to two minimum wages and who have registered a loss of base salary (that is, have a base salary above the minimum wage), who have been on 'lay-off' in one of the months between April and June.

The measure costs 70 million euros.