Temporary Labor Force Adjustment Plan (ERTE): What no one tells you

Hello, I'm Rubén Águila and today I come to talk to you about something that, although many know by hearsay, few really understand: the Expediente de Regulación Temporal de Empleo. If you have had to deal with this, you know well what I'm talking about. And if you haven't, you'd better get up to speed! Because sooner or later, this concept can show up in your work life like an unexpected bombshell.

I've had several experiences over the years with the dreaded ERTEs, and I'm here to tell you all about it from a real approach. No beating around the bush here, I'll tell you how things are.

What is an ERTE and why is it so important?

Let's start with the basics: an ERTE, or Expediente de Regulación Temporal de Empleo, is a measure that allows companies to temporarily suspend their workers' contracts or reduce their working hours. Eye, it is not a definitive dismissal; it is temporary. The idea behind the ERTE is to give the company a break when things go wrong (whether due to economic, technical, organizational causes or even force majeure such as natural disasters or pandemics).

Why is it important? Because when a company has no money to pay the payroll, the option would be to fire everyone.... but that is a shot in the foot! The ERTE, then, acts as a temporary lifeline for the company, which can maintain its structure while going through the crisis and, theoretically, recover employees when the situation improves.

Types of ERTEs: They are not all the same

Although all ERTEs are sometimes lumped together, the reality is that there are several types:

1. Force Majeure ERTE: This applies when the company has to close temporarily for reasons beyond its control. Classic example: the COVID-19 pandemic. Here, the labor authority comes into play and decides whether the cause is justified. During the pandemic, this type of ERTE became a lifesaver for thousands of businesses in Spain.
3. ERTE for economic, technical, organizational or production reasons (ETOP): Here we are already talking about internal reasons. The company is going through a bad time, either because there are no sales, because market conditions have changed, or because of problems with the means of production. The key point is that, in this case, need to negotiate with the workers' representatives. It is not as simple as pressing a button, you have to justify each step well.

How does an ERTE affect workers?

If you are a worker, this is what surely interests you. ERTE is no wonder, but it's a lot better than being out of work. During the time you are in an ERTE:

• Your contract is suspended or your working day is reduced, depending on how the file is structured.
• You collect unemployment. Even if you are not fired, the State pays you an unemployment benefit for the duration of the ERTE. At first, you will receive 70% of your regulatory base for the first 180 days and then it will drop to 50%(.
• You do not use up your unemployment days if you are in an ERTE due to force majeure, something that was crucial during the COVID-19 crisis(.

But what about afterwards? The best thing about an ERTE is that, in theory, you get your job back when the company returns to normal. The worst thing is that the salary during the ERTE is reduced and often the company allowances do not cover the total.

Benefits for companies (and the hidden traps)

Now, if you are a company, there are also many things you need to know. The ERTE is a tool that can be your best ally in times of crisis, but careful! it also has its requirements. For example, if you take an ERTE due to force majeure, you have to keep the jobs for six months after the end of the file. If you do not do so, the Social Security may require you to return the exemptions in contributions that were applied to you.

Another thing you can do during an ERTE? Adjust the workforce in a flexible manner. You can affect or disaffect employees as you need to. But beware of doing things like overtime or hiring new employees in the same positions, because the fines can suck you dry.

Lessons from the trenches (my experience with ERTEs)

Let me tell you something: reading about an ERTE is not the same as living it. In my career, I have gone through three temporary lay-offs, and each one was more complicated than the last.

In my first ERTE, back in 2008, the global financial crisis hit us hard. I remember how the company where I worked, a construction company, collapsed. All of us in the department had our contracts suspended, and we were six months in limbo. It was like living a slow nightmare. And when the thing ended, many of us did not return to our original positions.

The second ERTE was during COVID-19, and although the situation was global, it was less traumatic because everyone was in the same situation. The government offered protective measures, such as that the time in ERTE did not consume our unemployment, but I'm not going to lie: living on 70% of salary when you are already tight is not easy.

Is ERTE the perfect solution?

I'm not going to fool you, an ERTE is not a magic wand that solves everything. If you are a worker, the salary reduction can leave you in a precarious situation. And if you are an employer, complying with all the regulations can be a headache. But, in general, it is one of the best solutions we have to avoid mass layoffs when things go wrong.

ERTEs and the future: what lies ahead?

What is clear is that ERTEs are here to stay. The COVID-19 crisis taught us that this mechanism can be crucial in times of emergency, and although it is not perfect, it helps keep both companies and workers afloat.

And you, have you gone through an ERTE? How was your experience? Leave it in the comments!

Conclusion

The ERTE is a lesser evil in times of crisis. While it temporarily reduces workers' income, it protects jobs and gives companies some breathing room. Although it is complicated for all parties involved, it offers a viable alternative to mass layoffs. Knowing well how it works and its implications is key to dealing with it in the best possible way.