COVID-19 and Social Dialogue – The wage subsidies idea

Government must introduce wage subsidies as a key means to protect jobs

Our key demand is that government provide wage subsidies for short-time working and temporary layoffs.

Government should learn from examples across Europe and introduce an immediate package across the economy to protect jobs. As we recommend below, Government should immediately convene a taskforce of unions and employers to design details of this package. We know that government has the tools to deliver this package now.

Denmark:

Denmark has brought together employers and unions to agree a short term working scheme to deal with the impact of coronavirus.

With the agreement, the government and the social partners ensure that companies that experience a decline in orders and fewer customers as a result of COVID-19, and are therefore unable to employ their employees, can receive a partial reimbursement for wage costs incurred for three months. The companies undertake not to dismiss employees for financial reasons during the period in which they receive the compensation.

The agreement applies to employees of all private companies who are exceptionally affected by COVID-19 and therefore face having to notify redundancies for at least 30% or more than 50 employees. In this case, the company receives a state compensation of 75% of the salaries of the employees concerned, or a maximum of DKK 23,000 per employee (£2.807 for the month) if they fail to notify the layoffs. The employers will cover 25% of the wages and the workers will cover 5% by taking 5 days fewer holidays a year.

In addition, the scheme allows companies to reduce employees’ working hours to avoid redundancies for a temporary period during which they can then receive supplementary unemployment benefits.

Norway:

Similarly, in Norway the parliament passed a law in response to the economic effects of the pandemic. All workers temporarily laid off will now be entitled to 100% of their wages for 20 days (this is the estimated duration of the quarantine): two days paid by the employer and 18 days paid by the government. This is an improvement on the ordinary rule for temporary layoff, where only 60% of wages is guaranteed and the employer usually pays 15 days.

Austria:

Government brought unions and employers together to agree ashort time working package. The package guarantees that if working hours have to be reduced, employees’ net replacement wage will be worth 80 to 90% of their wage or salary while they are on shorttime work. The net replacement wage is made up of the wages for the hours they are able to work, and a support payment paid through the public employment service. Replacement rates are staggered by income, so the lowest earners receive 90 per cent of their wages; a middle band receives 85 per cent, and higher earners receive a replacement rate of 80 per cent. Those on low wages should be protected from any reduction in wages envisaged by these schemes, with reductions borne by those on higher wages. These thresholds should be set by the coronavirus Union and Business Taskforce, with some flexibility for individual employers and unions to revise at organisational or employer level.

Chosen excerpts by Job Market Monitor. Read the whole story @  Protecting workers’ jobs and livelihoods The economic response to coronavirus