Alexander Hijzen
Gabrielle De Haan-Montes
Mateo Montenegro
Sandra Nevoux
Agnès Puymoyen
Preparing ERTE for the Future
An Evaluation of Job Retention Support in Spain During the COVID-19 Pandemic
Abstract
This chapter provides a comparative analysis of the institutional features of short-time work schemes before and during the COVID‑19 crisis in Spain as well as Germany, Italy and France. It is structured around four key dimensions of short-time work: 1) implementation; 2) eligibility and conditionality requirements; 3) the generosity of support for firms and workers; and 4) the extent to which training is promoted whilst on short-time work.
Implementation
For STW to be effective in the context of a sharp downturn, it is important that support is provided in a timely manner. Applications can be made online and retroactively in each of the four countries. In France and Germany, the approval process is automated resulting in immediate or quasi‑immediate approvals. In Spain, the approval process takes somewhat longer but generally no more than two weeks. Payments typically follow soon after. The implications of delays in the payment process depend on whether the subsidy is paid to firms or workers. When payments are made to firms, as in France, Germany and Italy, delays reduce the effectiveness of STW in alleviating the financial difficulties of firms and preventing job losses. When payments are made to workers, as in Spain, delays reduce their effectiveness in alleviating financial hardship of workers. However, by directly alleviating firms’ liquidity constraints, it provides high internal flexibility to firms, which may help contain incentives for the use of workers on temporary contracts.
Eligibility and conditionality
Eligibility requirements restrict take‑up in an effort to increase the cost-effectiveness of STW. Eligibility requirements for firms seek to limit deadweight effects by targeting its use to firms with greater financial difficulties. Eligibility requirements for workers typically seek to restrict support for jobs with high levels of firm-specific human capital and/or a high probability of remaining viable in the medium term.
Eligibility is typically restricted to firms in the private sector, while additional restrictions with respect to their economic activity or size are rare. Italy, which used to restrict STW to large firms, expanded eligibility to all firms irrespective of their size in response to the crisis. Eligibility requirements related to the economic need for support tend to be modest and have been weakened further in response to the COVID‑19 crisis. Spain lifted the limit on the minimum reduction in working time at the onset of the crisis, while Germany reduced its work-sharing requirement from one‑third to one‑tenth of the workforce. More generally, requirements related to economic need do not appear to be very relevant in the context of STW since there is typically a strong business case for resuming activity whenever this is possible, particularly when hours not worked are subject to co-financing by firms.
During the COVID‑19 crisis workers on both open-ended and fixed-term contracts tended to be eligible for STW. Spain and Germany lifted restrictions on the use of STW for workers on temporary contracts in response to the COVID‑19 crisis. Spain also lifted the restriction on the use of STW for workers who do not meet the minimum contribution requirements for unemployment benefits, while this was maintained in Germany. Italy and France did not have any restrictions on worker eligibility already before the COVID‑19 crisis struck. While these measures contributed to a significant use of STW among temporary workers, job losses were nevertheless concentrated among this group. An open question is whether restrictions in relation to contract status should be brought back now that the crisis is behind us.
Eligibility may also require the consent of affected workers or an agreement with the social partners. Both are required in Germany, while neither is required in either France or Italy. In Spain, there is a mandatory consultation period, but this is replaced by a simple notification requirement when force‑majeure modality is used. Such requirements may reduce the risk that STW is used too widely by supporting jobs that do not need support (deadweight effects). However, there is also a risk that it hampers the quick deployment of STW arrangements, particularly when the consent of individual workers is required. The main issue with requiring an agreement with the social partners is that a legitimate worker representative with whom such an agreement can be concluded is not always present in the workplace. This may be easier in Germany, given the widespread presence of work councils, than in the other countries considered here. Spain partially sidesteps this issue by allowing national agreements to be used instead since April 2022 (under the RED mechanism).
To further enhance the effectiveness of STW schemes, countries sometimes impose additional conditions on the way support is used by firms and workers. Conditionality requirements for firms tend to take the form of work-sharing requirements, bans on layoffs or bans on the payment of bonuses and dividends. Spain imposes both bans on layoffs and dividends, whereas this is not the case in either France or Germany. Conditionality requirements for workers in principle can relate to work availability, job-search or training requirements but are rarely applied in practice.
Generosity
The generosity of STW determines how long support for STW is available and how the costs for reduced working hours are shared between public authorities, firms and workers. More generous schemes provide better protection for workers and alleviate financial constraints faced by firms. However, they also risk being used too widely, including for jobs that at limited or no risk of being destroyed and jobs in firms facing structural difficulties. These risks tend be small in the midst of an economic downturn, but grow as the economy recovers.
Benefits to workers for hours not worked tend to be similar to unemployment benefits or slightly higher. Effective replacement rates at the gross average wage – taking into account benefit caps and floors – range from slightly below 50% in Spain and Italy to 60% in France. STW benefits generally provide stronger income support to low-wage workers as a result of ceilings aimed at limiting the fiscal costs and floors to prevent financial hardship for low-wage workers. In addition, as the use of STW remains relatively short, limited attention has been paid to the benefit profile over the STW spell (a notable exception is the new STW modality for cyclical reasons in Spain that can be activated through the RED mechanism). Instead, it is more important to put a maximum duration to signal that STW support is not a solution for dealing with structural problems. In Spain, there is no maximum period of support, but there is need to re‑apply for support after each support period of about three to four months.
The cost of hours not worked for firms were temporarily set to zero at the onset of the crisis (except for large firms in Spain), but as economic activity has recovered, co-financing has generally been brought back (except in Italy). While co-financing helps to reduce concerns about supporting permanently unviable jobs, it can also reduce incentives of firms to place vulnerable workers (low skilled, temporary contracts, youth) on STW. This issue may be reinforced by the fact that co-financing rates tend to be lower for high-wage workers in many countries, including Spain. An alternative to co-financing is experience‑rating whereby firms contribute to the cost of STW schemes in the future through higher social security contributions depending on how much they have used it in the past. Unlike direct co-financing, this does not compound the financial difficulties of firms, but still provides incentives for firms to use support only for jobs that are temporarily at risk. However, experience‑rating of STW is rarely implemented in practice. The only examples are Italy in the pre‑pandemic period and the United States where STW is little used.
As the COVID‑19 crisis evolved, STW generosity has become increasingly differentiated across firms according to the presence of administrative restrictions on their economic activities. While the exceptional generosity of STW during the initial phase of the COVID‑19 crisis has been gradually phased out to encourage the resumption of economic activity (“regular STW”), generous measures have been maintained for firms whose activities continue to be directly affected by administrative health-related restrictions (“crisis STW”). Moreover, Spain and France have also introduced an additional “structural” or “long-duration” scheme to support firms in sectors with more long-term difficulties. It is important that such long-duration schemes come with strong conditions to promote restructuring (e.g. the involvement of the social partners, providing incentives for training and/or job mobility) and avoid that becoming an obstacle to efficiency-enhancing reallocation.
Training
Participation in training while on reduced working hours can help improve the viability of one’s current job or the prospect of finding a new job. In principle, training can therefore help to increase the cost-effectiveness of STW.
In response to the COVID‑19 crisis, all countries considered here except Italy put in place financial incentives to promote participation in training while on STW, without however making training mandatory. France, Germany and Spain reimburse part of training expenses, while Germany and Spain in addition grant exemptions for social security contributions to employers. Subsidies often build on the existing infrastructure for adult learning and the availability of training incentives for either employed or unemployed workers. In all three countries, more generous subsidies are provided to smaller firms. Specific incentives directed at workers are rare.
Several conditions apply to the type of training that is allowed during STW. In France, training must be work-related, whereas in Germany training should focus on the acquisition of transferable skills. In Spain, training should be work-related under the regular scheme. When the RED mechanism is activated, training may be either work-related or generic depending on the reason (e.g. cyclical, restructuring). Conditions on the use of training while on STW reflect different concerns. Training directed at the acquisition of firm-specific skills could induce firms to use short-time work to finance training activities that would have been undertaken anyway, while training directed at the acquisition of transferable skills may run counter to the objective of STW to promote job retention. Other conditions may exist related to the provider of training, the minimum duration of training and the need for worker consent. To avoid that work-related training generates moral hazard effects, one could require that training is provided externally by certified providers as in France.
There is some indication that participation in training while on STW was higher during the COVID‑19 crisis than during the global financial crisis. OECD estimates suggest that participation in training while on STW was about 10% in Germany, 20% in France and 30% in Spain. The relatively high use of training while on STW is likely to reflect the greater availability of on-line training courses, the ongoing development of adult learning systems and the greater generosity of financial incentives.
There are important differences in terms of the use of training while on STW across firms of different size and industries. Despite the use of more generous financial incentives for small firms, training while on STW remains concentrated in large firms. The use of training while on STW across sectors differs across countries. Whereas in France, training is strongly concentrated among manufacturing firms, it tends to be concentrated in services in Germany. One possible explanation for this difference may be that in France training has to be work-related, whereas in Germany the focus of training is on general skills.
Evidence on the effectiveness of combining STW with training is lacking. While there is a large literature on the effectiveness of adult learning in general, the combination of STW with training raises a number of important new questions on the barriers to participation in training while on STW, the effects of training in supporting job retention or reallocation and the role played by the type of training that is provided. To get some idea about the answers to these questions, evaluations of such training instruments will need to be conducted once the necessary data are available.
This chapter provides an in-depth analysis of the institutional features of short-time work (STW) schemes before and during the COVID‑19 crisis. As in the previous chapter, the analysis is based on a comparative approach that systematically benchmarks the institutional features of short-time work in Spain with those in Germany, Italy and France. The chapter is organised around four key dimensions of short-time work: 1) implementation, which mainly relates to the application process; 2) eligibility and conditionality requirements which relate to the groups of firms and workers than can apply for support and the conditions for its use; 3) the generosity of support for firms and workers; and 4) the extent to which training is promoted whilst on STW. As in the previous chapter, the main focus is on the period until the end of 2021, although some references are also made to implications of the labour market reform of December 2021.
A major difference with the global financial crisis was the ease with which STW schemes were adjusted and rolled out in response to the COVID‑19 crisis. This reflects to an important extent the use of digital technologies and force‑majeure modalities for their implementation, and notably the application, approval and payment process related to the use of STW. Table 3.1 provides an overview of the application, approval and payment processes in each of the four countries considered in this chapter.
3.2.1. The application, approval and payment process
The application and approval process is largely automated
In essentially all countries applications can be made online and in some countries, including France, the approval process is automated resulting in immediate or quasi‑immediate approvals (within two working days). In Germany and Spain, the approval process takes somewhat longer, about five working days, but remains short. In Spain, the use of the force‑majeure modality reduces the approval process from 15 to five days. In some countries, including in Italy, the approval process takes considerably longer, between one and two months, depending on the programme used. Such delays can have important consequences for firms in severe financial difficulties and the risk of layoffs.
Applications could be made retro‑actively
In the majority of countries, applications could be made retroactively, with respect to support one or several months in the past. This was not typically possible before the COVID‑19 crisis. Spain is one of the few countries that already allowed for retroactivity in certain cases before the crisis. In France, Germany and Italy, retroactivity was introduced to take account of the fact that lockdown measures were implemented with limited or no notice. Retroactivity allowed governments to adjust their existing job retention schemes or introduce new ones and firms to work out the implications of the lockdown measures for their activities before applying for support.
Payment delays were limited
Payments are usually made ex post. In France, Germany and Spain, payments typically start within two weeks from the time of application. No data are available for Italy and Spain.1 When payments are made to firms – as in France, Germany and Italy – payment delays reduce the effectiveness of JR schemes in alleviating the financial difficulties of firms and preventing job losses. When payments are made to workers such as in Spain, this reduces their effectiveness in alleviating financial hardship among workers, but directly alleviates firms’ liquidity constraints since no advance payments are required. This feature of the system ensures that firms have high internal flexibility in Spain and, in doing so, may help to contain incentives for the use of workers on temporary contracts.
3.2.2. Force‑majeure modalities further streamlined procedures
In France, Italy and Spain, a force‑majeure modality could be invoked to simplify access to JR support. In Spain, the application of the force‑majeure modality shortened the approval procedure to a maximum of five days and replaced the mandatory consultation period with worker representatives by a simple notification.2 In France, force majeure – described as an epidemic, disaster or storm of an exceptional nature – allows applying for STW support retroactively. In Germany, an explicit force‑majeure modality for the use of STW does not exist, but the application, approval and payments process was nevertheless simplified in response to the pandemic.3
Situation during the COVID‑19 crisis (changes with respect to the pre‑crisis situation in brackets where relevant)
Eligibility requirements restrict take‑up in an effort to increase the cost-effectiveness of STW by reducing costs related to deadweight or displacement effects, i.e. the costs of supporting jobs that either do not need support or cannot be saved as they have become permanently unviable. Eligibility requirements with respect to firms seek to limit deadweight effects by targeting its use to firms with greater financial difficulties. For example, Cahuc et al. (2021[1]) show that financially healthy firms often hoard workers during periods of reduced business activity even without STW support. Eligibility requirements with respect to workers typically seek to restrict support for jobs with high levels of firm-specific human capital and/or with a high probability of remaining viable in the medium term. Such requirements therefore tend to reduce the risk of supporting jobs that cannot be saved (displacement effects). Firm or worker eligibility may also be contingent on the consent of the worker or its representatives to participate in STW. Since STW is costly for workers, they are more likely to agree with STW when they face a significant risk of job loss. Such agreements therefore help to limit deadweight effects. Since deadweight and displacement effects tend to become smaller when the economic situation deteriorates – the risk of layoff is up and hires are down –, countries have tended to relax eligibility requirements at the start of major crises and restricted them during the subsequent recovery. Eligibility requirements prevailing before and during the COVID‑19 crisis in the four countries considered are reviewed below and summarised in Table 3.2.
3.3.1. Firm eligibility
Eligibility is typically restricted to firms in the private sector, while additional restrictions with respect to their economic activity or size are rare
Eligibility for STW is typically restricted to firms in the private sector. STW seeks to prevent excessive layoffs that arise because firms do not have the financial means to hoard workers during periods of reduced economic activity. Public-sector firms tend to be less vulnerable to economic shocks since they are less well integrated in the market economy and do not face the same kind of financial constraints as their private‑sector counterparts. Moreover, in most countries, STW is at least partly financed by the social security system for the private sector, while separate conditions for social security typically apply in the public sector.4
Eligibility restrictions with respect to the economic activity or size of private‑sector firms are rare. Among the OECD countries who operated a STW scheme already before the start of the COVID‑19 crisis, Italy was the only country that restricted eligibility to firms with 15 employees or more. Firms above this threshold are also subject to stricter rules with respect to the employment protection of workers on open-ended contracts, particularly until the introduction of the 2015 Jobs Act. STW may therefore have been a means to provide additional flexibility to firms subject to strict employment protection provisions by making it easier to adjust working hours in response to changes in economic activity. Following the introduction of the 2015 Jobs Act, eligibility was first expanded to firms with five employees or more (Fondi di Solidarietà Bilaterali and Fondi d’Integrazione Salariale), before expanding it to all private‑sector firms irrespective of their size in response to the COVID‑19 crisis (Cassa Integrazione Guadagni in Deroga).
Eligibility requirements related to the economic need for support tend to be modest and have been weakened in response to the COVID‑19 crisis
Beyond general restrictions based on sector or size of firms, firm eligibility requirements typically relate to the economic need of support. Justifications for economic need in principle can take the form of minimum thresholds with respect to the reduction in sales during a specific reference period or the reduction in working time during STW (related to the reduction for each worker, the number of workers involved or a combination). The objective of these conditions is to target firms facing large declines in business activity. It is noteworthy that none of the countries considered here except Spain impose formal economic requirements based on the reduction in sales.5 Moreover, limited minimum thresholds applied with respect to the reduction in working time before the COVID‑19 crisis. Only Germany and Spain imposed a minimum reduction in working time for workers participating in STW of 10%. In response to the COVID‑19 crisis, Spain temporarily lifted the minimum reduction in working time.
Firm eligibility requirements are likely to have played only a modest role in explaining the unprecedented use of STW during the COVID‑19 crisis. Firm eligibility requirements tended to be weak and – apart from the extension of STW to small firms in Italy –, changes in response to the crisis have been rather modest. Germany maintains slightly stricter eligibility requirements than the other countries considered here. Spain reintroduced the minimum limit on the reduction in working time as part of the labour market reform of December 2021.
3.3.2. Worker eligibility
Worker eligibility used to be limited to insured workers or workers with open-ended contracts in some countries
Worker eligibility may be limited to “insured” workers, i.e. workers who meet the minimum contribution requirements for unemployment benefits, or workers with a permanent contract, i.e. jobs that would be expected to last for a long time in the absence of the temporary shock. The focus of STW schemes on workers with recent work experience or permanent jobs is consistent with the rationale of such schemes to preserve firm-specific knowledge that would be costly to rebuild if the worker is laid off. However, it also risks deepening labour duality, i.e. the gap in employment protection between those on open-ended and temporary contracts (Hijzen and Venn, 2011[2]).
Before the COVID‑19 crisis, Germany was the only country considered which limited eligibility to insured workers with an open-ended contract. Spain also restricted eligibility to insured workers but did not exclude workers on temporary contracts from STW, as long as they meet the minimum contribution requirements for unemployment benefits. To the extent that some temporary workers qualify for unemployment benefits, this condition is likely to be weaker than that based on contract status. Indeed, it is not entirely clear why contract status per se should be a criterion at all when eligibility for unemployment benefits is required. One reason for this may be that minimum contribution requirements capture recent work experience in general including in other firms during a fixed window rather than tenure within the firm, which is key for the development of firm-specific human capital. France and Italy imposed no restrictions on worker eligibility. The importance of such restrictions hinges on the presence of co-financing requirements. In the presence of co-financing requirements, restrictions on worker eligibility may not be very relevant in practice since this provides incentives for firms to limit the use of STW job-matches with high levels of firm-specific human capital (OECD, 2021[3]).
During the COVID‑19 crisis, job losses were concentrated among workers on temporary contracts, despite being made eligible for STW in all countries
In response to the COVID‑19 crisis, several OECD countries extended worker eligibility. Spain lifted the requirement of being eligible to unemployment benefits (as part of its so-called “counter-to-zero” policy) and extended access to additional categories of temporary contracts (e.g. seasonal workers).6 Similarly, Germany temporarily allowed workers on temporary contracts to participate in its STW scheme. These measures promoted the use of STW and reduced the risk that STW led to a further deepening of labour market segmentation. They also played a potentially important role in alleviating liquidity constraints of firms and job losses among workers on temporary contracts. Since laying off workers on temporary contracts before the expiration of their contract can be costly, this allowed firms to hold on to such workers at limited costs when the COVID‑19 crisis struck. During the COVID‑19 crisis almost all countries with STW schemes allowed temporary workers to be covered, typically without minimum contribution requirements (OECD, 2021[3]).
As a result of these measures, a significant number of workers on temporary contracts were placed on STW during the COVID‑19 crisis. While this is likely to have helped limiting job losses among workers with temporary contracts, job losses were nevertheless strongly concentrated among such workers. STW may mainly have had for effect to postpone job losses among workers with temporary contracts rather than to prevent them.
3.3.3. Need for workers’ consent and an agreement with the social partners
Eligibility may also require the consent of the worker concerned or an agreement with the social partners. Since participation in STW is costly for workers, these requirements will tend to limit its use to jobs that are at high risk of being destroyed and hence reduce deadweight effects. While this provides a compelling economic case for the use of such requirements, there are practical limitations to their effective implementation. Getting the consent of workers may hamper the quick implementation of STW arrangements if this requires individual negotiations with all workers involved. In principle, this issue is solved by requiring an agreement with the social partners. However, this requires having a legitimate worker representative in the workplace with whom such an agreement can be concluded, which may not always be present. Germany is the only country to require both, while in France neither is required. In Italy, the requirement of worker consent was eliminated in response to the COVID‑19 crisis. In Spain, the consent of the worker is not required but an agreement with worker representatives is except in the case of force majeure.7 To speed up the implementation of STW, most countries tend to place limits on the negotiation period with the social partners.
Situation during the COVID‑19 crisis (changes with respect to the pre‑crisis situation in brackets where relevant)
To further enhance the effectiveness of STW schemes, countries sometimes impose additional conditions on the way support is used by firms and workers. Conditionality requirements for firms tend to take the form of work-sharing requirements, bans on layoffs or bans on the payment of bonuses and dividends. Conditionality requirements for workers in principle can relate to work availability, job-search or training requirements.
3.4.1. Conditionality requirements for firms
Work-sharing requirements can help share the burden of adjustment but also render STW arrangements more rigid
An objective of many STW schemes is to share the burden of adjusting to shocks through broad-based reductions in working time. Work-sharing requirements may take the form of limits on the maximum reduction in working time (effectively excluding temporary layoffs) or the minimum share of workers in a firm that participate in STW. Alternatively, STW may need to be implemented for entire units within a firm. Among the countries considered here, Germany requires a minimum share of workers to participate in STW (one‑third before the crisis, one tenth during the COVID‑19 crisis) and France used to require firms to apply STW equally within units before introducing more flexibility in response to the crisis. The main motivation for allowing for more flexibility in the application of work-sharing requirements in France was to allow for a speedier resumption of work as the economy recovered from the COVID‑19 crisis. None of the countries considered here impose maximum limits on the reduction in working time. Indeed, in countries that do so take‑up tends to be considerably more modest (Hijzen, Salvatori and Puymoyen, 2021[4]).
The effectiveness of bans on layoffs while on STW needs to be assessed
A number of countries impose restrictions on layoffs for firms that make use of STW support. Restrictions increase the costs of layoff by requiring firms to pay back the subsidy and in some cases a fine or ruling out economic layoffs, with the implication that they will be considered unfair if challenged in court. The restrictions may apply only during programme participation or extend for a period after its end. In Spain, layoffs are banned until six months after the support period (usually three or four months), the longest in the OECD. In the event of layoffs, firms had to reimburse the government for the full costs of support received. Since the labour market reform of December 2021, restrictions on layoffs in firms using STW have been relaxed. They now apply to six months from the start of the programme and, in the event of layoff, only require paying back subsidies received for the worker concerned. Germany and France do not impose layoff bans during or after programme participation. Italy is a special case as it temporarily suspended all layoffs irrespective of STW status.
Bans on layoffs can be viewed as a conditionality imposed on firms in return for public support. Whether layoff bans achieve their objective is not entirely clear as they may actually increase incentives for firms to be more selective in deciding which workers to place on STW and which ones to layoff. By increasing the de facto firing costs, layoff bans may improve the targeting of STW to jobs that are more likely to remain viable, with a potential positive effect on job reallocation, but at the expense of less job retention (especially among workers with lower replacement costs such as temporary workers or workers with limited skill requirements). However, it is also possible that layoff bans increase job retention by making it more difficult to lay off workers on STW schemes when business conditions deteriorate and slow down job reallocation. The relative magnitude of these different effects is likely to depend on the specific design of the bans and remains an important empirical question.
Bans on dividend payments and other forms of profit sharing
Similarly, some countries ban dividend payments or other forms of profit-sharing among firms receiving STW support (Muller and Schulten, 2020[5]). For example, Spain requires companies that make use of ERTE to reimburse the full amount of the subsidy if they pay any dividends. Such measures send a clear message that STW should be used to support jobs and not any other causes (e.g. profits) and also avoid that subsidies end up benefitting shareholders or executive managers who do not require public support. The latter reduces moral hazard effects, i.e. excessive risk-taking by investors or managers based on the expectation that the state will cover any major losses (to preserve jobs or minimise contagion effects). However, there is also a risk that it discourages the use of STW among firms with acute liquidity problems that nevertheless continue to have a healthy financial outlook over the medium term.
3.4.2. Conditionality requirements for workers
Work availability, job-search or training requirements for workers on STW are rare
While the idea of STW is to keep workers in their job, in practice this is not always possible and some jobs will be destroyed eventually. It therefore may make sense to encourage those in supported jobs but still at risk of job loss to be available for work if there is an offer for another job, engage in active job search or to participate in training. OECD analysis shows that early interventions – including those before job displacement takes place – can be very effective in promoting smooth job transitions (OECD, 2018[6]). In countries where subsidies are paid directly to the worker, such as Spain, registration with the public employment services is a condition for receiving benefits. However, work availability and job-search requirements are typically waived, since most workers on STW schemes are supported to keep their current job. About half of OECD countries, including Germany and Italy, allow workers on STW to access the services provided by the PES (e.g. job-search assistance, career guidance, counselling). In countries where registration with the PES is not mandatory, governments often can do more to promote it by reaching out to firms that make use of STW with information about the process and the potential benefits this can provide.
Workers on STW are usually allowed to temporarily work in a different firm
A number of countries, including France, Germany and Spain, allow workers on STW to temporarily work in another firm. The main argument for this provision is to allow low-wage workers to top-up their earnings while on STW. This may be particularly relevant in countries where STW replacement rates are low or no minimum level of benefits exists (for example, because there is no minimum wage). Other arguments that are sometimes advanced include providing workers with work experience that may be relevant for their current job or facilitate making a permanent transition to another job and alleviating labour shortages in the labour market. The main concern about this provision is that it reduces incentives among workers for resuming normal working hours in their main job or making a permanent transition to another job. In Italy, workers are not allowed to temporarily work for another firm while on STW.
Situation during the COVID‑19 crisis (changes with respect to pre‑crisis situation in brackets where relevant)
The generosity of STW determines how long support for STW is available and how the costs for reduced working hours are shared between public authorities, firms and workers. More generous schemes provide better protection for workers and alleviate financial constraints faced by firms. However, they also risk being used too widely, including for jobs at limited or no risk of being destroyed and by firms facing structural difficulties, resulting in deadweight and displacement effects. To the extent that such costs tend to increase as the economic situation improves, STW generosity should be set in a countercyclical way. In this respect, countries have tended to increase the generosity of their schemes at the start of the COVID‑19 crisis, while gradually phasing out the temporary increases during the economic recovery. This section focuses on the generosity of public schemes. It does not take account of top-ups in collective agreements, which can be quite important in some of the countries considered here.
3.5.1. The maximum duration of support
To avoid STW support is used for too long it tends to be time‑limited
To the extent that the risk of supporting permanently unviable jobs increases with the duration of support, restricting the maximum duration for which such support is available might limit displacement effects. In Italy, the maximum duration of STW varies between 12‑24 months in Italy depending on the scheme and reason for requesting STW. In Germany, it has been temporarily extended from 6 to 24 months and will be set back to 12 months by April 2022. In France, the maximum duration has been temporarily extended from 6 to 12 months before being set back in July 2021. In Spain, rather than having a fixed maximum duration, the duration of support is determined by support period (usually 3 or 4 months). There does not appear to be an explicit limit for the cumulative duration of support.
3.5.2. The costs of hours not worked for workers
STW benefits support the incomes of workers on reduced working hours to prevent financial hardship and support consumption. However, more generous benefits for workers increase the risk of subsidising jobs not at risk of being destroyed, since higher replacement rates for STW than for regular unemployment increase the attractiveness of STW in comparison to (full) unemployment and the willingness of workers, including those not directly at risk of being laid off, to accept a reduction in working hours as part of a STW scheme. In principle, STW benefits may also reduce job search among workers on STW and hence limit reallocation. However, preliminary evidence by Basso et al. (2022[7]) for Italy suggests that benefits do little if anything to depress job separations.
STW benefits tend to be similar or more generous than UI benefits
STW benefits tend to be similar to unemployment benefits or more generous (Figure 3.1). At present (January 2022), the effective replacement rates at the gross average wage – taking account of caps and floors – are quite similar in the four countries, ranging from slightly below 50% in Spain and Italy to 60% in France. In Germany, STW benefits have always been higher than unemployment benefits, while France decreased STW benefits from 70% to 60% in July 2021, while keeping unemployment benefits constant. Providing more generous STW benefits than unemployment benefits in the beginning of a deep crisis potentially helps preventing a surge in unemployment, overly intense competition for job vacancies among job seekers and stretching the capacity of the public employment services (OECD, 2020[8]). However, in the aftermath of a crisis, as the economy recovers and concerns about congestion in the labour market diminish, there is a case for re‑aligning STW with unemployment benefits. This helps to contain the overall cost of the schemes and improve their targeting to jobs at risk of being destroyed by reducing the willingness of workers to accept STW.
Benefit as a percentage of gross wage evaluated at the average wage, selected dates
Note: Germany: For a childless worker during the first three months of the support. Spain: For a childless worker.
Source: National sources.
STW provides stronger income support to low-wage workers due to the use of caps and floors
STW benefits are generally subject to ceilings and floors to limit their fiscal costs for high-wage workers and prevent financial hardship among low-wage workers. As a result, STW typically provides much stronger income support to low-wage than high-wage workers (Figure 3.2). In France, STW benefits tend to be the most generous among the four countries considered with a floor at the minimum wage and until July 2021 no cap and a high cap since (corresponding to 2.15 times the average wage). Italy also provides generous income support to low-wage workers by having a high policy rate (80% of the previous wage) in combination with a low ceiling (40% of the average wage for workers earning up to 86% of the average wage and 48% thereafter). Similarly, in Spain, low-wage workers until 70% of the average wage receive the policy rate of 70% of the previous wage, while benefits are capped for workers with higher previous wages. In Germany, workers in the first three months of STW receive a gross policy rate of 53% of the average wage, while benefits are capped at 160% of the average wage. However, as discussed below, Germany offers more generous support to workers who have been on STW for more than three months.
Benefit as a share of gross previous wage (expressed in multiples of the average wage)
Note: Germany: For a childless worker during the first three months of the support. For Germany, the gross replacement rate is estimated using the OECD Tax and Benefit model. The net replacement rate is typically equal to 60% with a cap at 160% of the average wage. Spain: for a childless worker.
Source: National sources.
As the use of STW tends to be relatively short, limited attention has been paid to the benefit profile over the STW spell
Introducing degressivity in STW benefits, i.e. letting STW benefits decline over the support period in countries where the maximum duration is relatively long, could in principle strengthen job search among workers in jobs that remain at risk.8 However, in contrast to workers on unemployment benefits, the evidence suggests that workers on STW tend to increase their job search activity over the STW spell (Hijzen and Salvatori, 2022[9]). Until the start of the COVID‑19 crisis, Spain was the only country to make use of a declining benefit schedule for STW, with a reduction in the policy rate from 70% to 50% of the previous gross wage after 180 days, similar to the schedule for unemployment benefits. However, this decline after 180 days was removed in response to the COVID‑19 crisis.9 By contrast, Germany operates an increasing benefit schedule, with the policy rate increasing from an initial level of 60% to 70% of the previous net wage after three months and 80% after six months if the hours worked are reduced by at least 50%. This seeks to limit financial hardship among low-wage workers who have been placed on STW for extended periods.
3.5.3. Co-financing by firms
Co-financing of STW by firms was gradually reintroduced as the economy recovered
Displacement effects occur when STW is used by unproductive firms, therefore postponing or even preventing unavoidable dismissals and slowing labour reallocation towards more productive firms and sectors. Providing STW at zero cost to firms not only increases its use but also the risk of supporting jobs that have no future without STW and will be destroyed once STW ends (Cahuc and Nevoux, 2017[10]). Requiring firms to share in the costs of hours not worked limits displacement effects by targeting the use of STW towards jobs in firms with temporary financial difficulties that remain viable in the medium term. Concerns about displacement effects were limited during the initial phase of the crisis since economic activity was depressed across the board and there was little hiring. All countries considered here temporarily set the cost for firms of hours not worked to zero, with the exception of Spain in the case of large firms, for whom a low level of co-financing was maintained (about 6% of normal hourly labour costs). However, concerns about displacement effects have taken more salience as economic activity resumed and labour shortages have become more visible. All four countries except Italy have therefore reintroduced or increased co-financing, which now corresponds to 13% in Germany, 14% in Spain and 18% in France (Figure 3.3).
The cost of hours not worked for firms as a percentage of total labour cost evaluated at the average wage, selected dates
Note: France, January 2020: for enterprises with 250 employees or more. Spain: March 2020; for enterprises with 50 employees or more. Spain, January 2022: for enterprises with 10 employees or more. Italy: end December 2021 instead of January 2022. In the four countries during the crisis, the employer social security contributions are partly or fully exempted during the STW period but the workers are still entitled to social security benefits (pension and unemployment insurance), meaning that the state takes over the social security contributions.
Source: National sources.
The degree of co-financing tends to be lower for high-wage workers
While co-financing can help to reduce concerns about supporting permanently unviable jobs, it can also have implications regarding the types of workers that are placed on STW by their firm. Indeed, increasing the cost of using STW for firms might encourage them to concentrate STW, whenever possible, on workers with high levels of firm-specific human capital which are more likely to have open-ended contracts. However, this can also exacerbate labour market duality, raising a trade‑off between efficiency and equity.10
In many countries, co-financing depends on the previous wage of workers, which in part reflects the value of firm-specific skills (Figure 3.4). While the patterns are quite varied across countries, there is some indication that co-financing rates tend to be lower for high-wage workers in proportional terms (France prior to the COVID‑19 crisis is an exception). This may suggest that, everything else equal, employers face stronger incentives to place high-wage workers on STW. It is not clear whether this has been the intention of policy makers.
Co-financing generally takes the form of employer obligations to pay employer social security contributions for hours not worked, either fully or in part. Since employer social security contributions typically are subject to ceilings, this yields declining co-financing schedules over the wage distribution in Germany and Spain. In Germany, employer SSC exemptions have evolved from 20% before the crisis to 100% during the crisis and 50% since January 2022 (until March 2022).11 In Spain, firms had to continue paying employer social security contributions in full before the crisis, while firms have been fully or partially exempted depending on company size and the reason for using STW since the start of the COVID‑19 crisis. In France, hours not worked under STW have always been exempted from social security contributions for hours not worked.12 Co-financing rates instead are designed as a contribution to the benefit for workers paid by the employer, initially as a lump-sum (per hour not worked) depending on firm size, and more recently, as a proportion of the benefit with a cap.13 Before the crisis, the co-financing rate was a function of the benefit schedule for workers and the lump-sum subsidy for firms, whereas it is now a function of the benefit schedule for workers only (see Figure 3.2).14 In Italy, employers have been fully exempted from paying employer social security contributions since the start of the crisis, whereas before the crisis they contributed at a fixed rate.
The costs of hours not worked for firms as percentage of total labour cost according to the level of previous gross wage, selected dates
Note: France, January 2020: for enterprises with 250 employees or more. Spain: March 2020: for enterprises with 50 employees or more. Spain: January 2022: for enterprises with 10 employees or more. Italy: end December 2021 instead of January 2022.
Source: National sources.
Experience‑rating represents as an alternative way of co-financing, but is rarely used
Experience‑rating is another way of co-financing STW schemes and therefore limiting displacement effects, while alleviating the temporary financial constraints faced by the firms. Indeed, under experience‑rating firms are required to contribute in the future to their use of STW in the past through higher employer SSC. The main advantage of experience‑rating compared with direct co-financing is that it does not reinforce financial constraints in firms already facing difficulties. Nevertheless, it has been rarely used, most likely because its implementation is complex. Among the four countries considered here, the only example of experience‑rating is pre‑crisis Italy. Before the COVID‑19 crisis, employers using STW had to pay an additional contribution proportional to the wage supplement and varying with firm size (8% for CIGO and firms with more than 50 employees, around 4% for CIGS or CIGO and firms below 50 employees) and STW duration (8% during the first year of use, 12% during the second year of use and 15% beyond).15 In response to the crisis, this additional contribution for CIGO or CIGS was set to 9% for firms experiencing a revenue loss below 20% (18% for firms experiencing no revenue loss), before being completely eliminated.
3.5.4. As the COVID‑19 crisis evolved, STW was increasingly targeted to sectors most affected by economic restrictions
While the exceptional generosity of STW during the initial phase of the COVID‑19 crisis was gradually phased out to encourage the resumption of economic activity (“regular STW”), generous measures were maintained for firms whose activities continued to be directly affected by administrative health-related restrictions (“crisis STW”). Moreover, Spain and France introduced an additional structural or long-duration STW scheme. In order to limit potential displacement effects arising from a prolonged use of STW, both countries impose additional conditions on its use. This is discussed in detail in Box 3.1.
During the COVID‑19 crisis, France and Spain created extraordinary STW schemes only targeted to the firms and sectors most affected by the pandemic and administrative health-related restrictions. These extraordinary schemes granted firms more favourable terms for the use of STW, as well as more generous benefits to workers. In theory, targeting STW in this fashion helps to alleviate concerns over moral hazard related to the use of support by firms who do not need it.
In France, eligible firms belonged to sectors such as accommodation, food services, tourism, transportation, entertainment and leisure, wholesale and retail, which experienced health-related restrictions and faced a revenue loss of at least 65%. It provided generous replacement rates for hours not worked for workers (70% until January 2022, 60% expected thereafter) and no co-financing requirements for firms. These conditions were substantially better than regular STW, which involved higher co-financing for firms (with the subsidy declining from 100% to 60% of the benefit) and lower benefits for workers after July 2021 (70% until June 2021, 60% afterwards).
In Spain, starting in September 2020, sectors with a consistently high use of STW and low recovery rates were provided with more favourable co-financing rates (which varied over the course of the pandemic), but standard replacement rates for workers. These sectors were offered generous reductions to social security contributions (ranging from 40% to 95% depending on the time and size of the firm) for workers that resumed work after being put on STW. These “work resumption bonuses” constituted an interesting attempt to avoid long-term reliance on STW and to promote efficiency-enhancing job reallocation across firms. Importantly, the sectors who could access these conditions were selected based on objective quantitative criteria, reducing the risk of political favouritism, and lobbying by sectors. Moreover, the list of sectors allowed to access these conditions were updated several times throughout the pandemic to keep track of changes in the underlying issues faced by sectors.
Both countries also created measures to help firms and sectors facing persistent, long-term difficulties. In France, long-duration STW as it is called, provides more generous to both workers and firms for a longer maximum duration, but also imposes significant additional restrictions on its use to encourage restructuring and the resumption of activity. The reduction in working time is capped at 40% and a formal agreement with the social partners is required. In Spain, the new RED mechanism, effective from April 2022, provides for STW in the case sector-specific changes that require productive reorganisation and/or worker requalification. To facilitate sectoral reallocation, this scheme conditions reductions in co-financing requirements on worker participation in training programmes and a social plan to promote the mobility of workers to other firms.
Note: Evaluated at the average wage. Spain: March 2020: for enterprises with 50 employees or more. Spain: January 2022: for enterprises with 10 employees or more.
Source: National sources.
1. Prior to the COVID‑19 crisis, a similar logic prevailed within the French scheme, as the lump-sum subsidy paid by the public authorities also depended on firm size.
By enhancing workers’ skills, participation in training while on reduced working hours can help improve the viability of their current job or the prospect of finding a new job. Training can therefore help to increase the cost-effectiveness of STW. However, the use of training has not been entirely uncontroversial traditionally and some countries even used to have bans on its use during STW in the past. Restrictions on the use of firm-related training while on STW may reflect concerns that training directed at the acquisition of firm-specific skills could induce firms to use short-time work to finance training activities that would have been undertaken anyway. Similarly, restrictions on the use of general training while on STW may reflect the possibility that training directed at the acquisition of transferable skills and the promotion of job mobility runs counter to the objective of STW to promote job retention. At the same time, many countries already promote adult training among employed and unemployed workers and it is not obvious why workers on STW should be treated differently. In response to the COVID‑19 crisis, all countries considered here except Italy put in place financial incentives to promote participation in training while on STW, without however making training mandatory.
3.6.1. Financial incentives for training while on STW
Financial incentives for training while on STW may relate to the cost of training itself (e.g. educational expenses), or the cost of training time, which in this case refers to the cost of STW for firms or the cost of STW for workers. Subsidies often build on the existing infrastructure for adult learning and the availability of training incentives for either employed or unemployed workers. Apart from promoting training, such financial incentives may also encourage the use of STW. Whereas in Italy almost no support was available for training during STW,16 it was actively encouraged in France, Germany and Spain by providing financial incentives to firms in the form of reimbursement of training expenses and/or greater SSC exemptions for employers (Figure 3.6). In all three countries, more generous subsidies are provided to smaller firms.
Subsidies for training expenses exist in France, Germany and Spain
In France, Germany and Spain, training while on STW is actively encouraged by subsidising training expenses (Panel A). In France, firms are reimbursed for training expenses through the National Employment Funds for training (Fonds National pour l’Emploi (FNE) – Formation), fully from March 2020 to March 2021 and partially thereafter, depending on firm size (100% for firms with less than 300 employees; 70% for firms with more than 300 employees; 80% under “long-duration” STW for firms with more than 300 employees).17 Moreover, workers could get their training expenses reimbursed through their individual training accounts (Compte Personnel de Formation – CPF). In Germany, training cost are reimbursed since January 2021 depending on firm size (100% for firms with less than 10 employees; 50% for firms between 10 and 249 employees; 25% for firms between 250 and 2 499 employees; 15% for firms with more than 2 500 employees). Since November 2021, Spain provides a lump-sum subsidy depending on firm size (425 euros per participant for firms with 1 to 9 employees; 400 euros for firms with 10 to 49 employees; 320 euros for firms with more than 50 employees).
Subsidies for training expenses are combined with higher STW subsidies for firms in Germany and Spain
In addition to subsidies for training expenses, Germany and Spain provide additional incentives to firms through increased exemptions from social security contributions (Panel B). In Germany, firms that place their workers on training have their SSC discounted by 50% on top of the already existing SSC exemptions (similar to situation during the global financial crisis). As the “regular” employer SSC exemptions have evolved from 20% before the crisis to 100% during the crisis and 50% since January 2022 (until March 2022), firms implementing training during STW periods hence have their SSC exempted at 100% since January 2022 and at 50% by March 2022 (until June 2023). Since November 2021, Spain operates SSC exemptions of 80% for firms combining STW with training.
Specific incentives for workers in the form of higher benefits are rare
Specific incentives for workers in the form of higher benefits are rare (Panel C). Only France operated such incentives before the COVID‑19 crisis by setting the replacement rate for hours not worked at 100%. Introduced within the “long-duration” STW scheme in the aftermath of the global financial crisis, this financial incentive towards workers was passed on to the “regular” STW scheme in 2013, before being eliminated in response to the COVID‑19 crisis. However, since the subsidy to firms for hours not worked was unchanged, firms entirely carried the burden of higher replacement rates for workers, potentially reducing their willingness to have workers participate in training while on STW (Panel B).
Note: Panel A: for enterprise with 50 employees or more in Spain, 250 employees or more in Germany and 300 employees or more in France. For Spain, it is a lump-sum subsidy. The average training cost per worker was estimated using the average number of training hours per worker (69) and the average hourly training cost (7.6 euros).
Source: National sources.
Conditions on the type of training vary
Several conditions apply to the use of training during STW. In France, the training type provided must be work-related and involve certified vocational training. In Spain (under the regular scheme, ETOP), training should also be work-related, and involve a minimum of training hours: 30 hours in small firms with 10 to 49 employees and 40 hours in larger firms. When the RED mechanism is activated, training must be work-related when it is activated for cyclical reasons and generic when it is activated to promote restructuring.18 In Germany, training must focus on the acquisition of general skills (strictly work-related training is excluded) and involve at least 120 hours (training involving strictly workplace‑related skills are excluded), and training providers must be certified. Given the focus on generic skills, employers and employees must agree on the training content. Differences in the type of training that is allowed while at STW reflect different views on the role of training. Requiring training to be work-related is consistent with objective of STW to preserve jobs but may also increase moral hazard if training is provided by the firm. This risk can be mitigated by only allowing training by certified providers.
3.6.2. Use and effectiveness of training while on STW
The use of training during STW appears higher during the COVID‑19 crisis than the global financial crisis
There is some indication that participation in training while on STW has been higher during the COVID‑19 crisis than during the global financial crisis. While comparable information on the use of training while on STW is hard to come by, OECD estimates suggest that it was about 10% in Germany, almost 20% in France and close to 30% in Spain (Figure 3.7).19 No information is available for Italy. These estimates appear considerably higher than those for the global financial crisis when its use was rather modest (Hijzen and Venn, 2011[2]). The relatively high use of training while on STW during the COVID‑19 crisis is likely to reflect a range of factors. In the past, it often has been difficult to organise training in such a way that it can be combined with temporary reductions in working time. The greater availability of training courses today that are targeted at individuals rather than groups, delivered in a flexible manner through online teaching tools and with a relatively short duration is likely to be particularly important (Hijzen, Salvatori and Puymoyen, 2021[4]). The ongoing development of adult learning systems and the greater generosity of financial incentives (e.g. France, Spain) are also likely to play a role.
Persons combining training and STW as a percentage of persons on STW (firms instead of persons for Germany)
Note: France: Non-responses are not included. Germany: share of firms instead of persons.
Source: Dares, Acemo COVID‑19 survey. https://dares.travail-emploi.gouv.fr/dares-etudes-et-statistiques/; Establishments in the COVID‑19 crisis (BeCOVID-Study), Institute for Employment Research (Institut für Arbeitsmarkt- und Berufsforschung, IAB), Ministerio de inclusión, Seguridad social y migraciones.
Despite more generous financial incentives for small firms, training while on STW remains concentrated among larger firms
There are important differences in terms of the use of training while on STW across firms of different size and industries (see Box 3.2). Despite the use of more generous financial incentives for small firms, training while on STW remains concentrated in large firms. In France, workers on STW in firms with more than 50 employees were about twice as likely to participate as their counterparts in smaller firms. The relative importance of training in larger firms is likely to reflect the greater importance of skills and a greater emphasis on long-term contracting. This is typically embedded in the use of high-performance management practices, which tend to be more difficult to put in place in small firms, given the resources needed for doing so. The use of training while on STW across sectors differs somewhat in France and Germany. Whereas in France, training is strongly concentrated among manufacturing firms, it tends to be concentrated in services in Germany. One possible explanation for this difference may be that in France training has to be work-related, whereas in Germany training has to focus on generic skills. Since firm-specific skills tend to be particularly important in certain manufacturing industries, this may explain the relatively greater use of training in France.
Evidence on the effectiveness of combining STW with training is lacking
To date, there is no evidence of the effectiveness of combining STW with training. While there is a large literature on the effectiveness of adult learning in general, the combination of STW with training raises a number of important new questions. How does training affect the viability of one’s job and how can it help the effectiveness of STW in promoting job retention? How does training affect the reallocation of workers from low to high productivity firms? To what extent do these effects depend on the type of training, i.e. whether it is mainly focused on the acquisition of firm-specific skills or that of transferable skills? How do financial incentives for combining STW with training affect the participation in training and its effectiveness in improving the outcomes of workers and firms? To get some idea about the answers to these questions, evaluations of training instruments are urgently needed. A number of countries that have actively encouraged the use of training while on STW through the use of financial incentives now have administrative data at their disposal that in principle should allow for an evaluation of its impact during the COVID‑19 crisis.
France has been one of the countries that has been most successful in combining short-time work with training. Between July 2020 and July 2021, 20% of the total workforce is employed in firms implementing training during STW periods. There are however important differences across firms and industries. Training while on short-time work is above‑average in large firms (>250 employees), whereas it is below average in small and medium sized firms, at respectively 7.1% for firms with 10‑19 employees, 8.5% for firms with 20‑49 employees, 13.8% for firms with 50‑99 employees and 14.2% for firms with 100‑249 employees. Differences across sectors are even larger with take‑up reaching more than 30% in most manufacturing industries (and over 50% in manufacturing of transport equipment), while it tends to remain below 10% in transport, construction and financial services.
Percentage of persons on short-time work, average June 2020 – June 2021
Note: Non-responses are not included.
Source: Dares, Enquête Acemo COVID‑19. https://dares.travail-emploi.gouv.fr/dares-etudes-et-statistiques/
This chapter examined the institutional features of STW schemes in Spain, Germany, Italy and France, with a focus on four key dimensions: 1) implementation, 2) eligibility and conditionality, 3) generosity, and 4) training. While there are the different schemes differ in their specific details, many of their key features are similar. This confirms the conclusion in the previous chapter there appears to be some convergence over time and all four countries now have well designed short-time work schemes that can be scaled up easily in times of urgent need and be phased out once the case for support recedes.
References
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← 1. Newspaper reports suggest that there have been significant delays in payments in some specific cases. If this was widespread, this could have substantially limited the potential effectiveness of short-time work.
← 2. The more recent introduction of the RED mechanism goes even further since eligibility is essentially established by the national agreement through which the RED mechanism is activated.
← 3. Weber and Yilmaz (Weber E., Yilmaz Y.,, n.d.[11])present a proposal to introduce a force‑majeure modality in Germany.
← 4. During the COVID‑19 crisis, eligibility was temporarily expanded to certain firms in the public sector in France and Germany.
← 5. The conditions for using STW for economic reasons in Spain (ETOP) are the same as those for collective dismissal and therefore rather strict. The conditions could be waived during the pandemic by relying on the force‑majeure modality of ERTE and, since April 2022, the conclusion of a national agreement under the RED mechanism.
← 6. These changes have become permanent with the labour reform of December 2021 (effective April 2022).
← 7. In the absence of recognised worker representatives in the company, it is possible since 2012 to appoint a commission instead and the consultation period can be replaced with the mediation or arbitration procedure. Since December 2021, the process is streamlined through the negotiation of national agreements between the social partners which replace the need to get the agreement of worker representatives in the firm under the RED mechanism.
← 8. In countries where unemployment benefits decline over the spell already, a digressive STW benefit schedule would also contribute to the overall fairness of the entire benefit system.
← 9. ERTE for cyclical reasons, which can be activated through the RED mechanism, also has a degressive benefit schedule.
← 10. In principle, equity concerns can be mitigated by imposing work-sharing conditions or by adjusting the degree of co-financing according to the characteristics of workers.
← 11. Moreover, somewhat atypically, employer obligations comprise both employer and employee SSC for hours not worked.
← 12. In France, under STW the SSC are fully exempted except for two kinds of SSC on the employees’ side, namely the generalised social contribution (Contribution Sociale Généralisée – CSG) and the contribution to the reimbursement of the social debt (Contribution au Remboursement de la Dette Sociale – CRDS) which are due to the respective rates of 6.2% and 0.5%.
← 13. Initially the cap was only applied to the subsidy for firms but since November 2020 this has also been applied to benefits.
← 14. Between March and October 2020, the co-financing rate in France was 0 for workers paid below 2.15 times the average wage, and a function of the benefit schedule for workers paid above.
← 15. However, if the employer can prove that the reduction of working hours was due to exogenous reasons, this experience‑rated component is not applied (hence rarely applied in practice).
← 16. Some regions however provide financial incentives for training while on STW.
← 17. Eligibility to FNE – Formation has recently been extended to firms not using STW in order to secure workers’ transition paths more generally.
← 18. When training is work-related, the agreement of the worker is not required, unless workers have to participate in the cost of training.
← 19. Percentages are expressed as a share of workers for France and Spain but as a share of firms for Germany. To the extent that not all workers on STW in a firm engage in training, the share of firms may be larger than the share of workers. However, to the extent that workers in large firms are more likely to engage in training, the share of firms may actually be smaller.