Job retention schemes in Europe: A lifeline during the Covid-19 pandemic — ETUI Working Paper 2021.07
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Job retention schemes in Europe: A lifeline during the Covid-19 pandemic is Working Paper 2021.07 of the European Trade Union Institute (ETUI), Brussels, by Jan Drahokoupil and Torsten Müller, published in 2021. The paper analyses the job retention schemes that EU member states, Norway, Switzerland and the United Kingdom used in 2020, drawing on an ETUI expert survey conducted in early 2021. It develops a typology of three types: short-time work schemes, furlough schemes and wage subsidies. Its sections cover take-up over time and across sectors, eligibility criteria, generosity, the role of collective bargaining, dismissal protection and provisions to avoid misuse, and training. The abstract states that permanent schemes would require meaningful financial participation by employers and provisions to avoid misuse. The paper closes with references and a list of other ETUI working papers.
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Drahokoupil, Jan; Müller, Torsten
Working Paper
Job retention schemes in Europe: A lifeline during the
Covid-19 pandemic
Working Paper, No. 2021.07
Provided in Cooperation with:
European Trade Union Institute (ETUI), Brussels
Suggested Citation: Drahokoupil, Jan; Müller, Torsten (2021) : Job retention schemes in Europe: A
lifeline during the Covid-19 pandemic, Working Paper, No. 2021.07, European Trade Union Institute
(ETUI), Brussels
This Version is available at:
https://hdl.handle.net/10419/299695
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7
Job retention
schemes in Europe
A lifeline during
the Covid-19 pandemic
Jan Drahokoupil and Torsten Müller
Working Paper 2021.07
7
Job retention
schemes in Europe
A lifeline during
the Covid-19 pandemic
Jan Drahokoupil and Torsten Müller
Working Paper 2021.07 european trade union institute
Acknowledgements
This publication benefitted from the support of a wide range of people. Our comparative
analysis draws on the thorough and insightful work of our network of national experts
who prepared the national country reports. We would like to thank them for the excellent
cooperation and for their patience in answering all our follow-up questions. We would
furthermore like to thank Lucia Kováčová and Martin Kahanec from the Central European
Labour Studies Institute (CELSI) for their help in administering the project and data
collection. We also express our heartfelt thanks to James Patterson whose language editing
made the text more reader-friendly and to Birgit Buggel-Asmus and Aymone Lamborelle
who efficiently organised the layout and production of the publication. Needless to say,
responsibility for the final manuscript rests with us.
ETUI publications are published to elicit comment and to encourage debate. The views
expressed are those of the author(s) alone and do not necessarily represent the views of the
ETUI nor those of the members of its general assembly.
Brussels, 2021
© Publisher: ETUI aisbl, Brussels
All rights reserved
Print: ETUI Printshop, Brussels
D/2021/10.574/23
ISSN: 1994-4446 (print version)
ISSN: 1994-4454 (electronic version)
The ETUI is financially supported by the European Union. The European Union is not
responsible for any use made of the information contained in this publication.
Table of contents
Introduction......................................................................................................................................5
Typology of job retention schemes.............................................................................................8
Job retention schemes in the Covid-19 crisis........................................................................ 15
Developments in take-up over time and across sectors..................................................... 20
Eligibility criteria.......................................................................................................................... 26
Generosity of job retention schemes. ..................................................................................... 32
Role of collective bargaining and consultation procedures. ............................................ 47
Special dismissal protection and provisions to avoid misuse. ......................................... 51
Training provisions. ..................................................................................................................... 53
Conclusions.................................................................................................................................... 55
References...................................................................................................................................... 59
WP 2021.07 3
Abstract
This paper analyses the job retention schemes implemented in response to the Covid-19
crisis, showing quantitative trends and differences in terms of expenditure on the schemes
and the number of workers involved. The key focus is on a qualitative analysis of the
schemes’ key properties. In order to understand the diversity of job retention schemes
implemented in the Covid-19 crisis, we first develop a typology, distinguishing between
three underlying types: short-time work schemes, furlough schemes, and wage subsidies.
We then provide a comparative overview of the different schemes implemented in the
context of the crisis, considering their design as well as their size in terms of expenditure,
and map adjustments made to them in the course of the crisis. The third section analyses
the evolution of the take-up of the schemes in the course of 2020. The remaining sections
discuss in detail such key properties as: eligibility criteria, the level of support for employees
and employers, the role of collective bargaining and worker participation, dismissal
protection, measures to avoid misuse, and training provisions. The paper concludes by
drawing lessons from experiences with the Covid-19 pandemic in light of the discussion
on whether and how permanent schemes should be established. It argues that the main
issue is to find a design that balances the interests of all stakeholders. This would require
meaningful financial participation on the part of employers, effective integration of the
schemes into active labour market policies, and provisions to avoid misuse, including the
effective involvement of worker participation and collective bargaining structures.
4 WP 2021.07
Job retention schemes in Europe
Introduction
Job retention schemes (JRSs) are aimed at preserving employment in firms
that experience a temporary drop in demand. They preserve the links between
companies and their employees, which may be costly to re-establish once broken.
They also support workers’ incomes, who keep their employment contract even if
work is suspended. Job retention schemes have become a hallmark of the European
approach to dealing with economic downturns, promising a more humane and
effective solution to economic crises (cf. Fischer and Schmid 2021). Job retention
schemes became widespread in the Great Recession when a number of European
countries introduced or extended job retention policies. In 2009, they were used in
sixteen European Union (EU) member states and also in Norway and Switzerland.
Belgium, Italy, Germany, and Luxembourg ran particularly large job retention
schemes, with the share of employees receiving support exceeding 2 per cent (Cahuc
and Carcillo 2011: Figure 1). Job retention schemes have become the key crisis
response measure in Europe in the Covid-19 crisis. In 2020, all EU member states,
as well as Norway, Switzerland, and the United Kingdom (UK), used some form of
job retention scheme. Many were just temporary, but the experience of the crisis
put the introduction of permanent schemes on the agenda in a number of countries.
This paper analyses the job retention schemes implemented in 2020, showing
trends and differences in terms of scheme expenditure and number of workers
enrolled. The key focus is on a qualitative analysis of the key properties of the
schemes. The comparative analysis of the institutional features aims to complement
existing assessments of job retention schemes that point to the importance of their
design, yet rarely engage in a systematic discussion of their differences. We do
that by analysing the dataset collected through the ETUI’s expert survey in all
EU member states and in Norway, Switzerland, and the United Kingdom in early
2021. The individual country reports are available as online appendices to this
report on the ETUI website.
The distinct economic benefit of job retention schemes is that they can prevent
the inefficient termination of otherwise viable jobs during a period of temporary
adverse economic conditions. Employment protection legislation can make such
separation of workers from firms particularly costly. Moreover, once valuable staff
are lost, it can be difficult and expensive to replace them when demand recovers.
This prolongs the return to pre-recession output levels or profitability and may even
reduce the economic potential of firms and the economy as the whole. The benefits
of job retention schemes must be balanced against their potential deadweight and
displacement effects, however, as well as against other inefficiencies (Lydon et al.
2019; see overview in Cahuc 2019). Job retention schemes may indeed subsidise
jobs that would have been preserved anyway (hence the deadweight losses). In
turn, they may subsidise jobs that are not viable in the longer term, hindering
labour mobility and disincentivising retraining and other forms of efficiency
enhancement (displacement effects). Other inefficiencies may arise when firms
less affected by demand fluctuation subsidise those that are more affected, with
large firms typically overrepresented in the latter group (as documented for
France in Cahuc and Nevoux 2018).
WP 2021.07 5
Jan Drahokoupil and Torsten Müller
Analyses of the effects of job retention schemes in the Great Recession point to net
job-saving effects, particularly as far as the short-term effects of the recession are
concerned (Boeri et al. 2011; Hijzen and Martin 2013). Cahuc and Cacillo (2011)
concluded that a one percentage point increase in job retention scheme take-up
rates was associated with a decrease of one percentage point in unemployment
and an increase of one percentage point in employment. The estimates quantifying
the job-saving effects remain uncertain, however. Much effort was put into
estimating the employment effects in Germany, which runs a permanent scheme
emblematic of one specific type of job retention scheme, namely a short-time work
scheme. Using German panel data, Herzog-Stein et al. (2013) concluded that the
cyclical job losses would have been around 40 per cent higher in the absence of
the job retention scheme (positive effects were also found by Boeri et al. 2011;
Balleer et al. 2016). Other analyses have downplayed the importance of the job
retention scheme in Germany and attributed more relevance to the use of flexible
working-time accounts (Burda and Hunt 2011; Möller 2010). Cooper et al. (2017)
even found output losses as a result of allocative inefficiencies through reduced
vacancy-filling.
The evidence from the Great Recession has consistently shown that job retention
schemes benefit only permanent workers, with no (negative) impact on temporary
workers (Hijzen and Venn 2011; Lydon et al. 2019). Analyses also indicate that
take-up is related to a high degree of firm-specific human capital, high dismissal
costs, stringent employment protection legislation and high downward wage
rigidity (Lydon et al. 2019). The effectiveness of job retention schemes is thus
related to links with other labour market policies and institutions, notably
employment protection legislation and collective bargaining structures.
Studies from earlier recessions also indicate that the effectiveness of job retention
schemes depends on their design. First, if the cost of participating in a job retention
scheme is too high, companies may dismiss workers in viable jobs; no or too low
costs, however, may incentivise inefficient use of such schemes (for example, Cahuc
2019). Second, allocative inefficiencies are more likely if a job retention scheme is
used outside a recession. Research by Boeri et al. (2011) suggests a threshold of
a 1.5 per cent reduction in GDP above which job retention schemes help prevent
employment losses. It also supports the common assumption that job retention
schemes are effective in the context of contemporaneous or cyclical, as opposed
to structural, shocks. Third, inefficiencies may also be reduced if job retention
schemes are financed by companies likely to actually use them (that is, experience
rating, see Cahuc 2019). Fourth, permanent schemes are likely to be more efficient
than ad hoc schemes. Permanent schemes are indeed characterised by a higher
take-up (Lydon et al. 2019), suggesting the importance of stable rules. Moreover,
designing a scheme under exceptional conditions may introduce suboptimal rules
that may then be difficult to change. Finally, Cahuc and Carcillo (2011) concluded
that plant-level bargaining may be more effective than an inefficient job retention
scheme for adjusting hours without making too many employees redundant. We
would argue, however, that the job retention schemes can be made more efficient
by involving collective bargaining in their design.
6 WP 2021.07
Job retention schemes in Europe
The severity of the Covid-19 crisis made efficiency considerations secondary to
the imperative of providing quick and widely accessible support in a situation in
which large parts of the economy were effectively shut down (see, for example,
Giupponi and Landais 2020). There seemed no need to test for the long-term
viability of supported jobs as the restrictions appeared to be an extreme form
of a contemporaneous shock. A key concern was to ensure access to groups of
workers excluded from schemes. This changed somewhat as it became apparent
that the extended restrictions may also induce structural changes. Concerns about
deadweight losses and displacement effects have thus informed adjustments
of the schemes during the crisis. Early assessments of the use of job retention
schemes in the Covid-19 crisis point to job-saving effects, but estimates of their
extent remain uncertain (OECD 2021; Eurofound 2021; Eichhorst et al. 2020).
The OECD’s estimate – allowing for efficiency losses – suggests that, on average,
the potential decline of employment would be almost 50 per cent larger than the
actual change in employment (OECD 2021: Figure 2.7). Eurofound’s calculations
suggest that well established job retention schemes were more effective than
temporary schemes.
In order to understand the diversity of job retention schemes implemented in
the Covid-19 crisis, we first develop a typology, distinguishing between three
underlying types: short-time work (STW) schemes, furlough schemes, and wage
subsidies. We then provide a comparative overview of the different schemes
implemented in the context of the crisis, considering their design, as well as size
in terms of expenditure, and map their adjustments in the course of the crisis. The
third section analyses the development of take-up of the schemes in the course
of 2020. The remaining sections discuss in detail the schemes’ key properties:
eligibility criteria, the level of support for employees and employers, the role of
collective bargaining and worker participation, dismissal protection, measures to
avoid misuse, and training provisions. Lessons from the crisis are discussed in the
conclusions.
WP 2021.07 7
Jan Drahokoupil and Torsten Müller
Typology of job retention schemes
Job retention schemes serve a dual purpose: they help companies to weather
economic difficulties and they also help workers to keep their jobs and protect their
wages. Their rationale is to maintain ties between companies and their employees
at times when demand falls temporarily. Job retention schemes in Europe come in
different shapes and sizes, but a key characteristic shared by all is that employees
keep their employment contract even if work is fully suspended. From the point
of view of the employee, job retention schemes, like unemployment insurance,
protect (part of) their income, and, unlike unemployment insurance, protect them
from the negative consequences of job loss and career disruption. Employers
benefit because job retention schemes prevent the loss of employees’ firm-specific
knowledge and the high costs involved in hiring and training new employees once
the economy picks up again. Job retention schemes may also prevent bankruptcies
of otherwise viable enterprises. Finally, like the unemployment insurance system,
job retention schemes serve as a counter-cyclical policy that stabilises the economy
during a recession. All in all, the key economic benefits of job retention schemes,
distinguishing them from unemployment insurance, are related to avoiding the
high adjustment costs involved in a transition from one state of the economy to
another.
It is common to distinguish between wage subsidies, short-time work schemes and
furlough schemes. There has always been some overlap between these schemes
and the differences have become particularly blurred as they were adjusted to the
unprecedented economic shock of the Covid-19 pandemic. At the same time, in
order to understand the functioning of the schemes, it is useful to work with the
three types, as they each have different objectives and follow distinct logics.
The most fundamental distinction can be drawn between wage subsidies, on one
hand, and short-time work schemes and furlough schemes, on the other. Whereas
wage subsidies can be understood as subsidising hours worked, short-time work
schemes and furlough schemes effectively subsidise hours not worked. Eligibility
for wage subsidies is thus linked to the situation of the company rather than to
the adjustment in working time experienced by the employee. While the level of
support of short-time work schemes and furlough schemes is directly linked to the
adjustment of working time, the level of the wage subsidy is either flat, or related
to the severity of the impact of the crisis for the company.
The main objective of wage subsidies is thus to preserve employment through
subsidising companies’ wage bills. For this purpose, a company in temporary
financial difficulty receives financial support per employee, regardless of whether
or not the working time of specific employees is reduced. Employees keep receiving
their wages. An ideal-typical wage subsidy scheme thus subsidises the wage bill
of all companies in difficulties without any conditions related to the reduction
of working hours. There may be conditions in terms of retaining a percentage of
workforce or wages paid to the workers. Simple to design and implement, wage
subsidies are relatively easy to establish as a crisis measure that provides support
at short notice. They are typically financed from the state budget.
8 WP 2021.07
Job retention schemes in Europe
Short-time work and furlough schemes are often distinguished with reference
to the number of hours reduced. The OECD (2021: Chapter 2) thus considers
furlough schemes as a subtype of short-time work schemes in which working hours
are temporarily reduced to zero. Eurofound (2021) refers to ‘temporary lay offs’
where no working hours are allowed. Such a distinction is somewhat arbitrary,
however. This has become apparent in the context of the Covid-19 crisis, when
both short-time work and furlough schemes have been made more flexible also
when it comes to the extent of working time reduction. At the same time, part-
time furlough and short-time work schemes with an option to reduce working
time by 100 per cent were common also before the Covid-19 crisis (for example,
in Finland and Germany respectively). More generally, however, the definition of
full reduction depends on the reference period, which can in practice vary from
a full reduction for a day or for a month. For instance, a one-week break from
work in the Belgian furlough scheme is typically understood as ‘full working-time
reduction’, but in substance it seemed to differ little from a 25 per cent working
time reduction spread over a month. We thus prefer to distinguish between short-
time work and furlough schemes with reference to distinct underlying rationales.
More specifically, short-time work schemes are aimed primarily at retaining
existing jobs by providing companies with wage support, while furlough schemes
provide assistance to workers who temporarily become unemployed. They can be
seen as a tool to facilitate their transition to other jobs.
The key objective of short-time work schemes is thus to help companies to retain
their employees in economic difficulties. The company receives financial support
for paying employees’ wages when they are not working. Other features of short-
time work schemes can vary, but an ideal-typical logic can be identified. The
classic short-time work schemes incentivise companies to spread the costs of
adjustment across the workforce by either limiting working time reduction to a
certain percentage (France, Austria), or by requiring that the reduction affects a
certain proportion of workers (Germany). The workers enrolled in the scheme are
neither available nor incentivised to take up other employment. Therefore, in order
to avoid misuse by companies, the scheme requires either that employers share
some of the cost of the hours not worked, or approval of use by public authorities.
Furthermore, worker representatives may be involved in the implementation of
the scheme to facilitate burden sharing and also to help avoid misuse. Employees
typically also bear some of the adjustment costs by receiving lower pay for hours
not worked. As the benefit comes in the form of wages, insurance contributions
are paid. With workers effectively waiting for their jobs to resume, training during
the downtime can be expected to be organized by companies. Finally, short-time
work schemes can be financed through various means, including special funds
with employer and employee contributions, the state budget, or unemployment
insurance.
WP 2021.07 9
Jan Drahokoupil and Torsten Müller
Table 1 Job retention schemes: a typology
Short-time work scheme Furlough scheme Wage subsidy scheme
Defining features
Common Retaining links between workers and companies (protecting jobs). Reducing the wage bill
goals (JRS) of companies in difficulties. Protecting workers from income loss.
Type of Support to companies to Benefit to employees for Subsidy to companies
support finance hours not worked. hours not worked. Allowing regardless of whether
companies to temporarily working time of specific
lay off parts of their employees is reduced.
workforce.
Typical design
Other Spreading the costs of Hedging against the costs
objectives adjustment across the of worker transitioning to
workforce. another job (by retaining
the old contract).
Eligibility Temporary economic Temporary economic Economic difficulties.
difficulties. Reduction in difficulties. Reduction Selected sectors or types of
working time. Employment in working time. Worker companies.
contract. eligible for unemployment
assistance.
Level Linked to pay. Directly Linked to pay. Directly Permissible wage
reflects adjustment of reflects adjustment of adjustments not directly
working hours. working hours. related to working time
reduction.
Financing Varies. Unemployment insurance. State budget.
Insurance Paid also for time not Not paid (insurance Paid, unless wage subsidy
contributions worked. compensation). in the form of insurance-
contribution relief.
Cost for A proportion of pay for the Initial period of the benefit Subsidy can be linked to
employers (to time not worked. may be born by the the severity of impact, or a
avoid misuse) employer (a flat rate). flat rate. It can effectively
reduce the wage bill to zero,
particularly for lower paid
employees, or if adjustment
in pay allowed.
Role of Worker participation Employee representatives None.
collective instrumental in managing may be involved in
bargaining the spread of adjustment managing temporary
in the company and layoffs. Sectoral collective
in avoiding misuse. agreements often regulate
Agreements may increase the system.
the level of support.
In contrast, furlough schemes can be best understood as temporary unemploy
ment. Financial support in the form of unemployment benefit is therefore as a rule
paid directly to workers for the period of partial or full working-time suspension.
The aim of a furlough scheme is to enable companies to reduce their wage bill by
temporarily laying off (parts of) their workforce. At the same time, the workers
keep their employment contract with the company and can thus return to their
previous position on unchanged terms. While retaining ties with their employer,
workers on the furlough scheme are available to seek alternative employment.
Integrated into the existing system of unemployment insurance, furlough
schemes can also be seen as a tool to facilitate transition to a new job. The typical
furlough scheme, including its financing, is thus integrated in unemployment
10 WP 2021.07
Job retention schemes in Europe
insurance and assistance. In order to avoid misuse, furlough schemes may require
that employers finance the first days of unemployment benefit. This can be
understood as a flat rate, but there are also more complex arrangements. Workers
on temporary unemployment are entitled to receive support in their efforts to
find other jobs. Training can thus be expected to be organised through public
unemployment assistance rather than in companies (however, as discussed below,
only a few existing furlough schemes have a strong training element). The level of
benefit follows the system of unemployment insurance; it can be understood as an
insurance pay-out and thus no insurance contributions are paid on it. Unlike in
short-time work schemes, the transition between furlough scheme and standard
unemployment insurance is relatively seamless and the boundaries may in practice
not be clear-cut. Finally, worker representatives may be involved in implementing
furlough schemes through their involvement in temporary dismissal procedures.
Table 2 provides an overview of the types of job retention scheme implemented in
Europe in 2020 and 2021. Box 1 includes additional information on their financing.
In many cases, our classification differs from those used in the respective countries.
For instance, we classify the Danish Lønkompensationsordningen as a short-time
work scheme rather than as a wage subsidy, despite its name (‘wage compensation
scheme’). However, the scheme is directly linked to the hours worked by a specific
employee and effectively subsidises the wage for the time not worked. This makes
it a short-time work scheme in our classification rather than a wage subsidy, which
subsidises the overall wage bill. Similarly, the UK scheme is typically referred to as
a ‘furlough’ scheme, but we classify it as a short-time work scheme as it contributes
to the cost of hours not worked without integrating workers into unemployment
assistance system.
WP 2021.07 11
Jan Drahokoupil and Torsten Müller
Table 2 Job retention schemes in Europe, 2020-2021
ETUI classification of Perma- Adjustment to the crisis Adjustments during the crisis*
the scheme nent
scheme
Austria STW scheme, 10-90% Yes Duration longer; more flexible Increase in the minimum working time
time, up to 100% in rules for extension of duration (unless restricted by government)
HORECA and administrative simplification
Belgium FS, can be part-time Yes Eligibility widened; level Additional allowance (‘protection
increased; duration extended; bonus’) in case of intensive temporary
administrative simplification unemployment, lower withholding tax
(15%), promoting temporary employment
in other branches or participation in
training
Bulgaria STW scheme, full-time and No Wider sectoral coverage; obligations to
part-time (1-4hours/day) preserve jobs lifted for some sectors;
eligibility: drop in revenues introduced
WS for hospitality, tourism Introduced later (July-December 2020;
and transport sectors extended to the end of May 2021)
Croatia WS No Special scheme: Job Preservation Wider sectoral coverage; various eligibility
Support changes; higher cap
STW scheme, 10-90% Special scheme: Short-time Work Maximum reduction increased from 50%
Allowance to 70% and then 90%; higher cap
Cyprus FS, can be part-time No A variety of furlough schemes
introduced
Czechia STW scheme, up to 100% No
WS: social insurance No Implemented in June-August 2020
contribution relief for
small companies
Denmark STW scheme, 100% No
reduction
Part-time FS, reduction Yes Procedures more flexible; Increasing of level of support; payment of
applies to all workers temporary Covid FS introduced security contributions by employers
(membership in unemployment
scheme not required, higher
level, no limit on duration)
Estonia STW scheme paid directly No Eligibility tightened (larger impact),
to employees as a benefit lower level of support and lower cap,
dismissal protection extended; scheme
not extended beyond June 2020 but re-
introduced in December 2020
Finland FS, can be part-time Yes Eligibility: fixed-term workers;
education provision; temporary
layoff procedure more flexible;
duration limit lifted
France STW scheme, working Yes Eligibility: wider categories of Reduction of level and subsidy to
time reduction up to 50% employees; 40% working time employers of standard STW scheme; a
(standard)/40% special reduction long-term scheme introduced (APLD):
longer duration; co-payment by
employers
Germany STW scheme, up to 100% Yes Eligibility: temporary agency Increase in level of support; from
working time reduction workers and impact; duration; June 2021 full coverage of security
level; employer support higher contributions by state only if workers
(insurance contributions receive training
covered); incentives for training
Greece FS No
STW scheme, 50% Coverage of employer contributions
working time reduction
12 WP 2021.07
Job retention schemes in Europe
ETUI classification of Perma- Adjustment to the crisis Adjustments during the crisis*
the scheme nent
scheme
Hungary STW scheme, working No Agency workers included into STW
time reduction 30-50% scheme
WS for HORECA Introduced during second wave
WS for R&D workers, to
the company
Ireland WS No WS (can be combined with FS) Increased level of support
Part-time FS Yes Minor role
Italy Normal STW scheme Yes Eligibility widened: pandemic
(CIGO), 0-100% reduction emergency; simplified procedure;
suspension of dismissals on
Special STW scheme Yes economic grounds
(CIGS), 0-100% reduction
Residual STW scheme Yes
(FSB), 0-100% reduction
Temporary Covid-19 STW No Covid-19 STW scheme for those August–December 2020: co-financing
scheme (CIGD), 0-100% not eligible for permanent from companies with revenue drop <
reduction schemes; suspension of 20%; September 2020: requirement to
dismissals on economic grounds enrol into re-activation programmes
Latvia STW scheme, full- and No Duration extended, overall level
part-time reduction decreased but increased for low income
through increase in cap
Lithuania STW scheme, full-time and No Level and ceiling increased, higher level
part-time and ceiling for employees > 60 years
Luxembourg STW scheme, up to 50% Yes A 'force majeure Covid-19 STW A ‘structural STW scheme’, July-December
reduction (100% in scheme': duration extended; 2020: no limit on % of employees and
2020) eligibility: company under working time reduction for Horeca and
restrictions & more flexibility if tourism
difficulties; temporary workers
and apprentices eligible, 100%
reduction possible
Malta WS No Eligibility widened: workers (students,
pensioners), impact (revenue drop
requirement relaxed); Level lowered for
some sectors
Netherlands WS No A special scheme replaced the Level: 10% wage cut allowed; support for
permanent FS employers adjusted; training provisions
Norway FS, can be part-time Yes Smaller working time reduction Increased co-payment by employers; the
possible, training allowed, length of temporary lay-offs has been
duration, eligibility (lower prior increased; the period in which employees
income, non-EFTA citizens receive the full wage at the beginning of
included), state subsidy; a WS a lay-off has been reduced from 20 to 10
for companies taking workers days; temporarily laid-off employees were
back from the scheme allowed to receive training; between May
and July 2020 laid-off employees from
third countries had the right to receive
unemployment benefits; between March
and July 2020 the minimum working
time requirements were reduced from
50% to 40%
Poland WS, unpaid working time No Eligibility impact: larger revenue fall
reduction possible required
Portugal STW scheme, 50- Yes Introduction of extraordinary STW
70%/33-100% reduction scheme in July 2020 replacing the
(depending on decrease standard scheme: eligibility widened
in turnover) beyond closure by government; 100%
working time reduction allowed since
January 2021, lowered to 75% in May
2021; increased level of support; full
exemption of employers from paying
security contributions turned into partial
exemption
WP 2021.07 13
Jan Drahokoupil and Torsten Müller
ETUI classification of Perma- Adjustment to the crisis Adjustments during the crisis*
the scheme nent
scheme
Romania STW scheme, up to No Working-time reduction more flexible;
50/80% May 2020: 3 months WS of 41.5% for
selected workers; co-determination by
employees introduced
Slovakia STW scheme, full-time and No Special schemes (higher level), Employer’s financial participation
part-time eligibility wider: restricted eliminated; Cap on support abolished
by government; economic
difficulties
Slovenia STW scheme, full-time No Lowering of costs for the employer
(waiting for work at
home)
Spain FS, full-time and part-time Yes Introduction of two types of In September 2020 introduction of a
extraordinary support sub- third sub-scheme each with different
schemes: based on force majeure reductions of social security contributions
and on economic, technical, for employers; simplification, expansion
organisational and production- of sectoral coverage,
related reasons arising because
of Covid-19
Sweden STW scheme, maximum Yes Generosity, extension Between May and July 2020 larger
80% reduction working time reduction of 80% possible
(re-introduced for January-June 2021)
Switzerland STW scheme, reduction > Yes Eligibility temporarily widened: Eligibility widened to employees with
10%, 100% reduction is fixed-term, temporary; duration work on demand
possible extended; employer contribution
reduced
United STW scheme No Co-payment temporarily introduced;
Kingdom payment of security contributions by
employers; part-time work allowed
Notes: * Extensions not considered; FS: furlough scheme; STW: short-time work; WS: wage subsidy.
Source: ETUI survey of job retention schemes.
Box 1 Job retention scheme financing
Wage subsidies, as temporary crisis measures, are funded from the state budget.
In contrast, furlough schemes are part of unemployment assistance and thus
typically financed from unemployment insurance funds. However, in many
countries these can be considered part of the public budget. Belgium, Finland and
Norway indeed subsidise these funds from the state budget. At the same time, the
furlough schemes in Cyprus and Spain were financed by the state.
The financing models of short-time work schemes are even more diverse. As a
rule, temporary schemes are financed from the state budget, with the exception
of Romania which has used unemployment insurance for financing. Permanent
schemes use a range of financing models, including unemployment insurance
(Germany and Switzerland) and the state budget (Austria, Slovakia and Sweden).
Some STW schemes also rely on special funds. In Italy, these are financed by
employers, the state, and, in some cases, also by employee contributions. In
France, STW financing combines state (67 per cent) and unemployment insurance
(33 per cent).
The role of SURE funding by the European Union is discussed in the next section.
14 WP 2021.07
Job retention schemes in Europe
Job retention schemes in the Covid-19 crisis
Job retention schemes became common in the Great Recession. Sixteen European
countries were using a job retention scheme in 2019, but some of these schemes
were just temporary. There were permanent short-time work schemes in Austria,
France, Germany, Italy, Luxembourg, Sweden, and Switzerland in the wake of
the Covid-19 crisis. Belgium, Denmark, Finland, Ireland, Netherlands, Norway,
and Spain had permanent furlough schemes. No country ran a permanent wage
subsidy scheme: the latter can be considered an ad hoc crisis-fighting measure.
As documented in Table 2, all EU countries had introduced some form of job
retention scheme by summer 2020. Some form of wage subsidy was introduced
in nine countries. Interestingly, the Netherlands replaced its permanent furlough
scheme with a Covid-related wage subsidy scheme. Similarly, in Ireland the wage
subsidy represented the main crisis measure, with the permanent furlough scheme
playing only a minor role. The appeal of a wage subsidy scheme as a crisis-fighting
measure is that it is easiest to implement at short notice as it requires least effort
in terms of administration and monitoring. At the same time, it is a relatively
blunt instrument that neither tests for the viability of supported jobs, nor takes
into account the actual working time reduction. However, this was less of an issue
in the sectors that were effectively shut down by the Covid-related restrictions
regardless of their longer term viability. Some countries thus introduced wage
subsidy schemes targeted at the affected sectors: hotels, restaurants, and tourism
in particular. In this context, the Hungarian wage subsidy for research and
development workers stands out, given its specific targeting. The sectoral wage
subsidy schemes in some cases complemented other job retention schemes. In
Czechia, a wage subsidy in the form of relief from social insurance contributions
for smaller companies also complemented the main short-time work scheme.
Ireland, Malta, and the Netherlands, however, relied on wage subsidies as their
main job retention scheme.
Most countries that had no job retention scheme at the beginning of the crisis
opted for a short-time work scheme. As a reaction to the crisis, short-time work
was introduced in eleven EU countries and in the United Kingdom. Furlough
schemes were introduced only in Cyprus and Greece. This is perhaps related
to the complexity of integrating a temporary scheme into an existing system of
unemployment insurance.
The existing furlough and short-time work schemes proved to be ill equipped to
address the challenges of the Covid crisis. As documented in more detail in Table
2, all permanent job retention schemes were adjusted to the new environment. The
scale of the economic shock, especially in the initial phase, was unprecedented.
Some companies have seen their business effectively disappear in the face
of government restrictions. In this context, the short-time work rationale of
spreading the costs of adjustment across the workforce became less relevant. The
limits on the maximum extent of working time reduction in STW schemes was thus
typically increased. The crisis also made it difficult to assess the temporal nature
of economic difficulties. The eligibility criteria of short-time work and furlough
schemes were thus made less demanding and the procedures more flexible. The
WP 2021.07 15
Jan Drahokoupil and Torsten Müller
limits on duration were extended or temporarily lifted. Short-time work schemes
also often allowed companies to enrol workers in quarantine. Finally, the aims
of providing generalised income support and a general freezing of ties between
employees and firms took priority over any targeting of the core workforce or
addressing possible freeriding by employers and, in the case of furlough schemes,
also by (uninsured) employees. The schemes were thus often made more generous
for employees (see Belgium, Germany and Sweden) and, in the case of short-time
work schemes, also for companies (see Germany and Switzerland). Finally, the
schemes were made available to wider categories of workers.
Both permanent and temporary schemes, typically, were further adjusted as the
crisis evolved (see Table 2, column 5). The extension of temporary measures was
the most common adjustment. Estonia and Latvia were the only countries which
discontinued their job retention schemes in June 2020, only to re-introduce them
at a later stage of the pandemic. Wage subsidies were also frequently adjusted
during the pandemic, but the changes did not follow a clear trend. Croatia,
for instance, widened its sectoral coverage and increased the support paid to
employers. Eligibility was made more demanding in Poland. Malta, running a
substantial wage subsidy scheme, made it accessible to a wider set of workers
and companies, but somewhat reduced the level of the subsidy. Finally, the
Netherlands, another country with a large wage subsidy scheme, allowed a cut
in wages paid and introduced training provisions, effectively introducing (minor)
incentives and support for changing jobs.
In contrast, the procedural adjustments of the short-time work schemes during
the crisis tended to follow a similar pattern, increasing flexibility and extending
scope and duration. Whereas the level of short-time work support for employees
as a percentage of the original wage and the cap remained remarkably stable over
time, the substantial changes introduced in short-time work schemes concerned
mainly the proportion of short-time work support paid to employees that needs to
be covered by the employer. Over time, many countries in which, at the beginning
of the crisis, the state fully covered employees’ short-time work support – such
as France, Italy, Slovenia and the United Kingdom – introduced some kind of co-
payment by the employer. This clearly reflects the dynamics of the pandemic and
the fact that at the beginning of the crisis providing broad support and retaining
companies’ financial liquidity took precedence over concerns about unjustified
claims. Over time, the latter gained in importance.
The adjustments of furlough schemes to the crisis tended to introduce more
flexibility into systems and allowed for longer use of schemes. In Denmark,
furthermore, eligibility was widened by extending the scheme to workers not
enrolled in the unemployment insurance system. The country also increased the
level of the benefit as the crisis unfolded. In general, furlough schemes proved to
be more universally applicable, requiring fewer adjustments.
Figure 1 provides an overview of the size of the schemes, in terms of spending in
2020 as a percentage of GDP. Unfortunately, the quality of data differs across
countries. For some countries, the spending figures are based on estimates (for
16 WP 2021.07
Job retention schemes in Europe
example, Finland) or do not cover all programmes in all periods (for example,
Italy). Countries with permanent furlough schemes may not distinguish spending
on furlough schemes from spending on standard unemployment schemes, hence
the lack of data for Finland and Denmark. In any case, the data suggests that
spending on job retention schemes cannot be linked directly to their type, even if
the severity of the crisis is taken into account.
As indicated in Figure 2, spending on job retention schemes reflects falls in GDP,
but there was also a lot of variation between countries affected by the crisis to
a similar extent. Malta, Cyprus and Greece, three countries that recorded the
highest spending on job retention schemes in 2020, also recorded the highest
spending levels relative to the fall in GDP. If the depth of the crisis is taken into
consideration, Ireland and the Netherlands also rank among the highest spenders
(see Figure 2). In contrast, Portugal, Slovakia and Latvia have spent less than
might be expected based on GDP.
As suggested by Figure 3, spending on job retention schemes has reflected take-up
to a considerable extent. We can expect take-up to be influenced by, besides the
severity of the crisis, the scope of job retention schemes (eligibility criteria) and
the cost to the employer of using the scheme (relative to dismissing and rehiring
workers). The large job retention schemes in Cyprus and Greece were characterised
by wide accessibility and low cost to the employer. Interestingly, wage subsidies –
which, as discussed below, were characterised by relatively strict eligibility criteria
in terms of the economic difficulties experienced by firms – were also among the
schemes with the highest spending and take-up (with the exception of Poland).
As far as the cost of job retention schemes is concerned, many countries have
reduced the cost of time not worked for the employer close to zero. At the same
time, a number of countries, including Czechia, Denmark, Norway, Poland and
Portugal, require substantial employer co-financing of hours not worked. These
countries are indeed among those with lower spending and take-up, relative to the
fall in GDP. On its own, however, the cost of using the scheme does not explain the
variation in spending and take-up.
Finally, spending patterns indicate that the ability to spend, or rather to borrow
on the financial markets, played little role in explaining the size of job retention
schemes in Europe. There were indeed worries at the beginning of the pandemic
that the crisis would exacerbate economic divisions within Europe, with countries
in good financial shape spending their way out of the crisis, leaving behind countries
with historically high debt levels that might find it difficult, or more expensive,
to access funding on financial markets. In the end, however, southern European
countries were among the highest spenders, also taking the severity of the crisis
into account. This can be attributed to supportive EU policies. The European
Commission allowed, at an early stage of the crisis, considerable flexibility in
using EU funding (the European Social Fund in particular) for financing crisis-
related measures. A number of EU countries took advantage of this flexibility to
finance their job retention schemes (for example, Czechia, Romania). Moreover, a
system of joint borrowing (EU SURE bonds) was adopted in May 2020 (European
Commission 2021). Member states could use the programme to finance their
job retention schemes through loans guaranteed by the EU, hence under better
WP 2021.07 17
Jan Drahokoupil and Torsten Müller
conditions than would be available for states with high borrowing costs. As
indicated in Figure 1, SURE funding was used by a large number of EU countries.
A survey among policymakers confirmed the importance of SURE funding in a
number of member states in providing the fiscal space to finance job retention
schemes (Eurofound 2021: 39). Among the higher spenders, Netherlands, Austria
and Luxembourg chose not to use SURE financing. Importantly, in contrast to
past programmes of EU lending, SURE funding was unconditional. It could be
used only for eligible spending that included job retention schemes and other
crisis-related programmes.
Figure 1 Spending on job retention schemes and SURE issued, 2020 (% of GDP)
4.0 JRS type (predominant)
Furlough scheme
STW scheme
Wage subsidy
3.0
2.7 SURE issued
2.5
2.4
% of GDP, 2020
2.1
2.0
1.9
1.8
2.0
1.6 1.6 1.5
1.3 1.3
1.0 1.0 0.9 0.8
0.9
1.0
0.7 0.7 0.6 0.6 0.6 0.5
0.3 0.3 0.3 0.3 0.2
0.0
MT CY EL HR UK NL ES AT IT* CH LU IE FR EE BE SI CZ SE DE RO DK* BG PT LT FI PL SK LV NO HU
Note: * Denmark: short-time work spending only (not available for the furlough scheme), Italy: spending for March-October 2020.
– No spending figures available for Norway and Hungary.
Source: ETUI survey of job retention schemes.
18 WP 2021.07
Job retention schemes in Europe
Figure 2 Spending on job retention schemes and GDP change in 2020
3.0 JRS type (predominant)
STW scheme
MT
Furlough scheme
CY Wage subsidy
EL
Spending on JRS, % of GDP, 2020
Linear fit
HR
UK
NL
ES
IT* AT
CH
1.0 2.0
LU IE
FR BE EE
SI
CZ
DE RO SE
DK*
PT BG
FI LT
SK LV PL
0.0
-10.0 -5.0 0.0 5.0
GDP change, %, 2020
Note: * Denmark: short-time work spending only (not available for the furlough scheme), Italy: spending for
March-October 2020.
Source: ETUI survey of job retention schemes.
Figure 3 Job retention scheme spending by take-up
3.0 JRS type (predominant)
STW scheme
MT
Furlough scheme
Wage subsidy CY
Spending on JRS, % of GDP, 2020
Linear fit
HR
UK
NL
ES
IT* AT
CH
1.0 2.0
IE LU
EE BE FR
SI
CZ
SE DE
BG DK* RO
PT
PL SK FI LT
LV
0.0
0 .1 .2 .3 .4
Take up, peak month, 2020, % of employees
Note: * Denmark: short-time work spending only (not available for the furlough scheme), Italy: spending for
March-October 2020.
Source: ETUI survey of job retention schemes.
WP 2021.07 19
Jan Drahokoupil and Torsten Müller
Developments in take-up over time and across sectors
The use of job retention schemes peaked at the beginning of the pandemic. Our
database – which covers EU member states and Norway, Switzerland and the UK –
records 38.6 million workers benefiting from support from a job retention scheme
in April 2020 (Figure 4). In EU member states for which data is available, take-up
peaked in May, with 28.6 million workers on schemes. The use of job retention
schemes dropped rapidly after May 2020, with the lowest number of workers –
11 million – on some form of job retention scheme in October 2020. The second
wave of the virus then drove the number up again, but to a much lower level of
14.6 million in November 2020 (10.4 million for EU members). These figures are
calculated on an employee/month basis: a single employee using a job retention
scheme during several months thus counts as a job retention scheme user in each
month. Importantly, these figures do not take into account whether a worker used
a job retention scheme on a full-time basis, or just for 10 per cent of their time.
Many short-time work and furlough schemes indeed allowed various degrees of
enrolment. In any case, take-up figures in full-time equivalents are not available
for most countries. The data is thus not directly comparable across countries.
This also constrains the interpretation of take-up rates and their development
in individual countries. At the same time, we observe a correlation between our
measure of take-up and spending, suggesting that variations in monthly working
hours do not play a major role in explaining the variation in take-up rates.
With these caveats in mind, we compare the take-up rate, measured as a percentage
of employees benefiting from some form of job retention scheme, between countries
in Figure 5. The rate was highest in Malta, Croatia and Cyprus, where it reached
around 40 per cent in the peak month. Unfortunately, data on take-up is not
available for Greece, which is among the high spenders. Take-up peaked in April
or May in almost all countries. Czechia is an exception, however, as it introduced a
broad wage subsidy in the form of insurance contributions relief for smaller firms
in June–August, driving up the take-up rate in this period. Figure 5 thus displays
the take-up rate for Czech short-time work separately, and clearly it is one of the
smaller schemes. It also highlights data for the Netherlands, which is not directly
comparable, being collected for three-month rather than monthly periods.
Analyses of take-up in the first wave point to underlying factors that explain
variation, namely the stringency of the respective lockdowns and the share
of contact occupations that make employment structures vulnerable to social
distancing (OECD 2021: Figure 2.3; Eurofound 2021: Table 3.4). These two factors
are directly related to the fall in GDP, the factor that we discussed in the previous
section. Take-up rate cannot be directly linked to the share of temporary contracts
(see Eurofound 2021: Graph 3.4). As will be further discussed, many countries
have extended their job retention schemes also to temporary workers. Countries,
notably Belgium, only exceptionally allowed keeping temporary workers on the
job retention scheme after their contract had expired, however. In contrast,
temporary contracts were not extended in Spain and Portugal, two countries with
a high share of them.
20 WP 2021.07
Job retention schemes in Europe
Figure 6 maps the development of take-up throughout 2020. It followed a two-
way pattern across Europe, with large schemes recording the highest take-up
rates also in the second wave. Figure 6 also shows that some countries stood
out. First, the Maltese wage subsidy had a high take-up rate throughout 2020.
It was characterised by broad eligibility criteria (sectors), with the economy
suffering severely from restrictions on tourism. Second, the take-up of the Irish
wage subsidy remained at a similar, albeit much lower, level throughout the year.
The eligibility criteria were somewhat stricter in Ireland (a 30 per cent decline in
turnover or customer orders) and the wage subsidy was implemented in a context
of a relatively mild economic shock. Third, the take-up rate declined much more
gradually and remained relatively high throughout the October nadir also in
the United Kingdom, which implemented a short-time work scheme (termed a
‘furlough scheme’). The design of the latter was fairly sui generis, however, with no
eligibility criteria in terms of economic impact and no cost to the employer from
March to August. Fourth, Portugal recorded high take-up in the first wave, but only
a very low one by the end of the year. Finally, as already mentioned, the second
peak in Czechia was driven by the additional wage subsidy for smaller companies,
implemented on top of its short-time work scheme for a limited period.
Figure 4 Number of employees supported by a job retention scheme each month
in 2020
45 000 000
40 000 000
38 594 739
38 232 468
35 000 000
Total
EU
30 000 000
26 450 678
25 000 000 24 722 741
20 000 000
19 067 676
15 000 000 14 425 956 14 639 976
11 779 094 14 263 313
11 375 197
10 000 000
5 000 000
0
h ril ay e Ju Au r
be be be r be r
ar c Ap M Ju n ly gu r
M st em Oc
to
ve m ce m
pt No De
Se
Note: Data are not available for Greece and Hungary. The figures are based on incomplete data reported in
Malta, Romania, and Latvia. In Malta, take up figures were not reported for March, June, August, October, and
December 2020. In Romania, take up is not available for August-November 2020. For Latvia, take up was not
reported in November 2020. For Netherlands, quarterly figures were used. The figures do not take into account
the number of hours on the JRS.
Source: ETUI survey of job retention schemes.
WP 2021.07 21
Jan Drahokoupil and Torsten Müller
Figure 5 Persons using job retention schemes as a percentage of employees, peak month in 2020
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
a tia Ne ypr C
th us
Lu rlan
xe e
m ds
alt oa
Un ite Fra
d Ki
Sw gdo bo
n e
itz m
er
Be nd
ur
nc
la g
M Cr Cz ec Au al
hi Po mlg
rtu
a S stri
TW a iu
+Wg
Ita S
Es ly
to
Slo ia
ve
Sp n
ni
ain a
Ire
Ge ndrm
Lit any
Cz hua
ec nia
hi la
aS
Sw W
Ro en
m ed
No iaanT
De aynmrw
Fin k
Slo d ar
lan
La
Bu iava
lg
Po a kia
tv
ar i
lan d
Note: Data are not available for Greece and Hungary. The figures are based on incomplete data reported in Malta, Romania, and Latvia. In
Malta, take up figures were not reported for March, June, August, October, and December 2020. In Romania, take up is not available for
August-November 2020. For Latvia, take up was not reported in November 2020. For Netherlands, quarterly figures were used. The figures
do not take into account the number of hours on the JRS.
Source: ETUI survey of job retention schemes.
Figure 6 Development in take up rates in 2020
0,45
0,4
0,35
0,3
0,25
0,2
0,15
0,1
0,05
0
March April May June July August September October November December
Malta Croatia France United Kingdom
Czechia STW+WS Germany Ireland Portugal
Note: Data unavailable for Greece, and fragmentary for Hungary, Latvia and Romania; data for the Netherlands are not directly comparable
as they were collected for three-month periods. Moreover, the figures do not differentiate the number of hours covered.
Source: ETUI survey of job retention schemes.
22 WP 2021.07
Job retention schemes in Europe
Our survey did not produce comparable data on the sectoral composition of job
retention schemes across Europe. Instead, we present the sectoral breakdown on
the development of expenditure on such schemes throughout 2020 for Germany
and the United Kingdom (see Table 3 and Table 4, respectively). If considered
together with information in other country reports and with Eurofound’s analysis
of take-up in Spain, Portugal and France in the first wave (Eurofound 2021: Table
3.2), the data suggests that differences in sectoral composition in the relevant
economies gave rise to different sectoral biases in take-up. More specifically,
countries with high manufacturing employment had a higher propensity to
resort to job retention schemes in manufacturing than countries with lower
manufacturing employment. In turn, countries specialising in services tended
to exhibit more intensive use of job retention schemes in services than countries
with low service employment. At the same time, given the high contact intensity,
services tended to record higher take-up than manufacturing in all countries in
2020, but there were important shifts throughout the year.
It is indeed informative to contrast sectoral developments in Germany and the
United Kingdom, given the large differences in the sectoral composition of their
economies, particularly in relation to manufacturing. While the latter accounted
for 20 per cent of employment in Germany in 2020 it represented only 9 per
cent of employment in the United Kingdom. Similar trends can be identified in
the two countries, despite their structural differences. Manufacturing, wholesale
and retail trade, and accommodation and food received the largest share of job
retention scheme support in both the United Kingdom and Germany. In the later
stages of the crisis, the sectoral composition changed, however, with job retention
scheme expenditure shifting towards accommodation and food, as well as arts and
entertainment and other services (NACE R and S). Spending on manufacturing,
as a share of overall job retention scheme spending, declined somewhat, but it
remained among the major recipients.
The role of manufacturing in job retention schemes sets the two countries apart. The
differences in the share of manufacturing in job retention scheme expenditure is far
larger than one might expect given the difference in manufacturing employment.
Germany is indeed characterised by a strong bias towards manufacturing, with the
sector accounting for about 40 per cent of job retention scheme spending in June–
August 2020. The sectoral bias and its change over time can be best identified by
considering the share of workers using the scheme within sectors, data on which is
available for Germany (Table 3). It indicates that, in the early stages of the crisis,
the share of employees benefiting from the German short-time work scheme was
indeed highest in manufacturing, where 29.2 per cent of workers were enrolled in
some form of it in May 2020, in comparison with 17.1 per cent for all sectors. The
share dropped to 9.1 per cent in December 2020, which was still above the average
share of 7.9 per cent in the period. Moreover, the shift towards accommodation
and arts and entertainment and other services (NACE R and S) appears much
more pronounced if analysed in terms of take-up within the sectors. While the
take-up rates in these sectors was 25.2 per cent and 10.9 per cent, respectively,
in May 2020, the second lockdown drove them to 56.3 per cent and 24.2 per
cent in December 2020. The large increases in the take-up rate in services can
be attributed to an overall decline in employment in these sectors. The actual
WP 2021.07 23
Table 3
Jan Drahokoupil and Torsten Miller
numbers of workers in accommodation and catering receiving short-time work
support was in fact 12 per cent lower in December than in May (Miiller 2021).
An analysis of the adjustments in hours worked for Czechia suggests that the
pattern observed in Germany may not be unique (Jurajda and DoleZelova 2021).
Czech data also show a bias towards larger firms across sectors. The support was
thus concentrated in manufacturing companies with over 250 employees. The
evidence provided in the country reports suggests that the manufacturing bias is
indeed larger in economies that rely more heavily on this sector. We thus observe
a strong manufacturing bias in Bulgaria, Czechia, Finland, Germany, Hungary and
France. This sector accounted for a smaller share of supported employment in
other countries for which sectoral breakdowns are available, however (Denmark,
Estonia, Norway, Ireland and the United Kingdom).
The manufacturing bias can be attributed to the higher importance for
manufacturing companies of maintaining links with their employees than
for employers in accommodation and food services. Evidence from the Great
Recession indeed shows a strong link between high human capital and job
retention scheme take-up (Lydon et al. 2019). Manufacturing companies thus may
be more willing to contribute to the costs of keeping an employee in a short-time
work scheme. The relatively high share of the service sector in the British short-
time work scheme may thus be related to the relatively low cost of keeping workers
under a job retention scheme. The costs were lowered in the crisis also in Germany
(amounting to a 50 per cent cut in insurance contributions), but the German
short-time work scheme, as is common for this type of job retention scheme, still
involves considerable administration costs on the part of the employer. These
costs may also explain a possible bias towards larger companies. The latter are
able to spread fixed administration costs across a larger number of workers.
Finally, employment norms may play a role, with the accommodation and service
sector often relying on casual employment (fixed term or informal contracts). In
such a context, employers will find it easier not to extend the contract, or will not
have access to job retention schemes at all.
Sectoral breakdown of job retention scheme take-up in Germany and the use of job retention
schemes within sectors, 2020 (% of employees)
Sector (NACE) In JRS InJRS (Within InJRS = (Within InJRS (Within InJRS = (Within
sector) sector) sector) sector)
A: Agriculture 0 0.1 0.09 0.09
B: Mining and quarrying 0.02 0.07 0.12 0.14
C: Manufacturing 23.22 35.49 (29.2) 42.05 (20.3) 40.89 (15.1) 22.92 (9.1)
D: Electricity, gas 0.03 0.11 0.07 0.06
E: Water supply; sewerage 0.13 0.22 0.18 0.17
F: Construction 9.18 2.14 (6.4) 1.96 (3.4) 2.05 (2.7) ] (1.4)
G: Wholesale and retail trade 16.13 14.73 (14.7) 12.21 (9.0) 11.92 (6.7) 17.38 (10.2)
H: Transportation 4.76 5.59 (17.1) 6.06 (10.8) 6.82 (9.4) 5.54 (7.9)
|: Accommodation and food 17.29 11.11 (25.2) 9.73 (31.3) 10 (24.7) 20.39 (56.3)
24 WP 2021.07
Job retention schemes in Europe
J: Information and (9.5) (7.7) 2.01 (4.1)
communication
K: Financial and insurance 3.91 0.8 0.53 0.54
L: Real estate 0.39 0.45 0.36 0.36
M: Professional, scientific and 6.13 7.16 (7.2) 7.22 (10.3) 7.54 (8.3) 7.21
technical
N: Administrative and support 7.54 7.01 (11.4) 7.53 (11.4) 8.02 (9.3) 7.11 (8.6)
O: Public administration 0.08 0.38 0.35 0.31
P: Education 1.37 1.53 (2.8) 1.12 (2.8) 1.03 (2.0) 1.10 (2.1)
Q: Human health and social 481 5.81 (2.1) 3.14 (2.1) 2.55 (1.3) 2.24 (1.2)
work
R: Arts, entertainment and 2.54 2.37 1.63 1.59 4.84
recreation
S: Other services 4672.26 2.28 (09) 935, (85) 5 go (24-2)
T: Activities of households 0.02 0.01 0.01 0.01
All 100 100 (17.1) 100 (9.9) 100 (7.6) 100 (7.9)
Note: JRS — job retention scheme. Sources: Bundesagentur fiir Arbeit (2021a, 2021b) in Miller (2021).
Table 4 — Sectoral breakdown of job retention scheme take-up in the United Kingdom, 2020 (% of all
employees)
A: Agriculture
B: Mining and quarrying 0.1 0.2 0.0
C: Manufacturing 10.2 78 6.9
D: Electricity, gas 0.2 0.0 0.1
E: Water supply; sewerage 0.4 0.3 0.3
F: Construction 8.1 5.4 49
G: Wholesale and retail trade 21.0 14.9 18.0
H: Transportation 43 5.1 40
|: Accommodation and food 18.6 25.1 28.1
J: Information and communication 2.2 3.2 2.6
K: Financial and insurance 0.8 0.8 0.7
L: Real estate 1.7 1.6 14
M: Professional, scientific and technical 6.4 8.1 6.0
N: Administrative and support 9.1 8.9 8.2
O: Public administration 0.1 0.2 0.2
P: Education 3.3 2.6 2.2
Q: Human health and social work 43 40 3.3
R: Arts, entertainment and recreation 5.0 6.7 7.2
S: Other services 3.4 43 4.6
T: Activities of households 0.1 0.1 0.1
Unknown and other 03 0.6 1.0
All 100 100 100
Source: HM Revenue & Customs (2020) in Fulton (2021).
WP 2021.07 25
Jan Drahokoupil and Torsten Müller
Eligibility criteria
‘Eligibility’ refers to the criteria that companies and their workers have to fulfil
to receive financial support. The broadest possible distinction between eligibility
criteria therefore concerns whether they refer to the situation of the company or
that of the employees. Even though the specific form and mix of company- and
employee-related eligibility criteria vary considerably across Europe, they can be
divided into sub-categories shared to varying degrees by all job retention schemes.
The company-related criteria comprise four sub-categories: first, whether the
pandemic caused some sort of economic difficulties; second, whether the reason
for support is a government decision leading to restrictions on companies’
economic activity; and third, company-specific characteristics such as size and
sector. A fourth sub-category is the degree to which trade unions and company-
level employee representation structures are involved in the implementation of the
respective job retention scheme as a precondition for receiving financial support.
This fourth sub-category will be dealt with in a separate section. The employee-
related criteria, by contrast, are much more homogenous across countries, in
particular because countries have tried to make their Covid-19 job retention
schemes as inclusive as possible.
Analysis of eligibility criteria yields the following two key results:
(1) Reflecting the severity of the Covid-19 crisis all countries have pursued the
principal objective of making the provision of support as inclusive, timely and
effective as possible by ensuring broad eligibility for companies and workers.
This also includes measures to simplify application processes and the actual
payment of support. Applications, for instance, could be made online in virtually
all countries. In many countries, applications could also be made retroactively,
taking into account that government decisions to contain the crisis that negatively
affect economic activity were often made at short notice. This also involves the
possibility to pay a certain percentage of support in advance, based on the expected
economic impact and to settle the final amount to be paid once the actual need
for support has been reliably established. If the economic impact is less severe
than expected this may also mean that a company has to pay back part of the
support that has already been paid. The newly introduced wage subsidy scheme
in the Netherlands is a case in point. In July 2021, officials of the Dutch Ministry
of Finance revealed that more than 70 per cent of the entrepreneurs who received
a wage subsidy in 2020 have to repay parts of it. The officials estimate that for
the period March-September 2020, approximately €4.2 billion have to be repaid
by more than 50,000 companies because they overestimated the expected loss of
revenue on which the wage subsidy is based (Schellekens et al. 2021). It should be
emphasised, however, that such advance payments are much easier to organise in
wage subsidy schemes in which the amount paid does not depend on working time
arrangements. Alternatively, some short-time work schemes, like those in Austria
and Germany, enable companies to apply for short-time work as a precautionary
measure for a longer period and only then claim support for the workers who
actually go onto short-time work. This is why in Austria and Germany the number
of applications diverges considerably from the actual number of workers for whom
short-time work support has been paid.
26 WP 2021.07
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(2) The specific form and mix of eligibility criteria are shaped by the underlying
logic of the different types of job retention scheme, the course of the pandemic
and its economic impact. In a nutshell, economic criteria tend to be more specific
in wage subsidy schemes and newly established short-time work schemes than
in permanent, more well-established short-time work and furlough schemes. By
contrast, in the latter, formal requirements to involve trade unions and employee
representation structures are more common than in wage subsidy schemes. Over
time, eligibility criteria have not changed much, irrespective of the type of job
retention scheme. In countries in which changes have taken place, they reflect
a growing concern about deadweight losses. As a consequence, the criteria were
made more restrictive during low ebbs of the pandemic and loosened during
peaks. In some countries, growing concern about deadweight losses is furthermore
reflected in attempts to make them more sector-specific, channelling financial
support more strongly to sectors hardest hit by the pandemic. In some countries,
these attempts to avoid deadweight losses also include special provisions that
exclude companies from eligibility that pay out dividends or bonuses, operate
from tax havens or buy back shares.
Company-related eligibility criteria
Because by definition the aim of a job retention scheme is to provide support
in a situation of a temporary drop in economic activity, the main criterion for
companies in all schemes is that they find themselves in some sort of economic
difficulties caused by the pandemic. More specific requirements to prove
economic difficulties differ considerably across countries and are strongly shaped
by the underlying logic of the respective scheme. As a rule, the requirements to
prove economic difficulties are most stringent in wage subsidy schemes, which all
include some kind of numerical minimum threshold for the drop in revenue. The
more stringent requirements in the case of wage subsidy schemes can be explained
by the fact that support is paid to companies usually per employee and often as a
lump sum, irrespective of any working time reductions. This increases the need to
link support to more ‘objective’ economic criteria to lower the risk of deadweight
losses from supporting companies that in fact do not need it.
In the various wage subsidy schemes across Europe, the minimum entitlement
threshold for a fall in revenue ranges from 15 per cent in Poland to 60 per cent
in Croatia in the period July–September (see Table 5). The criteria not only vary
between countries but in some cases also within them, depending on the reference
period of the comparison or the specific situation of the company. In Poland,
for instance, the minimum threshold of a 15 per cent drop in revenue applies to
comparisons with the same period in 2019. If, however, the reference period is
the previous month in 2020, companies need to prove a drop in revenue of at
least 25 per cent (Surdykowska 2021). Croatia represents the prime example of
frequent changes over time in adapting to the development of the pandemic and
its economic implications. In the period March–May 2020 companies needed to
prove a 20 per cent drop in revenue. In June 2020, the criteria were tightened to
apply only to companies from selected sectors which had to provide evidence of a
drop of at least 50 per cent compared with 2019. For the period July–September
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Jan Drahokoupil and Torsten Müller
2020 the threshold was raised to 60 per cent and kept at 50 per cent only for micro-
companies with fewer than 10 employees. For the period October–December 2020
the threshold was again lowered to 40 per cent for companies in selected sectors
and for micro-companies regardless of the sector in which they operate (Jaklin
2021). The frequent changes in economic eligibility criteria in Croatia reflect the
fact that at the beginning of the pandemic, from March to May 2o20, the provision
of broad support took precedence over concerns about unjustified claims. Later
on, in particular when government-imposed economic restrictions were eased,
abuses became more important. As a consequence, criteria were tightened and
geared more specifically towards sectors that were still more heavily affected, such
as transport and storage, HORECA, information and communication, various
other service activities and arts and entertainment. The fact that in the period
October–December 2020 the criteria were loosened again reflects the impact of
the second wave of the pandemic and the increased need for more easily accessible
and broader financial support.
By contrast, in short-time work schemes the requirements for proving economic
difficulties are less specific because the size of support is linked to the extent of
the working time reduction. The reduction of working hours can be seen as an
indicator of economic difficulties in its own right. This makes a more specific
justification in terms of a fall in revenue less important. This is why some short-
time work schemes – for instance in Denmark, Estonia, Germany and Romania
– specify a minimum number of employees who need to be negatively affected
by the temporary drop in economic activity. In Germany, the rules stipulate that
for a company to be eligible for short-time work support at least 10 per cent of
the workforce needs to be affected by a loss of at least 10 per cent of gross pay.
Similarly, in the Romanian short-time work scheme companies are eligible only if
the contracts of at least 10 per cent of the employees are suspended. In the short-
time work scheme in Estonia, support was initially provided only to employers
that reduced working time or wages for at least 30 per cent of their workforce.
Concerning the exact proof of economic difficulties to be provided, a distinction
needs to be drawn, however, between permanent, well-established short-time
work schemes – for instance in Austria, France, Germany and Sweden, which
adapted their eligibility criteria to the specific needs of the crisis – from schemes
newly set up in many central and eastern European countries in the context of
the crisis. The permanent schemes did not include specific economic criteria in
the first place and did not introduce them in their adapted Covid-19 schemes. By
contrast, the newly set up schemes in many central and eastern European countries
include specific minimum thresholds for a drop in revenue, ranging from 10 per
cent in Romania to 50 per cent in Estonia in June 2020 (see Table 5). Hungary
is a special case, specifying a range of 5–75 per cent. Economic criteria are least
specific when it comes to furlough schemes. This once again reflects the underlying
logic of such schemes. Because support is paid directly to the employee for time
not worked, the support is de facto part of the unemployment benefit system. As a
consequence, employee-related eligibility criteria play a more important role than
in, for instance, wage subsidy schemes.
28 WP 2021.07
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Table 5
Eligibility criteria for companies
Wage subsidies Short-time work schemes Furlough schemes
Economic difficulties
Specified Unspecified Drop In Unspecified
revenue
BG: at least 20% AT, CZ, FR, DE, | BG: 20% BE, CY, DK, Fl, NO
HR: at least 20-60% (changes LT, SE HR: 20%
over time) EE: 30/50%
IE: at least 30% GR: 20%
NL: at least 20% HU: 5-75%
PL: at least 15%/25% SK: 20%
Sl: 20%
PT: 25%
RO: 10%
Closure/restrictions because of government decisions
HR: selected sectors and micro
companies
HU: at least 30% drop in
revenue in HORECA, culture
and sport
MT: at least 25% drop in revenue
in selected sectors
CZ: less than 50 employees and
employment and wage bill
kept at least 90%
HU: hours reduced by 15-75%
CZ, DK, FR, LT, PT, SK, SI, ES
Selected sectors
BG: list of NACE codes
LU: in tourism and HORECA
75% of the workforce to be
retained
Sl: non-financial companies and
companies not relying on
public budget
ES: selected sectors
Other criteria
DE: 10% of the workforce
affected by loss of at least
10% of gross pay
DK: temporary layoff of at least
30% of staff or at least 50
employees
EE: employer cannot provide
work to 30% of the workforce
and wage reduction of
30/50% of the employees by
at least 30%
HR: more than 10 employees
LV: volume of exports within the
EU in 2019 is 10% of total
turnover or not less than
€500,000; average monthly
gross wage in 2019 was not
less than €800; long-term
investments in fixed assets as
of 31.12.2019 were at least
€500,000
RO: suspension of contracts for at
least 10% of employees
CY, GR, NO
CY (HORECA and business
related to these sectors)
GR
IE: working time reduction of 2-4
days per week.
Note: One country may run different types of job retention schemes in parallel and therefore be dealt with
under wage subsidy, short-time work scheme and/or furlough scheme at the same time.
Source: ETUI survey of job retention schemes.
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Reflecting the specific conditions of the pandemic, in some cases, the decision to
grant support is based on whether the disruption of economic activity is because
of government measures to contain the pandemic. This is common in short-time
work and furlough schemes and in some cases, such as Czechia, it is also linked to
a higher level of support. This criterion, however, does not play a role in any of the
wage subsidy schemes. A common feature of all three types of scheme are sector-
specific requirements. The broadest possible distinction can be made concerning
whether public sector employers are eligible for job retention schemes. A sizeable
number of countries exclude public sector employers to varying degrees, including
Austria, Cyprus, Czechia, Greece, Hungary, Italy, Malta, Portugal, Romania,
Slovakia, Slovenia, Sweden and the United Kingdom (see also Eurofound 2021: 25).
Irrespective of the type of job retention scheme, some countries have also
established sector-specific schemes or have specified certain sectors that have
been particularly hard hit by the crisis and are therefore eligible for such support.
Where sector-specific schemes were established, for instance in Hungary and
Cyprus, they focus on the HORECA sector. Other countries – such as Bulgaria,
Croatia, Greece, Malta and Spain – have taken a more comprehensive approach,
establishing a list of sectors that are eligible for job retention schemes. A case in
point is Malta, where at the beginning of the crisis two different lists of sectors
were drawn up, based on the degree to which they were affected by the crisis and
providing different levels of support. To take account of the course of the pandemic
and its economic impact, the lists were under constant revision and in July 2020,
the system was further differentiated with the introduction of a third list of sectors
(Fiorini 2021).
Employee-related eligibility criteria
Whereas the company-related criteria vary considerably, the employee-related
eligibility criteria are much more homogenous across countries. A common trend
irrespective of the type of job retention scheme is the fact that, at the beginning of
the pandemic, most countries tried to make their schemes as inclusive as possible.
This means that most countries also included non-standard workers on part-time
and/or fixed-term contracts and temporary agency workers. Exceptions include
the short-time work schemes in Croatia and Hungary, which explicitly apply only
to full-time employees; and the short-time work scheme in Denmark, which covers
only permanent employees. In many countries with a long-standing tradition
of job retention schemes, the permanent scheme was adapted to make it more
inclusive. In Germany, for instance, temporary agency workers, who normally are
not eligible, were included in the scheme. In France, the scope of the standard
short-time work scheme has been extended to almost all categories of employee,
including executives, temporary and part-time workers, domestic workers and
childminders, travelling salesmen and employees at most public companies
(Vincent 2021). Similarly, the Covid-19 scheme in Switzerland made short-time
work support temporarily available to categories of employees that were excluded
from support under the standard scheme. This applies to employees with a fixed-
term employment relationship, temporary agency workers, employees working on
call, apprentices, people in at-risk groups (for example, with high blood pressure)
30 WP 2021.07
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and people with quasi-employer status (Baumann 2021). In Italy, where the
traditional short-time work schemes were limited to the industrial sector and in
the case of CIGS only applied to companies with at least 15 employees, all these
limitations were removed under the Covid-19 short-time work scheme to cover
all workers, all sectors and companies with fewer than five employees (Faioli and
Bologna 2021).
While the general trend of making job retention schemes as inclusive as possible
during the pandemic applies irrespective of the type of scheme, some employee-
related eligibility criteria are more specific to the type of job retention scheme. The
wage subsidy schemes in Ireland and Poland, for instance, exclude support for
workers above a certain earnings threshold. In Ireland this threshold is €1,462 per
week and in Poland it is 300 per cent of the national average wage. The furlough
schemes in Denmark, Finland and Ireland require that the respective employee
has contributed sufficiently to the unemployment benefit system in order to
be eligible for financial support — although in Finland this only refers to the
earnings-related unemployment benefit. A de facto link to sufficient contributions
to unemployment insurance also exists in the short-time work schemes in Austria
and Germany, which exclude marginally employed employees below a certain
monthly earnings threshold and are therefore not covered by social insurance.
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Jan Drahokoupil and Torsten Müller
Generosity of job retention schemes
The generosity of support refers to the amount of job retention scheme support
provided to companies and employees over a certain period of time. Generosity can
be assessed from two angles: first, from an employee perspective as the financial
support received to compensate (part of) wages lost because of reduced working
hours and, second, from an employer’s perspective as the financial support a company
receives to cover (part of) its overall wage costs during a temporary drop in demand.
The two are not necessarily the same because the latter also includes payment of
social security contributions. In many countries the employers, furthermore, also
have to cover a certain part of employees’ wages for hours not worked.
Generosity is more than just the replacement rate defined as a percentage of the
original wage received for time not worked. It consists of three elements: the
most obvious is the level of job retention scheme allowance, which refers to the
replacement rate. The second element is the so-called ‘cap’, which specifies a
maximum amount of money paid for time not worked. The cap plays an important
role in assessing the generosity of job retention scheme support because in a
seemingly generous scheme with a high allowance as a percentage of the original
wage, the actual amount paid – and therefore the overall generosity – may still be
low if the cap is very low. The third element is the duration of wage support, which
refers to the maximum length of time for which wage compensation is paid. The
longer the duration the higher the overall generosity. During the pandemic, the
duration of the initial Covid-19 arrangements did not play a major role because
even in countries with a short initial duration the Covid-19 arrangements have
been extended several times. As a consequence, in almost all countries some kind
of scheme was in place without interruption for the whole period March–December
2020. The only exceptions are Estonia and Latvia. In Estonia, the short-time work
scheme in place from March to June 2020 was discontinued and only reinstated
from March to May 2021. A slightly adjusted scheme was also in place for the
period 28 December 2020 to 17 January 2021 in response to the restrictions
imposed by the government to tackle the second wave of the pandemic (Kallaste
2021). Similarly in Latvia, the short-time work scheme that was established at
the beginning of the crisis for the period March to June 2020 was discontinued
and reinstated in an adapted version for the period November 2020 to June 2021
(Preisa 2021). The following analysis of the generosity of job retention schemes
from the perspective of employees and employers will therefore focus on the level
and cap of job retention scheme support.
Generosity of job retention schemes support from an employee
perspective
The level of support which an employee receives while on a job retention scheme
is usually calculated as a percentage of the original wage. In most countries,
the gross wage is used as the basis for calculation. Only in the short-time work
schemes in Austria, Croatia, Germany, Greece and Hungary is the net wage taken
as reference. In comparisons this can make a substantial difference. In France,
for instance, the official replacement rate of 70 per cent of the original gross wage
32 WP 2021.07
Job retention schemes in Europe
corresponds to 84 per cent of the net wage. Another issue to be taken into account
in international comparisons is the fact that in some cases the level of support
as a proportion of the original wage does not correspond to the actual support
received by employees. In Belgium, for instance, the state pays an additional
‘corona supplement’ of €5.63 per day, which means that the actual allowance for
employees is higher than the statutory 70 per cent. The short-time work scheme in
Latvia provides for a supplement of €50 for each dependent child up to 24 years of
age. In other countries, such as France and Italy, but particularly in Germany, the
level of statutory short-time work support is frequently topped up by industry- and
company-level collective agreements (see below for more detail). It also has to be
born in mind that in some job retention schemes – in particular, in wage subsidy
schemes – the allowance is a flat-rate payment. As a consequence, no general
replacement rate can be calculated. This applies to the wage subsidy schemes in
Bulgaria, Ireland and Malta, as well as the furlough scheme in Greece.
With these caveats in mind, the level of job retention scheme allowance in the
30 countries covered in this study varies considerably, both across and within
countries, irrespective of type of scheme, according to the following criteria.
Duration of support
In Germany, Greece, Norway and Spain the level varies according to the duration
of support. In Germany, the permanent short-time work scheme was adapted
so that the usual support of 60 per cent for workers without children and 67 per
cent for workers with children applies only to the first three months. Between the
fourth and sixth months of receiving short-time work allowance, the level increases
to 70 per cent (for workers without children) and 77 per cent (for workers with
children). After that the level is 80 per cent (without children) and 87 per cent
(with children), respectively. The rationale for raising the level of short-time work
support with increasing duration was that in view of the relatively low starting
level workers may find it difficult to live on 60/67 per cent of the original wage for
a longer period, in particular low-wage earners. In Norway, Spain and Greece, by
contrast, the level of support decreases with increasing duration. In Norway, from
March to August 2020, the employee received 100 per cent of the original pay for
the first two days from the employer and for the following 18 days from the state
(up to a cap of NOK 608,000). After that the worker receives between 62.4 per cent
(if original annual earnings are between 304,000 and 608,000 NOK) and 80 per
cent, if the workers’ original annual salary is below 304,000 NOK. In September
2020, the period for which workers receive the full wage was shortened from 20 to
10 days (Svalund 2021). In Spain, the level of support is 70 per cent for the first six
months and 50 per cent thereafter. In the furlough scheme in Greece, the worker
receives €800 for the first 45 days and between €300 and €534 thereafter.
Original gross wage
Taking into account that low-wage earners find it more difficult to live on a reduced
wage, job retention schemes in some countries – such as Austria, Norway and
Switzerland – provide a higher level of support to lower wage groups. In Austria,
for instance, there are three wage brackets, with different levels of short-time
WP 2021.07 33
Jan Drahokoupil and Torsten Müller
work support. Low-wage earners with a monthly gross wage of up to €1,700 are
paid a higher allowance of 90 per cent compared with 85 per cent for workers
whose monthly gross wage ranges between €1,701 and €2,685; and 80 per cent
for workers earning between €2,686 and €5,370 (Tamesberger and Moser 2021).
Switzerland has a different model. While the replacement rate for all wages is
80 per cent of the original wage, workers earning less than CHF 4,340 are paid
a flat rate of CHF 3,470, which means that the actual replacement rate gradually
increases for low-wage earners (Baumann 2021).
Reason for job retention schemes
In some countries – such as Czechia and Slovakia – the level of support varies
according to the reason why workers cannot work. In Czechia, an employee
receives 60 per cent of the original wage if they are in quarantine or cannot work
because of a temporary drop in demand; 80 per cent if the company cannot
provide enough work because of a temporary fall in supplies; and 100 per cent
if the economic restrictions are caused by a government decision to contain the
spread of the pandemic (Drahokoupil 2021). A similar arrangement existed in
Slovakia for March 2020. For the period April to December 2020, the replacement
rate was 80 per cent, no matter whether the economic restrictions resulted from a
temporary economic downturn or from a government decision (Kováčová 2021).
Extent of working time reduction
In Poland and Sweden, the level of support varies depending on the extent of the
working time reduction. In Poland, workers receive 50 per cent of the original wage
if operations are suspended. If, however, working time is only reduced between 20
and 50 per cent the workers only receive pay for time worked (Surdykowska 2021).
The short-time work scheme in Sweden distinguishes three different options:
workers receive 96 per cent in case of a 20 per cent working time reduction;
94 per cent if the working time reduction is 40 per cent; and 92.5 per cent in case
of a 60 per cent reduction of working time. Between May and July 2020 it was
also possible to reduce working time by 80 per cent. In this case short-time work
support was 88 per cent of the original wage. This possibility was reintroduced for
the period January–June 2021 (Berglund 2021).
Bearing in mind the variations within countries, the level of support for employees
ranges from 50 per cent in Estonia (in June 2020), Latvia (for employees of
micro companies), Poland and Spain (after the first six months), to 100 per
cent in Bulgaria, Croatia, Czechia (in case of government restrictions) Denmark
(in the case of the short-time work scheme ‘Lønkompensationsordningen’),
Hungary (wage subsidy schemes), the Netherlands and Norway (for first 10/20
days of support) (see Table 6). It is, furthermore, noteworthy that in the majority
of countries the level of support did not change between March and December
2020. The exceptions are: Estonia, where the level of short-time work support
was reduced from 70 per cent for March to May 2020 to 50 per cent in June 2020;
Latvia, where the level dropped from 75 per cent for the period March–June 2020
to 70 per cent or the period November 2020 to June 2021; Slovakia, where in case
of economic restrictions imposed by the government the level was 60–80 per cent
34 WP 2021.07
Job retention schemes in Europe
in March 2020 and 80 per cent in the period April–December 2020; and Portugal,
where the level of short-time work support has been increased considerably over
time: in the traditional scheme from 66 per cent at the beginning of the crisis in
March 2020 to 88–92 per cent in the period from October to December 2020; and
in the extraordinary scheme from 66 per cent in August and September 2020 to
80 per cent in the period from October to December 2020 (Campos Lima 2021).
Another important factor determining the volume of job retention scheme
support is the so-called ‘cap’, which refers to the maximum amount of money
paid, irrespective of the level of job retention scheme allowance as a percentage
of the original wage. Most systems specify the cap as an absolute sum of money,
but it can also be expressed in relation to the minimum or the average wage. In
France, for instance, the cap is 4.5 times the minimum wage, in Portugal three
times, in Luxembourg 2.5 times and in Lithuania – depending on the chosen
model of support – either 1.5 times or the actual minimum wage. In Slovenia the
cap is the average wage, in Romania it is 75 per cent and in Poland 40 per cent of
the national average wage. Other countries specify a maximum gross wage which
serves as the basis for calculation. This is particularly important in countries such
as Austria and Germany, where the replacement rate refers to the net wage. This
makes the calculation of the payable maximum amount of money very complex.
In Germany, for instance, the maximum gross wage to be taken into consideration
for the calculation of the short-time work support is €7,100 in western Germany
and €6,700 in eastern Germany. This is, however, not the actual cap in terms of
the maximum amount payable. The calculation of the short-time work allowance
is based on the difference between the actual gross remuneration in the month
of short-time work and the gross remuneration which the employee would have
earned in that month without a reduction of working hours. From this gross
difference a net difference is calculated, which in turn provides the basis for the
calculation of the actual short-time work allowance. Because the short-time work
allowance is a percentage of the net wage lost due to the working time reduction
the amount of the allowance depends on various factors: the original gross wage;
the reduction of working time which determines the wage lost due to short-time
work; the tax bracket; whether or not the employee has children; the duration of
short-time work; and the part of Germany in which the employee lives. Against
this background, the maximum amount payable is approximately €3,900 for an
employee in western Germany with at least one child, an original gross wage of
€7,100, a working time reduction of 100 per cent, membership of tax bracket 3
and at least 7 months’ short-time work (Müller 2021).
Given the large differences across Europe in the cost of living and overall wage
levels it is difficult to compare the absolute value of caps across countries. The
following comparison will thus be based on the relative value of the cap defined as
a percentage of the average wage. Table 6 shows that in the 30 countries covered
in this study the cap ranges from below half the average wage in Belgium, Croatia,
Greece, Hungary (short-time work scheme), Italy, Malta and Poland to 150 per cent
or more of the average wage in Austria, France and the Netherlands (see Table 6).
This illustrates that seemingly equally generous systems in terms of the level of job
retention scheme support – such as Italy, Austria and Switzerland – differ widely
in terms of overall generosity. In all three countries the level of support is 80 per
WP 2021.07 35
Jan Drahokoupil and Torsten Müller
cent but in Austria and Switzerland the relative value of the cap is more than three
times that of Italy. Thus the overall generosity of the short-time work schemes in
Austria and Switzerland is considerably higher than in Italy. While a cap on job
retention support generally tends to protect the wages of workers at the lower end
of the income distribution, a higher cap ensures that also workers higher up the
pay scale receive the full wage compensation offered by the respective scheme.
The wage subsidy scheme in the Netherlands is thus the most generous because it
not only compensates 100 per cent of the workers’ original gross wage, but its cap
has by the far the highest relative value of all schemes covered by this study and
therefore provides full wage compensation also for workers who earn more than
twice the average wage.
In some countries, such as Estonia, France, Greece, Luxembourg, Poland,
Portugal and Slovenia, the job retention scheme also defines a minimum amount
of support. This absolute lower limit is usually the statutory national minimum
wage. Such ‘minimum support’ related to the national minimum wage is intended
above all to guarantee employees in low-wage sectors a certain minimum income
while on a job retention scheme.
Another element of support – and from an employee perspective often overlooked
– is the payment of insurance contributions. This is because non-payment of
insurance contributions while one is enrolled in a job retention scheme is likely
to lead to a loss of accrued rights in the pension or unemployment insurance
system. It also implies a loss of funding for social insurance schemes, notably
the pension system. Integrated into the system of unemployment assistance,
workers on furlough schemes are in fact claiming an insurance benefit. As for
other unemployed persons, no social security contributions are generally paid
for the time on the furlough scheme. In Denmark, the standard furlough scheme
obliged the employer to pay social contributions for the first two full working
days an employee is registered as unemployed. As an adjustment to the crisis,
this was waived in March–September 2020. In Cyprus, however, the state covered
social insurance contributions for workers using the temporary furlough scheme.
Finally, the Spanish furlough scheme represents another exception with some
companies, depending on company size and situation, obliged to pay up to 25 per
cent of employer contributions.
In contrast, short-time work and wage subsidy allowances are paid as a wage. By
implication, social security contributions are due on these payments, albeit possibly
reduced as the salary may be lower if these schemes are used. Social security
contributions are indeed paid also for time not worked in existing short-time work
schemes. France and Hungary are exceptions, with social security contributions
not being paid for time spent on their short-time work scheme. In Bulgaria, the
state covers only 60 per cent of employer contributions for time not worked.
Finally, social security payments are, in principle, due on wages supported by a
wage subsidy scheme. At the same time, the latter can actually take the form of
relief from social security contributions. Wage subsidy schemes in the form of
social security relief were implemented in Czechia and Hungary. In Ireland, the
wage subsidy involved also a reduced 0.5 per cent rate for employer contributions.
36 WP 2021.07
Job retention schemes in Europe
In Croatia, employers were exempt from social security contributions, but the state
paid them on the supported amount. Otherwise, social security contributions were
paid on wages under most of the wage subsidy schemes implemented in 2020.
In Malta, the state covered also the employee contributions on top of the wage
subsidy.
Table 6 Generosity of job retention scheme support from the employees’ perspective
Job re- Level Variation in level Cap (absolute) Cap as a
tention percentage
scheme of the
average
wage*
AT STW 80-90% net Depending on original gross wage: Maximum gross wage to be taken into €4,034:
scheme wage (a) 90% net wage if gross wage €1,700 account: €5,370 168%
or less; Maximum payable with maximum
(b) 85% net wage if gross wage amount of working time reduction
between €1,700 and €2,685; and, as common practice in Austria,
(c) 80% net wage if gross wage including special payments: €6,814
between €2,685 and €5,370.
100% for apprentices
BE FS 70% gross Additional Covid 19 supplement of Maximum gross wage to be taken into €4,130:
wage €5.63 per day. account: €2,754.76 47%
Maximum payable: €1,928.40
Since 1 July 2021 the cap is
€2,785.76 and the maximum amount
payable €1,950.03
BG STW 100% gross Maximum gross wage to be taken BGN 1,468
scheme wage into account: BGN 3,000 (€1,533); (12/2020):
Maximum payable: BGN 1,800 (€920) 123%
WS Lump sum
BGN 290
(€148) for each
job preserved
HR STW 100% net wage Maximum gross wage to be taken into HRK 9,601
scheme account: HRK 4,000 (03/2021):
Depending on maximum working time 21-29%
reduction allowed:
06-09/2020: HRK 2,000 (€267)
based on 50% maximum reduction
10-12/2020: HRK 2,800 (€369)
based on 70% maximum reduction
WS 100% net wage 03/2020: HRK 3,250 (€428) 21-42%
04-09/2020: HRK 4000 (€533)
10-12/2020: cap depends on drop in
revenue:
at least 40% drop: HRK 2,000 (€267)
60% and more: HRK 4,000 (€533)
CY FS 60% gross Minimum: €360 €1,914
wage Maximum: €1,214 (12/2020):
63%
CZ STW 60-100% gross Depending on reason of STW: Cap on payment to employer: CZK 34,063:
scheme wage 60% gross (lack of demand, CZK 29-39,000 per employee/month 85-114%
quarantined), 80% (lack of supplies), (€1,060-1,900)
100% (operations restricted, workers
absent)
WS 90% gross
wage
WP 2021.07 37
Jan Drahokoupil and Torsten Müller
Job re- Level Variation in level Cap (absolute) Cap as a
tention percentage
scheme of the
average
wage*
DK STW 100% gross DKK 30,000 (€4,034) DKK
scheme wage 35,658:
84%
FS Up to 90% Due to cap replacement rate for high Traditional scheme: DKK 19,083 64%
gross wage earners can be lower. (€2,566),
Temporary Covid-19 scheme: DKK
23,000 (€3,093)
EE STW 50-70% gross 03-05/2020: 70% gross wage 03-05/2020: €1,000 €1,427:
scheme wage 06/2020: 50% gross wage 06/2020: €800 56-70%
Minimum amount: minimum wage
Fl FS 40%-90% gross Two types of payment:
wage Basic benefit: €33.78 /day + bonus for
children
Earnings-related: 40-90% of gross
wage
FR STW 70% gross Maximum gross wage to be taken into €3,046:
scheme wage account: 4.5 times the minimum wage 159%
(approximately 03-12/2020: €6,927.39
84% net wage) Maximum amount payable: €4,849,17
Minimum amount: minimum wage
DE STW 60-87% net Depending on duration of STW support Maximum gross wage to be taken into €4,349:
scheme wage and children account €7,100 in western Germany 89%
1-3 months: 60/67% and €6,700 in eastern Germany.
4-6 months: 70/77% Actual maximum amount paid as
More than 6 months: 80/87% percentage of net wage depends
on: original gross wage, duration of
STW support, tax bracket, children,
extent of working time reduction. The
maximum amount possible is therefore
approximately €3,900
GR STW 60% net wage Minimum amount: minimum wage
scheme
FS Lump sum of Depending on the duration of support: €300-800 €1,782:
€300-800 First 45 days: €800 17-45%
After 45 days: €300-534 per
month depending on the financial
circumstances of worker
HU STW 70% net wage Maximum gross wage to be taken into HUF
scheme account: twice the minimum wage of 370,845:
HUF 214,130 (€602). Cap depends 30%
on extent of working time reduction.
Maximum amount payable with a
maximum working time reduction of
75%: HUF 112,418 (€316)
WS 100% gross HUF 241,500 (€680) 65%
(sector- wage
specific)
WS (for 100% gross HUF 318,920 (€897) 86%
R&D) wage
IE WS Flat rate Payment varies depending on gross pay €350 per week; based on a 39 hours €4,067:
payment: €203- per week week this amounts to €1,516, 37%
350 per week 67 per month
FS €41.10 per day
IT STW 80% gross Cap depends on monthly gross wage: €2,633:
scheme wage Below €2,159.48: €939.99 36-43%
Above €2,159.48: €1,129.66
38 WP 2021.07
Job retention schemes in Europe
Job re- Level Variation in level Cap (absolute) Cap as a
tention percentage
scheme of the
average
wage*
LT STW 70-90% gross The level depends on the model of Cap depends on model of support €1,199:
scheme wage support chosen by employer. chosen by employer: 51-76%
Employees above 60 years of age: 70% model: 1,5 monthly minimum
70-100% wage (€910.50)
90% model: 1 minimum wage (€607)
LV STW 50-75% gross The level depends on the type of Cap depends on the timing: €1083:
scheme wage company and the timing: 03-06/2020: €700 65-92%
03-06/2020: 75% as standard level 11/2020-06/2021: €1000 and
and 50% for employees of micro the minimum wage of €500 as the
companies minimum amount to be paid.
11/2020-06/2021: 70% standard
level and 50% for employees of micro
companies
LU STW 80% gross Maximum gross wage to be taken into €5,064:
scheme wage account: 2.5 times the minimum wage 84%
for unskilled workers: €5,354.98
Maximum amount payable: €4,283.98
Minimum amount: minimum wage for
unskilled workers
MT WS Flat rate Depending how hard the sector was hit €800 per month €1,535
payment: €160- by the crisis: (12/2020):
800 Annex A severely hit: €800 (top up of 52%
€400 by employers)
Annex B: less severely hit: €160
Since 06/2020 Annex C: €600
NL WS 100% gross Since 10/2020 employer can cut Maximum gross wage to be taken into €4,433:
wage wages to 90% account: varied over time: 215-219%
03-09/2020: €9,538
10-12/2020: €9,691
NO FS 62.4-100% Depending on duration of support and NOK 608,000 (approximately NOK
gross wage original wage: €53,000) per year which amounts to 51,226:
03-08/2020: NOK 50,667 (€4,417) per month 99%
First 20 days: 100% (up to the cap for
days 3-20)
Then for wages up to NOK 304,000
(€26,500): 80%
For wages between NOK 304,000 and
608,000: 62.4%
09-12/2020:
First 10 days: 100%
Then for 30 weeks benefits as
described.
PL WS 50% gross Two options: 40% of national gross average wage; 40%
wage If operations suspended: 50% gross minimum amount payable: minimum
wage; wage
If working time reduced by 20-50%
then wage only for the time worked
PT STW 66-92% gross Two schemes available: Maximum amount payable: 3 times €1,566:
scheme wage Traditional Scheme: the minimum wage: €1,905 per month 122%
03-07/2020: 66% Minimum amount: minimum wage
08-09/2020: 77-83%
10-12/2020: 88-92%
Extraordinary Scheme:
08-09/2020: 66%
10-12/2020: 80%
RO STW 75% gross 41.5% for employees on fixed-term 75% of the national gross average 75%
scheme wage contracts wage
41.5% of the national average wage
for fixed-term contracts
WP 2021.07 39
Jan Drahokoupil and Torsten Müller
Job re- Level Variation in level Cap (absolute) Cap as a
tention percentage
scheme of the
average
wage*
SK STW 60-80% gross Two sub-schemes: For both sub-schemes: €1,100:
scheme wage (1) Economic restrictions due to 03/2020: €880 per month 80-100%
government order: 04-12/2020: €1,100 per month
03/2020: 60-80%
04-12/2020: 80%
(2) Economic restrictions due to
economic downturn:
03-12/2020: 80%
Sl STW 80% gross 100% for quarantined workers Minimum amount payable: Minimum 100%
scheme wage wage (€940.58)
Maximum amount payable:
Average wage (€1,821.44) provided
that overall support per undertaking
does not exceed €800,000
ES FS 50-70% gross Depends on the duration of support: Depends on number of children: €2,295:
wage 70% for the first six months of support; 0 child: €1,098.09 48-62%
50% from the seventh month onwards 1 child: €1,254.96
2 children or more: €1,411.83
SE STW 88-96% of Depends on the extent of working time SEK 44,000 (€4,071) SEK 38,485:
scheme gross wage reduction: 114%
20% reduction: 96% of wage
40% reduction: 94% of wage
60% reduction: 92.5% of wage
In the period 05-07/2020:
80% reduction: 88% of wage
CH STW 80% of gross flat rate of CHF 3,470 (€3,220) for CHF 9,880 (€9,170) per month CHF 7,611:
scheme wage workers earning less than CHF 4,340 130%
(€4,030)
UK STW 80% of gross GBP 2,500 (€2,810) GBP 3,400:
scheme pay 74%
Note: FS: furlough scheme; STW scheme: short-time work scheme; WS: wage subsidy.
Source: ETUI survey of job retention schemes; * source for average wage in May 2020: OECD (2021).
40 WP 2021.07
Job retention schemes in Europe
Generosity of job retention scheme support from an employer’s
perspective
From an employer’s perspective the key aspect of generosity of support is the
extent to which the job retention support reduces overall wage costs. As regards
the design of a job retention scheme, two aspects play an important role in this
respect. First, the extent to which the state and the employer share the costs of
employees’ wages for time not worked, and second, the extent to which the state
covers the social security contributions for workers on job retention schemes as
a substantial part of additional wage costs. For employers a job retention scheme
is attractive if the overall cost of putting workers on it is lower than the costs of
laying off existing and in recruiting new workers when economic activity resumes.
Thus, the ideal solution for employers is that the state fully covers employees’ wage
support and social security contributions so that the employer has no additional
costs when putting a worker on a job retention scheme. For the state, however,
avoiding deadweight losses and undue strains on public budgets by obliging
employers to cover parts of these costs are further factors to be considered.
Overall, two key features can be observed as regards the rules on employers’ co-
payment of job retention scheme support. First, the rules depend strongly on the
type of job retention scheme. Co-payment rules are particularly common among
wage subsidy schemes and almost absent among furlough schemes. Second, over
time co-payment practices, in particular in short-time work schemes, became more
common, reflecting the fact that during the course of the pandemic considerations
of avoiding deadweight losses gained in importance in relation to the objective of
providing broad-based support to maintain companies’ financial liquidity. In what
follows these two features will be outlined in more detail.
Measures to avoid unjustified support are particularly relevant for wage subsidy
schemes, which provide support irrespective of working time arrangements and
therefore potentially also cover part of the wage for time worked. They therefore
provide a strong incentive for employers to continuously draw on the wage
subsidy even if the initial economic reasons for support no longer pertain. In most
wage subsidy schemes covered in our study concerns about providing unjustified
support are taken into account by establishing clear economic eligibility criteria,
on one hand, and by requiring employers to cover parts of the employees’ wages, on
the other. In Croatia, Malta, Poland and the Netherlands, for instance, employers
should pass on the wage subsidy to the employee in full and top up to the required
level those wages that exceed the amount received as the wage subsidy. In the
Netherlands employers are required to top up wages to 100 per cent of the original
wage. The wage subsidy schemes in Hungary stipulate that the employer has to
cover up to 50 per cent of the employees’ replacement wage.
Because in furlough schemes furloughed employees are de facto considered
(partially) unemployed, support for time not worked is, as a rule, fully covered by
the state or the respective unemployment insurance system. Of all the furlough
schemes covered in this study, Norway is the only exception, providing for a share
to be covered by the employer. Employers usually pay wages to the furloughed
worker for 5 to 15 days. In the period March–August 2020 the employer had to
WP 2021.07 41
Jan Drahokoupil and Torsten Müller
pay furloughed workers their full wages for the first two days only. For the period
September–December 2020 the number of days for which the employer has to
pay the employees their full wages was increased to ten (Svalund 2021).
In many short-time work schemes, the state fully covers the employees’ wage
support for time not worked. The Covid short-time work scheme in four further
countries – France, Italy, Slovenia and the United Kingdom – foresaw full coverage
by the state at the beginning of the pandemic and introduced some co-payment by
employers later on. In France, in the standard short-time work scheme, Activité
Partielle, the public Unemployment Insurance Scheme (Unedic) fully covers the
allowance. In the Activité Partielle de Longue Durée (APLD), which was newly
introduced in June 2020, the employer has to take over 10 per cent of employees’
short-time work support (Vincent 2021). In Italy, the usual practice of the normal
short-time work scheme, namely that the Wage Guarantee Fund fully covers the
STW allowance, also applied to the Covid-19 scheme between March and July
2020. From August to December 2020, however, companies had to take over a
share of the costs depending on their loss of revenue. For companies with a loss
of below 20 per cent the share was 9 per cent and for companies with no loss of
revenue the share was 18 per cent (Faioli and Bologna 2021). Slovenia also started
the pandemic with full state coverage for April and May 2020 and introduced an
employer co-payment of 20 per cent for the period June – November 2020. In
December 2020, the co-payment rule only applied to companies that received
more than €800,000 in state aid. For those companies that remained below this
threshold the state fully covered the short-time work allowance (Poje 2021). The
United Kingdom also introduced frequent changes as regards the share covered by
the state and the employer. From March to August 2020, the state fully covered
the short-time work allowance; in September 2020 the employer had to cover
10 per cent; and in October 20 per cent. In November 2020, the system reverted
to the original rule of full coverage by the state (Fulton 2021).
In the other countries the share of the employees’ short-time work support to be
covered by the employer ranges from 1 to 40 per cent (see Table 7). In a range of
countries the share varies, depending on certain criteria. In Czechia, for instance,
the share depends on the reason for short-time work and ranges from zero in case
of restrictions due to government decisions to contain the pandemic, to 20 per
cent if a worker is in quarantine, and 40 per cent if the company is in economic
difficulties (Drahokoupil 2021). In Denmark the share to be covered by the
employer depends on the category of workers, and in Sweden and Portugal on
the extent of the working time reduction (see Table 7). Croatia is a special case
because there the state pays a fixed amount per employee on short-time work to
companies, which then have to top up the employees’ wages to 100 per cent of
the net wage. For these two countries it is therefore not possible to calculate the
percentages covered by the state and the employer. The share covered by the state
is larger for low-wage earners and smaller for employees higher up the pay scale.
42 WP 2021.07
Job retention schemes in Europe
Table 7 Generosity of job retention scheme support from the employers’ perspective
JRS Part of employees’ JRS support covered by Coverage of social security contributions (SSC)
company
AT STW None – 100% covered by the Austrian Public State covers 100% of SSC for the hours not worked
scheme Employment Service
BE FS None – 100% covered by the Unemployment Insurance SSC paid only for the time worked (or at least for time
covered by a salary)
BG STW 40% employer, 60% covered by the state State covers 60% of employer contribution
scheme
WS 07-12/2020: The employer receives a subsidy of BGN Employer and employee continue paying SSC
290 (approximately €148) or each job preserved
HR STW Employer receives a fixed amount of support depending Employers pay SSC for the time on STW but are
scheme on maximum working time reduction allowed. The reimbursed up to the amount paid
employer has to pay the part of the employee’s wage
that exceeds the amount of the support:
06-09/2020: HRK 2,000 (€267) based on 50%
maximum reduction
10-12/2020: HRK 2,800 (€369) based on 70%
maximum reduction
WS Employer receives fixed amount for every full-time Employers are exempt from SSC; the state covers SSC up
employee which the employer passes on in full to to the amount paid
the employee. The employer has to pay the part of
the employee’s wage that exceeds the amount of the
support:
03/2020: HRK 3,250 (€428)
04-09/2020: HRK 4000 (€533)
10-12/2020: depending on drop in revenue:
at least 40% drop: HRK 2,000 (€267)
60% and more: HRK 4,000 (€533)
CY FS None – 100% covered by the State Employers’ SSC are covered by the state
CZ STW Share of employer depends on reason for STW: Employers’ SSC partly covered by the state
scheme 0% in case of restrictions due to government decision
20% if the worker is in quarantine
40% in case of restrictions due to economic difficulties
WS Wage is fully covered by the employer Employers’ SSC covered by the state
DK STW Depends on the category of workers: Fully compensated by the state
scheme White-collar workers: 25%
Non-white collar workers: 10%
FS None – 100% covered by the Unemployment Insurance Depends on the scheme:
Traditional Scheme:
Employers’ SSC are suspended
Covid Scheme:
Since 09/2020: employers have to pay SSC
EE STW Employer needs to pay at least €150 per month to the SSC covered by the state
scheme employee on STW
Fl FS None – 100% covered by the Unemployment Insurance No SSC paid when on FS
FR STW For standard scheme: fully covered by the state and the SSC paid only for the time worked
scheme Unemployment Insurance Scheme
For APLD introduced in 06/2020: employer has to
cover 10% of the employees’ 70% wage support
and the Unemployment Insurance Scheme covers the
remaining 60%
DE STW None – 100% covered by the Federal Employment For 03-12/2020 Federal Employment Agency covers
scheme Agency 100% of employers’ SSC for hours not worked.
GR STW None – 100% covered by the state 06/2020: Employers’ SSC; after that covered by the
scheme state
FS None – 100% covered by the state Covered by the state
WP 2021.07 43
Jan Drahokoupil and Torsten Müller
JRS Part of employees’ JRS support covered by Coverage of social security contributions (SSC)
company
HU STW None – 100% covered by the state No SSC paid when on STW scheme
scheme
WS 50% of the wage to be covered by employer No SSC paid when receiving wage subsidy
(sector-
specific)
WS (for 47.6% of the wage to be covered by the employer Employers and employees keep paying SSC
R&D)
IE WS None: flat rate payment; but frequently employer pays Employers pay SSC at a reduced 0.5% rate
wage top-up
FS None – 100% covered by the state No SSC paid when on FS
IT STW Normal Scheme: none – 100% covered by the Wage Normal scheme: covered by the fund
scheme Guarantee Fund (WGF) Covid Scheme: not paid when on STW scheme
Covid Scheme:
03-07/2020: none – 100% covered by the WGF
08-12/2020: special contribution of employers to WGF
depending on the loss of revenue:
Below 20% loss of revenue: 9% of wages for hours not
worked
No loss of revenue: 18% of wages for hours not worked
LT STW None - 100% covered by the state Employers and employees keep paying SSC
scheme
LV STW None - 100% covered by the state No SSC paid when on STW scheme
scheme
LU STW None – 100% covered by the state Employers and employees keep paying SSC
scheme
MT WS In severely hit sectors the employer receives a flat rate Employers keep paying SSC also on the subsidy
payment of €800 for full-time employees which the
employer has to top up to a maximum of €1,200
NL WS Employer has to top up wage subsidy to 100% of the Employers and employees keep paying SSC
employees’ wages. The size of the subsidy depends on
loss of turnover (from 20-100%) and a multiplier which
varied over time:
03-09/2020: multiplier of 90%; thus employers’ share
ranged from 10% (100% loss of turnover) to 82%
(20% loss of turnover)
10-12/2020: multiplier of 80%; thus employers’ share
ranged from 20% (100% loss of turnover) to 84%
(20% loss of turnover)
01-06/2021: multiplier of 85%; thus employers’ share
ranged from 15% (100% loss of turnover) to 83%
(20% loss of turnover)
NO FS 03-08/2020: employer has to cover 100% of wages for No SSC paid when on FS
the first two days
09-12/2020: employer has to cover 100% of wages
for 10 days
After that the employee receives FS support with no
costs for the employer
PL WS Depends on the extent of working time reduction: Employers and employees keep paying SSC
If operations suspended, the employer receives a
subsidy of 50% of the minimum wage and has to top
up wages to the level of 50% of the original wage but
at least the minimum wage;
In case of a working time reduction of 20-50%, the
employer receives 50% of reduced wage and has to
cover the remaining 50% of the reduced wage
44 WP 2021.07
Job retention schemes in Europe
JRS Part of employees’ JRS support covered by Coverage of social security contributions (SSC)
company
PT STW Normal scheme: the state covers 70% and the employer Normal scheme: employers are exempt from paying SSC
scheme 30% of the wage support for employees Extraordinary scheme:
Extraordinary scheme: employers’ share varies according 08-09/2020: complete exemption for micro and small
to working time reduction and drop in revenue: and medium-sized companies and 50% exemption for
70% state and 30% employer if working time reduction large companies
is less than or equal to 60% and drop in revenue 10-12/2020: exemption for micro and small and
between 25-75% medium-sized companies has been reduced to 50%
100% state and 0% employer if working time reduction
is greater than 60% and drop in revenue is 75% or
more.
RO STW None – 100% covered by the Unemployment Insurance Employers and employees keep paying SSC
scheme
SK STW None – 100% covered by the state 03-09/2020: SSC covered by the employer
scheme 10-12/2020: SSC covered by the state
Sl STW Employers’ share varied over time: 04-05/2020: SSC covered by the state
scheme 04-05/2020: 100% covered by the state 06/2020-01/2021: employer has to pay SSC
06-11/2020: 80% covered by state and 20% by
employer
12/2020-01/2021: 80% state and 20% employer
for all companies that received more than €800,000 in
state aid; for those below the €800,000 threshold the
state covers 100% of the employees’ wage support.
ES FS None – 100% covered by the state The employer receives a certain reduction, which
depends on company size and the reason for STW: the
reduction varies between 75 and 100%
SE STW Share of the employer varies depending on the extent of Employers pay SSC on the adjusted wage
scheme working time reduction:
20% reduction: 1% by employer and 15% by the state
40% reduction: 4% by the employer and 30% by the
state
60% reduction: 7.5% by the employer and 45% by the
state
In the period 05-07/2020:
80% reduction: 8% by the employer and 60% by the
state
CH STW The Covid scheme reduced the number of days to be Employers and employees pay SSC on the full wage for
scheme covered by the employer (so called waiting days) from normal working hours
1-3 to 1 and from 09/2020 to 0.
UK STW Employers’ share of the employees’ wage support varied 03-07/2020: SSC covered by the state
scheme over time: Since then employers pay SSC on adjusted wage
03-08/2020: 100% covered by the state
09/2020: 90% covered by the state and 10% by the
employer
10/2020: 80% covered by the state and 20% by the
employer
11/2020-06/2021: 100% covered by the state
Note: FS: furlough scheme; STW scheme: short-time work scheme; WS: wage subsidy.
Source: ETUI survey of job retention schemes.
WP 2021.07 45
Jan Drahokoupil and Torsten Müller
Concerning social security contributions (SSC), which are another important
cost factor for employers, there is a wide range of arrangements across the
30 countries covered in this study. Despite the variation, however, some trends
can be observed. In well-established STW schemes, as in Austria and Germany,
SSCs are fully covered by the state, while in Belgium and France SSCs are paid
only for time worked. In many wage subsidy schemes, such as in Bulgaria, Malta,
the Netherlands and Poland, employers and employees keep paying SSCs; while in
furlough schemes, as in Finland, Ireland and Norway, SSCs are not paid when on the
scheme. The most striking features, however, are that in most countries employers
are at least partly relieved from paying SSCs and the rules on SSC payment are
frequently used as a tool to adjust costs for employers. In most countries in which
the rules on SSC coverage have been changed during the pandemic they became
more restrictive and increased costs for employers over time. This can be seen
as an indicator that over time considerations of avoiding unjustified support
and of providing more targeted support took precedence over considerations of
reducing employers’ wage costs. In the furlough scheme in Denmark employers
were traditionally exempted from paying SSCs, but have had to pay them since
September 2020. According to the Covid-19 short-time work rules in Germany,
the employers’ SSC are fully reimbursed by the Federal Employment Agency.
A new law adopted in September 2020, however, stipulates that from June 2021 the
state will cover only 50 per cent of the employers’ SSC unless the employee spends
time off work on training, in which case the state continues to cover 100 per cent.
In Slovenia and the United Kingdom, employers’ SSC were fully covered by the
state at the beginning of the pandemic. This changed over time. In Slovenia, the
employer has had to pay SSC since June 2020 and in the United Kingdom since
August 2020. Similarly, in Portugal the complete exemption of employers from
paying SSC under the standard scheme has been turned into a partial exemption
under the extraordinary scheme (see Table 7).
46 WP 2021.07
Job retention schemes in Europe
Role of collective bargaining and consultation
procedures
In many countries, trade unions and company-level employee representation
structures have played an important role in the design and implementation of job
retention schemes. The involvement of trade unions and employee representation
structures is important for three reasons: first, it facilitates the smooth
implementation of the respective arrangements and in doing so contributes
to the timely and efficient provision of job retention scheme support. Second,
it provides another layer of control to avoid unjustified claims for support; and
third, industry- and company-level agreements can help to address and improve
some of the shortcomings of statutory job retention schemes.
Trade unions and employee representation structures can be involved in different
stages of the provision of job retention scheme support, including the design of the
scheme and actual implementation. Most frequently, the involvement happens
at the stage of implementation at company level in determining the specific
arrangements and modalities. When looking at different national arrangements,
it is important to distinguish different degrees of involvement, ranging from no
formal requirement at all to involve employee representation structures, to a
requirement to inform and consult employee representation structures and,
finally, a formal requirement for the two sides to conclude an agreement about
the modalities of implementation of the respective job retention scheme. The
different country-specific arrangements are heavily influenced by the type of job
retention scheme and the national industrial relations tradition. As a rule, formal
requirements for some kind of involvement of trade unions and/or employee
representation structures as a prerequisite for resort to the job retention scheme
are most common in short-time work schemes (see Table 8).
Because in short-time work schemes the financial support depends on the specific
working time arrangements, there is a greater need for more detailed regulation
of the modalities than, for instance, in wage subsidy schemes. The involvement of
employee representation structures, therefore, is essential to ensure the smooth
functioning of the scheme. Because, furthermore, employees bear a substantial
Table 8 The role of trade unions and/or employee representation structures
in the implementation of job retention schemes
Wage subsidies STW schemes Furlough schemes
Formal requirement to negotiate agreement about modalities of job retention scheme
PL AT; CZ; DE; FR (APLD); HR; IT DK (standard scheme); Fl;
(Covid-STW); SE
Formal requirement to inform / consult trade unions / employee representation structures
NL BG; CH; ES; FR (standard BE; DK (Covid-19 scheme); NO
scheme); IT (standard scheme);
LU; PT; RO; SK; Sl
No formal requirements
BG; CZ; HR; IE; MT EE; GR; HU; LT; LV; UK CY; GR; IE
Source: ETUI survey of job retention schemes and Workers’ Participation in Europe Network Survey by ETUI.
WP 2021.07 47
Jan Drahokoupil and Torsten Müller
part of the costs of short-time work in the form of accepting lower wages for time
not worked, the involvement of trade unions and/or employee representation
structures also fulfils an important control function: employees and their
representation structures will accept short-time work only if there really is a
temporary drop in economic activity requiring financial support.
Of the seven wage subsidy schemes in our sample five did not foresee any formal
requirements for involving employee representation structures. Only in the
Netherlands is there a requirement for information and consultation. Poland is the
only case in which an agreement with trade unions or the employee representation
structures is a formal requirement to apply for support under the wage subsidy
scheme. By contrast, of the 18 short-time work schemes in our sample only in
five countries is there no formal requirement for employee involvement: Bulgaria,
Estonia, Greece, Lithuania and the United Kingdom. In all the other cases some
form of involvement is required. In the case of France and Italy the rules for
involving employee representation structures have even been tightened under
the respective Covid-19 schemes. Whereas in Italy the standard short-time work
schemes only require the information and consultation of trade unions, access to
the special Covid short-time work scheme is conditional on the negotiation of a
firm-level agreement. By the same token, in France the standard scheme foresees
only information rights for the works council in companies with more than
50 employees. The newly introduced long-term partial unemployment scheme
(APLD), however, can be implemented only on the basis of a company-level or
sectoral collective agreement, which clearly specifies the duration of APLD, the
activities and employees concerned, the maximum reduction in working hours,
the procedures for informing employee representatives and the commitments
made in terms of employment and training (Vincent 2021).
The requirements to involve employee representation structures can also vary
within countries, depending on the type of job retention scheme. In Croatia and
Czechia, for instance, where a wage subsidy scheme exists alongside a short-time
work scheme, the wage subsidy scheme does not foresee any formal requirement to
involve employee representation structures. The short-time work scheme in both
countries, by contrast, contains a formal requirement to conclude an agreement on
the use of short-time work. In Croatia, however, a company can still unanimously
apply for the short-time work scheme if they cannot reach an agreement with the
works council or the trade union (Jaklin 2021).
Furlough schemes show a more mixed picture than short-time work schemes.
Of the seven furlough schemes in our sample, three do not include any formal
requirements for employee representatives’ involvement. It should be noted,
however, that trade union involvement may be ensured through normal dismissal
procedures. The four countries that foresee some kind of formal trade union
involvement are all countries with a well-developed collective bargaining tradition:
Belgium, Denmark, Finland and Norway. In Denmark, the Covid-19 furlough
scheme actually reduces the degree of involvement. Whereas under the traditional
Arbejdsfordeling scheme in companies covered by a collective agreement, the
furlough scheme can be used only if the employer and the local union branch, shop
48 WP 2021.07
Job retention schemes in Europe
steward or other workplace representatives agree on introducing the scheme,
the Covid-19 furlough scheme includes only a requirement for information and
consultation (Larsen and Ilsøe 2021).
In some countries, however, the involvement of trade unions and employee
representation structures goes beyond the implementation of the scheme at
company level and extends to the actual design of the scheme, including the level
of support. In countries with a strong tradition of social partnership the whole
scheme is based on a collective agreement negotiated by the two sides of industry.
This applies to the Scandinavian countries Denmark, Norway and Sweden, where
following a voluntarist tradition of industrial relations the definition of the rules
of the game and the terms and conditions of the employment relationship is
left to the bargaining parties. Hence, in Denmark, the short-time work scheme
‘Lønkompensationsordningen’ is based on a tripartite agreement between the
government and the peak organisations of trade unions and employers. Similarly,
in Norway the furlough scheme is anchored in the central Basic Agreement
concluded between the central organisation of trade unions and the employers;
and in Sweden the use of short-time work is based on an industry-level collective
agreement that defines the framework for the conclusion of local agreements on
the use of short-time work. This, however, also applies to Austria, where the short-
time work scheme is based on a so-called ‘social partner agreement’ that sets the
terms and conditions for the use of short-time work at company level.
In other countries, collective bargaining plays an important role in improving the
level of support provided by the statutory job retention scheme. In some countries
this was done by concluding an industry-level agreement on a special supplement
as, for instance, in the metal industry in Belgium or the public sector in Slovenia.
More frequently, however, this was done by concluding a company-level
agreement that tops up the level of support provided by the statutory job retention
scheme. Examples include Belgium, Czechia, France, Germany, Italy, Slovenia,
Switzerland and the United Kingdom. Often the company-level agreements went
beyond merely topping up the level of support. In France, for instance, there were
examples of company-level agreements that included a solidaristic component,
ensuring disproportionally higher support for low-wage earners (Vincent 2021).
Examples from the United Kingdom include company-level agreements that also
ensure full payment of pension benefits and the extension of the scheme to staff
who might otherwise have been excluded, such as workers on zero-hours contracts
(Fulton 2021).
While in all the countries mentioned the role of collective agreements in improving
the terms and conditions of the statutory job retention scheme remained restricted
to some best-practice examples, Germany is a special case. Here, collective
agreements play a crucial role in addressing the shortcomings of the statutory
short-time work scheme. This applies in particular to the role of industry- and
company-level collective agreements in increasing the level of the statutory STW
allowance from 60 per cent of the net wage for the first three months in the case of
a worker without children, up to a level between 75 and 100 per cent. According to
Eurofund (2021: 28), approximately 45 per cent of workers in Germany saw their
support for hours not worked increased through collective agreements.
WP 2021.07 49
Jan Drahokoupil and Torsten Müller
The importance of collective agreements in topping up the level of short-time work
allowance is illustrated by a survey conducted by the Hans Böckler Foundation.
According to the survey, in June 2020, 60 per cent of employees in workplaces
with a collective agreement benefited from a top-up, compared with just 34 per
cent in firms without. By November 2020, 53 per cent of employees in firms
covered by collective bargaining were still in receipt of a top-up, compared with
29 per cent of those outside collective bargaining (Schulten 2021). Examples of
industries in which industry-level agreements have, in the context of the Covid-19
crisis, improved the level of short-time work allowance (often with higher
increases for lower pay grades) include: the film industry (100 per cent); retail
in North Rhine-Westphalia (100 per cent for the first four weeks and 80 per cent
thereafter); theatres and orchestras (90–100 per cent); (metalworking (80–97 per
cent); local government (90–95 per cent); insurance (90–95 per cent) chemicals
(90 per cent); automotive craft (90 per cent); fast food restaurants (90 per cent);
paper industry (90 per cent); ports (80 per cent); textiles services (80 per cent);
glass industry (80 per cent); wood and plastics industry (75 per cent) and banking
(75–95 per cent) (Müller and Schulten 2020; Schulten 2021).
The large number of collective agreements increasing the level of short-time work
support in Germany can be explained by the low level of statutory support for
the first three months. In parts of the private services sector characterised by low
wages, many employees on short-time work will not be able to make ends meet,
with a net income loss of 40 per cent for the first three months of short-time work
support. Moreover, for many low-paid workers – for instance, in the restaurant
and catering sector – the increase of the short-time work allowance to 80 per cent
after seven months comes too late because their employer may have gone out of
business by then. In many cases, collective agreements not only increase the level
of support but also improve other shortcomings of the German statutory short-
time work system. Many collective agreements, for instance, have also provided
for dismissal protection for workers on short-time work that is not foreseen in the
statutory scheme.
50 WP 2021.07
Job retention schemes in Europe
Special dismissal protection and provisions to avoid
misuse
Job retention schemes protect ties between workers and companies through
various forms of subsidies. Many schemes also make subsidies conditional upon
an additional commitment not to dismiss workers, which may extend beyond the
period for which the scheme is used. This typically includes 1–2 additional months
or a multiple of the time for which the job retention scheme was used (with a
maximum coefficient of 2 in Bulgaria). This means that if, for instance in Bulgaria,
STW was used for three months, the protection against dismissal is six months
covering the three months of STW plus three additional months after the end of
the use of STW.
Special dismissal protection is most common among short-time work schemes,
but even this group includes a number of countries that implement short-time
work without any special protection against dismissals (such as Germany, Latvia,
Sweden, Switzerland and the United Kingdom). It is also common for special
dismissal protection to apply also for a period after the scheme has been used
(for example, in Austria, Bulgaria, Croatia, Estonia, Hungary and Slovakia). Spain
and Lithuania restrict dismissals for an extended period, but companies commit
to retaining a percentage of their workers. In Luxembourg, there are restrictions
on dismissals in terms of the percentage of workforce or working time reduced.
Other forms of protection include a general suspension of dismissals on economic
grounds (Italy and Luxembourg), and restrictions on part-time working and
collective dismissals (Slovenia).
As far as wage subsidies are concerned, only Czechia has implemented a payroll
subsidy not linked to specific employees, making it conditional on retaining a
proportion of employees and a proportion of payroll. Wage subsidies in other
countries have subsidised the wages of specific employees. These typically
enjoyed protection against dismissal, which extended for an additional period in
Bulgaria (50 per cent of the time during which the wage subsidy was used) and
Hungary (1 month). In Malta, wage subsidies could not be claimed for workers
who replaced those who were dismissed. This rule was changed, however, in
January 2021. The new conditions of the wage supplement include a clause that
allowed the supplement to be received for workers replacing employees who had
left voluntarily. The number of workers for whom an organisation may receive the
wage supplement, however, cannot exceed the number of employees receiving it
at the end of May 2020 (Fiorini 2021).
Special dismissal protections are least common in furlough schemes. This is in
line with the logic of a system of temporary unemployment, in which workers
can switch to standard unemployment once the economic reasons for dismissal
appear to be permanent. At the same time, furlough schemes in Cyprus, Denmark
and Greece include protection against dismissal for the duration of the scheme.
In order to ensure that companies do not abuse job retention schemes, since
the beginning of the pandemic there has been a lively debate in many European
countries on linking job retention scheme support to a ban on profit-sharing
WP 2021.07 51
Jan Drahokoupil and Torsten Müller
through dividends, management bonuses and other forms of profit-sharing. The
logic behind the exclusion of such companies from job retention schemes is, simply,
that if they have enough money to pay out dividends and buy back shares, their
financial problems cannot be so severe as to justify the socialisation of the cost
of retaining their employees. Thus, before applying for state support, companies
are supposed to utilise their own resources. So far, however, only a minority of
countries have attached provisions to their job retention schemes to avoid abuse.
These could be found in 11 countries with all three types of job retention scheme
with which we are concerned. Most frequently, such provisions included a ban on
profit-sharing and management bonuses. Companies resorting to job retention
schemes were not permitted to indulge in profit distribution through dividends
and other forms of profit-sharing in Croatia, Denmark, the Netherlands, Portugal,
Slovenia and Sweden. The Swedish Agency for Economic and Regional Growth
(Tillväxtverket), which is responsible for refinancing short-time work allowances
for companies, declared, for instance, that it is ‘inappropriate for a company to be
paying out large amounts in dividends and at the same time to be taking advantage
of the support from the State in the form of the short-time work allowance’
(Tillväxtverket 2020). In such a case, Tillväxtverket exercises its power to adjust
the support granted. It therefore monitors value transfers in companies using the
short-time work scheme two months beforehand and six months afterwards. A
ban on profit-sharing would also often be in line with other conditions for the
provision of public support to companies. In Germany, for instance, companies
applying for special Covid-19 loans from the state-owned development bank, KfW,
are not allowed to distribute profits and dividends. This is not the case, however,
if companies receive wage subsidies from the Federal Employment Agency when
using short-time work (Müller and Schulten 2020).
The payment of management bonuses was restricted in even fewer countries
than profit-sharing, namely Croatia, Denmark, the Netherlands, Romania and
Slovenia. Two countries, Czechia and Spain, also excluded companies residing
in tax havens from receiving assistance. In order to comply with EU regulations,
however, these did not cover tax havens within the EU, raising question marks
about the effectiveness of such provisions. Special provisions also included
excluding companies in bankruptcy (Czechia and Lithuania) and those with a
record of tax violations (Latvia).
52 WP 2021.07
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Training provisions
For employees, time spent on job retention schemes could be an opportunity
to upgrade their skills and to improve their position within the firm and future
employability. In the absence of retraining, workers who end up being dismissed
may lose out twice over: first, through lower income when on a job retention
scheme and then again through lower income when on unemployment assistance
with time possibly spent on retraining. Employers may not be inclined to organise
training without additional incentives, however. Investment in training is not
likely to be an priority for companies in difficulties. Employers may also consider
the prospects of workers on job retention schemes within the firm as uncertain.
They are thus also likely to have little interest in investing in the skills of workers
who may eventually seek employment elsewhere. There is thus a strong case for
including incentives for worker training in the design of job retention schemes.
Some of the job retention schemes that were in place before the crisis included also
a provision that allowed workers to take part in training, or included incentives for
workers to enrol in training programmes. The training provisions were in some
cases introduced as an adjustment to the crisis (Finland, German and Norway).
They were also included in some of the temporary schemes introduced in the crisis.
As far as wage subsidy schemes are concerned, none included training provisions
as a conditionality. The Netherlands issues a recommendation to provide training,
and also obliged employers to assist terminated workers in their job search.
Providing access to training for the unemployed and incentivising workers to
improve their employability seem to follow from the logic of furlough schemes. We
found training courses offered to workers on furlough schemes only in the Belgian
region of Flanders, however. In Denmark, workers are allowed to take part in
training organised by their employers. Other countries have introduced training
provisions in response to the crisis. Norway allowed participation in training only
during the Covid-19 crisis. Finland allowed workers temporarily to study full-time
without losing unemployment benefit.
Some short-time work schemes included an obligation to provide training or
direct support for retraining. Training programmes were available to short-time
work recipients in Slovenia. The Swedish scheme included a subsidy of 60 per cent
of training costs, up to SEK 10,000 (€990) per employee. A training grant can
accompany short-time work in Portugal, too, which also supports training plans at
the company level. In Spain, workers on short-time work schemes have priority in
voluntary vocational training programmes, financed by employers’ and workers’
contributions. In Hungary, the employer must provide training during 30 per cent
of reduced hours. Germany offered subsidies and introduced training incentives
from June 2021 making insurance contributions fully reimbursable only if the
respective employee takes part in training. In Luxembourg, short-time work
allowance is higher for workers participating in training. In Austria, employees
were obliged to take part in training offered by employers, but only a minority of
firms do that. Finally, training was required in Italy, but it was not enforced and
typically no training programmes were implemented.
WP 2021.07 53
Jan Drahokoupil and Torsten Müller
Finally, some short-time work schemes allowed training without providing
specific incentives for participation. In France, companies were also encouraged
to provide vocational training. Norway introduced the possibility to take part in
training by any provider (be it the employer or an external programme) as an
adjustment to the crisis. The British scheme also allowed enrolled workers to take
part in training.
54 WP 2021.07
Job retention schemes in Europe
Conclusions
One lesson learned from the Great Recession more than a decade ago is that job
retention schemes play an important role in cushioning the employment impact of
an economic crisis. Hence, in order to deal with the consequences of the Covid-19
pandemic, all the 30 countries covered in this report implemented some kind of
job retention scheme. The experience of the Covid-19 pandemic illustrates that
job retention schemes have been an integral part of a more demand-focused crisis
management. Such schemes have allowed companies to weather the economic
crisis by sustaining their financial liquidity, preventing unnecessary job losses
and serving as an automatic economic stabiliser by sustaining internal demand
through the protection of workers’ wages. Studies that focussed more closely on
job retention schemes’ impact on employment, furthermore, confirm that the
negative effects as regards job reallocation were only limited, with the balance
tilted well in favour of the positive effects (OECD 2021). In essence, during the
Covid-19 crisis job retention schemes have provided a lifeline for companies,
workers and the economy at large.
As the Covid-19 crisis has dragged on for much longer than initially expected,
discussions have emerged in many countries that did not have a permanent scheme
before the crisis about whether to phase out the temporary schemes or whether
(and how) to turn them into permanent ones. By the same token, the question
arises in countries with a permanent job retention scheme whether the current
‘Covid-19’ rules should be kept or whether (and when) they should return to the
standard scheme. Against this background, it is important to shed some light on
the lessons to be learned from the Covid-19 pandemic as regards the institutional
characteristics that worked well and some of the opportunities that were missed.
Any discussion about the potential advantages of a permanent scheme has
to consider that job retention schemes are not only a tool for dealing with an
exceptional situation, such as a pandemic, when financial support is needed on
an extraordinary scale at very short notice. Job retention schemes by their very
nature are tools for dealing with temporary economic difficulties caused by a
cyclical fluctuation in demand. Such a situation can occur any time for a multitude
of reasons, in particular in the current volatile economic environment resulting
from the uncertain prospects of a recovery from the Covid-19 crisis, coupled with
potential supply shocks disrupting value chains. Examples of such supply shocks
are the pandemic-related shortage of computer chips or disruptions in ports.
A permanent scheme helps companies and workers to deal with such cyclical
economic difficulties at short notice. Another advantage of a permanent scheme is
that when faced with an exceptional situation like the Covid-19 crisis, it is easier to
adjust and upscale an existing system than to establish a new system from scratch.
A permanent scheme, furthermore, facilitates take-up because in well-established
schemes all the actors involved know exactly what to do when a temporary crisis
emerges. In well-established permanent schemes applying for a job retention
scheme is essentially a routine procedure. In non-permanent schemes, by
contrast, applications are often fraught with uncertainty concerning the rules and
procedures. This may deter some employers from applying at all. It is important to
find a design that takes into account and strikes a balance between the interests of
WP 2021.07 55
Jan Drahokoupil and Torsten Müller
all parties involved. From the workers’ perspective the scope and generosity of the
scheme, in terms of the assistance they receive, are of key importance. From the
perspective of employers and the state the costs involved are of crucial importance
and in particular how the two share these costs.
As regards the scope of job retention schemes, all countries made the eligibility
criteria as inclusive as possible to ensure that workers on different types of contracts
receive support. This applies to countries with permanent job retention schemes,
which adjusted their employee-related eligibility criteria so that previously
excluded categories of workers – such as workers on fixed-term contracts or
temporary agency workers – also benefit from the system, as well as to countries
with newly established schemes, which established inclusive eligibility criteria
from the outset. This obviously reflects the key concern at the beginning of the
crisis, namely the need to provide broad-based support, but it is also an important
element of a permanent scheme, aimed at avoiding not only further segmentation
of the workforce through the use of job retention schemes, but also leaving behind
the most vulnerable categories of workers by excluding them from such support.
This also applies to the issue of generosity. During the crisis, a number of different
options have been tried, as can be seen from the wide variation in the level of
support across the 30 countries covered by this report, ranging from 50 to 100 per
cent of the original wage. There is no single best solution for the appropriate level
of support for workers. Two aspects are worth considering, however: first, the
level should be high enough to ensure that workers on job retention schemes can
make ends meet without having to rely on other state support measures. Half the
countries covered in this report opted for a replacement level of at least 80 per
cent. Because the cap also plays an important role in determining the generosity
of the scheme, its level should be set so that it does not counteract the objective
of ensuring that workers can make ends meet. The second lesson learned from
the Covid-19 pandemic is that job retention schemes in a wide range of countries
included specific provisions to protect wages at the lower end of the wage
distribution. This can be done in different ways. Some schemes ensure a higher
replacement rate for low-wage workers, while others include a provision that the
minimum amount paid to workers for the time they spend on the scheme should
be at least the minimum wage. In line with the recent European Commission
proposal for a Directive on adequate minimum wages this minimum wage should
not be below the internationally acknowledged ‘double decency threshold’ of
60 per cent of the national median and 50 per cent of the national average wage
(European Commission 2020).
At the beginning of the crisis, states’ clear priority was to ensure broad coverage
and broad-based support for workers and companies by fully covering the costs
of job retention scheme support. Later on, however, when some of the most
severe economic restrictions were withdrawn and economic activity picked up
again a range of countries made companies participate in covering the costs. The
key issue here is to strike a balance between securing the financial liquidity of
companies in temporary economic difficulties, while at the same time avoiding
deadweight losses by supporting jobs, or companies, that actually do not need
financial support. Furthermore, co-financing by employers may lead to a lower
56 WP 2021.07
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take-up, but it is ultimately also in the interest of the workers. It makes sure that
only workers with a reasonable chance of retaining their jobs are enrolled. It also
prevents employers from using job retention schemes to avoid or postpone paying
workers’ severance payments. The experience of the Covid-19 crisis illustrates
that different options may be pursued to strike this balance. Some countries made
companies cover a certain percentage of the support provided to workers. Others
restricted cost-sharing to the payment of social security contributions. The extent
of the employers’ share varied considerably.
Other measures to avoid misuse that are far easier to implement include, first, the
establishment of clear and quantifiable economic eligibility criteria that ensure that
only companies in economic difficulties apply for support. This should go along
with regular checks on whether the criteria are still being met. A second measure
is the involvement of trade unions and employee representation structures in the
design and implementation of the scheme. Such involvement not only ensures
the smooth functioning of the scheme by enabling tailor-made company-specific
solutions that take into account the interests of workers and employers, but it also
provides another layer of control. Because employees bear a substantial part of
the costs of working time reductions in the form of lower pay for time not worked,
employee representatives will agree to put workers on job retention schemes only
if there really is no other option. Only a minority of countries set some kind of
formal requirement to negotiate an agreement with or to consult trade unions
and employee representation structures as a precondition for job retention
scheme support, mainly countries with a permanent scheme. The majority of
countries with newly established, temporary job retention schemes did not insist
on a meaningful role for worker participation or collective bargaining. A third,
easier to implement option to avoid misuse are provisions to prevent companies
benefiting from public support from distributing profits to shareholders and
management. Very few schemes included such provisions, however, which was
clearly a missed opportunity. A number of countries, furthermore, attempted
to deny access to support to companies that are based in tax havens outside the
EU. These efforts were ineffective, however, as a number of EU member states
offer tax avoidance opportunities. Any meaningful provisions should therefore
also include EU countries. Another measure against misuse are provisions on
dismissal protection for workers enrolled in the job retention scheme. Because
special dismissal protection for workers on such schemes may deter employers
from applying for support the length of its validity needs to be chosen carefully.
Following the example of a range of countries, to be effective protection against
dismissal should last at least one month beyond the period of enrolment.
A related issue of relevance for permanent schemes, and which has received much
attention in the media, is the risk of supporting unviable jobs in so-called ‘zombie
companies’, whose survival depends largely on job retention scheme support.
Financial participation in covering the cost of downtime and restricting full-time
enrolment can effectively reduce the risk of such deadweight losses. Other ways
to address this problem could be to link access to job retention schemes to the
submission of a business plan on which management has to at least consult trade
unions and/or employee representation structures. To ensure that the survival
of the company and its jobs is not based on exploitative working conditions
WP 2021.07 57
Jan Drahokoupil and Torsten Müller
this business plan should also include a clear commitment to paying at least an
adequate minimum wage to all employees.
Because existing job retention schemes typically make workers wait for their job
to reappear, another opportunity missed in many countries during the Covid-19
crisis is the establishment of a clearer link between job retention schemes and
training. As a matter of fact, very few schemes offer training opportunities and
effective incentives for retraining. This is also the case for furlough schemes, which
are integrated into the system of unemployment assistance. Workers thus do not
have an opportunity to use the time to upgrade their skills and make themselves
potentially employable also in other companies. This is problematic as the workers
whose jobs turn out not to be viable effectively pay the costs of transferring to a new
job twice: first as the cost of participation in the job retention scheme (lower pay)
and then the cost related to transfer to a new job (lower income, retraining costs).
To avoid such situations, job retention schemes should thus be better integrated
into active labour market policy instruments and include clear incentives for the
provision of training.
58 WP 2021.07
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Fiorini L.A. (2021) Job-retention schemes in Europe: Malta, Brussels, ETUI.
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COVID-19: better constrained in the corset of an insurance logic or at the whim of a
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Kováčová L. (2021) Job-retention schemes in Europe: Slovakia, Brussels, ETUI.
Larsen T.P. and Ilsøe A.(2021) Job-retention schemes in Europe: Denmark, Brussels, ETUI.
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60 WP 2021.07
Job retention schemes in Europe
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The individual country reports on which this analysis is based are available on the ETUI
website. Please visit etui.org/ZU2
All links were checked on 3 August 2021.
WP 2021.07 61
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