How to resize the workforce of your company

Featured News, Labor News
HOW TO DEAL WITH THE WORKFORCE SIZING (DISMISSALS) GENERATED BY THE COVID-19

 At the moment, companies are in a very discouraging scenario and in absolute uncertainty when making decisions regarding the restructuring of the workforce, when the current needs are different but the organizational and personnel structures belong to the pre-pandemic era.

Many sectors and companies are moving from a temporary situation, result of the expansion of the pandemic, to a structural situation derived from the new economic and market environment.

Each company requires an ad-hoc strategic plan

Despite the difficulties that derive from the regulations and the problems that we will refer to later, each company faces specific circumstances that will determine the need of adequate staff sizing, through the accreditation of the circumstances that led to the restructuring, by way of example:

  1. Causes unrelated to COVID-19 and/or pre-existing.
  2. The irreversible/difficult situation of the organization has accelerated with the pandemic
  3. The conjunctural situation that gave rise to the ERTE becomes a structural need that must be addressed with different measures.
  4. Incurring in a bankruptcy situation if measures are not adopted in time.

In short, by analyzing the organization, the market, the environment, the economic perspectives, the productive situation, the organizational needs, and the changes that have taken place we will be able to determine how to approach the reduction of the workforce. It is a process that requires time, study and anticipation to do it correctly.

The labor regulations created during the pandemic no longer apply to companies that face different challenges

The referred regulation that made sense at the beginning of the pandemic, it is now affecting the decision of organizations referred to work-force reduction:

  1. The regulations to safeguard employment for a period of 6 months for all those companies that applied to Temporary Employment Regulation File (ERTE) of Force Majeure or in an ERTE for Economic, Technical, Organizational or Productive reasons (ERTE ETOP ) with exemption in the payment of social security contributions (hereinafter “ERTE with exemption of quotas”), act as a slab in this process.

Failure to comply with said clause entails the obligation to return the exemptions of the social security contributions from which the company has benefited, with the corresponding surcharge and interest. The legal text is not exempt from doubts in its interpretation, by leaving open many questions that must be solved by the Courts, like the following:

  • The business penalty that derives from this breach is the return of the contributions that have not been paid, with the corresponding surcharge and interests. Completely moving away from the criterion of prudence that must preside over the sanctioning law, in addition to being inconsistent with the moment that companies are going through.
  • Furthermore, the beginning of the term for calculation the safeguard employment obligation is not clear either: In line with the interpretation made by the General Directorate of Labor, it would be the term of 6 months from the reincorporation to the company of any employee, even part-time from ERTE; However, another line of interpretation based on the premise that the employment commitment is nominative, that term would be individualized for each employee. And for others, it would be computed after the last employee is removed from the ERTE.
  • To all this, we must add the risk, of being applied the criteria stated by some Courts,  as we will see later, regarding the declaration of these dismissals as null and void or illegal, but with additional compensation.
  • The regulation, establishes that the safeguard employment obligation to maintain employment does not apply to those companies in which there is a risk of bankruptcy. The conciseness of the regulation and the absence of developing rules, does not generate security when approaching this option. Above all, when with this, the company may be risking the application of the Courts criteria on dismissals derived from or linked to COVID-19.

2. Prohibition to carry out dismissals based on the causes that protect the suspension of contracts due to COVID-19, consistent with the start of the pandemic, in FM ERTES and of temporary duration, limited to that moment, but after 8 months companies are facing a new reality so the regulation in place have lost sense.

Companies face the uncertainty and insecurity derived from the absence of clear criteria and jurisprudence to support these decisions. Decision-making is difficult given that:

  • In some cases, the Court determines that it derives directly, or indirectly, from the pandemic and is therefore prohibited.
  • The criteria of the Court ads uncertainty and legal insecurity, since, although the norm does not establish a penalty other than the illegal dismissal in these cases, the criteria of some Courts have gone much further determining:
    • The nullity of the dismissal for violating said regulations, with the obligation to reinstate the employees in their previous position with payment of the accrued salaries and social security contributions during the Court process.
    • Admitting the dismissal, but applying the payment of a supplementary compensation  (40,000€ to 60,000€) for offering a legal compensation not sufficiently dissuasive, based on ILO C158.
    • The need to establish a criteria to discourage companies from sizing the workforce, agreeing to the immediate reinstatement of the employee, on the same conditions and with payment of accrued salaries and social security contributions, instead of applying the legal regulation that states that it is the company the part that chooses between reinstatement, or termination of the contract, with payment of the corresponding compensation.

Our department of Labor Advisory offers specialized services in the analysis, implementation and collective bargaining of the workforce reorganization processes, adjusting to the needs of the organization, and reducing the risks derived from the situation described. We also have a team specialized in the elaboration of technical and organizational reports to give an objective view that can be used to justify the decision taken by the company with regards to its workforce.

 

Fe López

Partner – Lawyer specialized in Labor Law

flopez@uhy-fay.com

 

 

 

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