Ascent GroupAscent Group
Ascent Group. Business Consulting

"Technical unemployment" - how can we benefit of the new facilities?

In the context of the economic crisis caused by the spread of coronavirus (COVID-19), many companies are forced to apply cost-cutting measures and to reduce the activity. In this context the Romanian Government adopted on March 21 an Emergency Ordinance (no. 30/2020) to establish some measures in the field of social protection. The decree also brings some additions to the temporary suspension of the individual employment contract, at the initiative of the employer, known in common language as "technical unemployment".

Technical unemployment existed also until now, being governed by the Labor Code which, in Article 53, contains provisions related to the interruption or reduction of the employer's activity:

"Article 2 53

During the reduction and/or temporary interruption of work, employees engaged in the reduced or interrupted activity who are no longer engaged in work, shall be entitled to an allowance paid from the wage fund, which may not be less than 75 % of the basic salary corresponding to their work place.

During the reduction and/or temporary interruption referred to in paragraph 1, employees shall be at the disposal of the employer, and the eompoyer shall be able at any time to request them to restart their work."

In other words:

  • employees can be sent home during the period of business disruption, without the termination of the employment.

  • they remain the company's employees and return to work as soon as we they are recalled.

  • contracts of employment are suspended at the initiative of the employer, but they the employers are forced to pay to the employees a monthly allowance.

  • the compensation paid can be more than 75% of the basic salary, but in no case it can be less.

  • when the company decides to restart the activity, employees return to work and get their regular salaries again.

  • a person with a suspended contract cannot claim unemployment benefit.

According to the Labor Code, however, the cost of the allowance in such situations has so far been fully supported by the employer.

In the current crisis, however, the Romanian Government comes with a support mechanism for companies that have to make use of this measure. The Government Decision published in the Official Gazette no. 21.03.202 stipulates that the wages paid by employees in such circumstances are set at 75% of the basic salary, but not more than 75% of the average gross salary stipulated by the law on social insurance for 2020. Currently the average gross salary in the economy is of 5.429 lei per month, according to the National Statistics Institute (INS), corresponding to a net salary of 3.176 lei. In conclusion, the State will reimburse companies for a maximum of 4071,75 lei.

Employers who fulfill the following conditions can benefit from these facilities:

(A) companies who had to stop their activity, wholly or partly, on the basis of decisions issued by the public authorities in accordance with the law during the decreed State of Emergency and who are holding the Emergency Certificate issued by the Ministry of Economy. In principle, this category will include hotels, restaurants, cafes, events organisers, etc. The government will publish in the coming days a list of the CAEN codes for which the facility will apply.

B) companies who reduce their activity as a result of the effects of the COVID-19 epidemic and do not have the financial capacity to pay all the wages of their employees. Employers can benefit from the payment of the compensation provided for up to 75% of the employees who have individual active employment contracts at the start of the State of Emergency.

For employers referred to in point (b), the payment of the allowance shall be made on the basis of a declaration stating that the employer has recorded a reduction in the revenues in the month preceding the submission of the declaration, by at least 25 % compared with the average revenues in the period January to February 2020, and that he does not have the financial capacity to pay all the employees.

The compensation:

  • is subject to taxation and compulsory social security contributions

  • calculation, retention and payment of income tax, the state social contribution and the health social security contribution shall be made by the employer from the benefits received from the unemployment insurance budget.

  • for these payments, the employer shall not pay the insurance contribution for work (this is the contribution on behalf of the employer, respectively 2.25%).

How does it works?

In order to receive the reimbursments of the payd amounts, the employers will submit by e-mail an application signed and dated by the legal representative, addressed to the Labour Authority, accompanied by a list of the employees who are to receive the allowance. The application will be drawn up in accordance with the model set out in Annex 3 to the Emergency Ordinance.

The documents are submitted in the current month for payment of the previous month's allowance (so the employer will first have to bear the amounts  from his own budget, and will subsequently request their reimbursement). Reinbursment of the indemnity  is made no later than 30 days from the submission of the documents.

 

 

Copyright© 2005-2020, Ascent Group. All rights reserved. Politica de confidențialitate (Privacy policy)