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Companies currently have available a series of instruments to reduce their immediate social security costs and minimize the economic impact of the COVID-19 crisis, depending on i) whether they have had a temporary labor force adjustment (ERTE) due to force majeure authorized; ii)whether their activity has been suspended as a result of the declaration of the state of emergency; and iii) the industry in which they operate.
There are three alternative social security benefits that companies can apply today if they meet the requirements established for each of them in the corresponding regulations::
1. Exemption from social security contributions for the workers affected by suspension of contracts and reduction of working hours due to force majeure related to the COVID-19 crisis
In addition to introducing exceptional measures to process the suspension of contracts and reduction of working hours, i.e., ERTEs, as a result of COVID-19, section 24 of Royal Decree Law 8/2020 includes the possibility of applying the social security contributions exemption for workers affected by an ERTE due to force majeure:
- Scope of application of the exemption: The exemption will apply to the company´s social security contribution and the joint collection items relating to the workers affected by an ERTE due to force majeure as a result of COVID-19.
This benefit will also apply to ERTEs for force majeure authorized or initiated prior to Royal Decree Law 8/2020 entering into force, provided they are linked to COVID-19.
- Exemption percentage: The exemption percentage will be 100% of the contributions for companies that had fewer than 50 workers registered with the social security administration as of February 29, 2020, and 75% for those that had 50 or more.
- Duration of the exemption: The application of this exemption will be linked to the time that the work contracts remain suspended or the working hours reduced under the corresponding temporary redundancy plan due to force majeure; that is, the exemption may be applied until the end of the declaration of the state of emergency, which is when, in theory, the temporary redundancy plans due to force majeure linked to COVID-19 will end.
- Application and consequence: This exemption will only apply when the business owner applies for it to the General Treasury of Social Security. This requirement is important, as this exemption from social security contributions will entail the obligation to preserve jobs provided in Additional Provision 6 of Royal Decree Law 8/2020, which limits the possibility of terminations or dismissals for the six months after the company resumes its activity.
2. Moratorium on social security contributions
Section 34 of Royal Decree Law 11/2020 introduced the possibility of applying for a six-month, interest-free moratorium on company social security contributions accrued between April and June 2020.
This benefit has the following characteristics:
- Scope of application of the moratorium: The six-month, interest-free moratorium will apply to the company’s social security contributions and the joint collection accrued between April and June 2020, provided the company’s activity has not been suspended as a result of the declaration of the state of emergency.
Applying this benefit is also limited to a few, very specific sectors, including retail trade (not affected by the state of emergency), farming, carpentry and air conditioning installation, and advertising (under Ministerial Order ISM/371/2020 of April 24).
- Incompatibilidades: Esta medida resultará incompatible con la aplicación de la exoneración en el pago de las cuotas a la Seguridad Social en el caso de ERTE por fuerza mayor establecida en el artículo 24 del Real Decreto-ley 8/2020, así como con la solicitud de aplazamiento de deudas a la Seguridad Social prevista en el artículo 35 del Real Decreto-ley 11/2020, que se detalla más adelante.
- Application: Companies must expressly apply individually for each contribution account code within the first 10 calendar days of the contributions’ regulatory periods for which the moratorium is requested.
3. Deferment of social security debts
The third extraordinary measure on social security is the possibility provided in section 35 of Royal Decree Law 11/2020 of deferring social security debts due between April and June 2020 in exceptional cases.
- Scope of application of the deferment: This deferment can be applied for social security debts payable between April and June 2020. Instead of the deferred debts accruing the default interest rate in force (currently 3.75%), these debts will accrue a reduced interest rate of 0.5%.
The deferment will also be granted through a single resolution, regardless of the number of monthly payments it entails. That resolution will set a four-month repayment period for each deferred monthly payment from the month after the deferment is granted, and the total maximum repayment period will not exceed 12 months.
We must highlight that the General Treasury of Social Security has raised the total amount of the debt for which it is not necessary to establish a security from 30,000 to 150,000 euros in case of a deferment application, and from 90,000 to 250,000 euros if, when the deferrable debt is below 250,000 euros, at least one third of the total is paid within ten days of the deferment being granted.
- Incompatibilities: To apply this benefit, the company must not have any other social security debt deferment in force. It is also incompatible with the moratorium.
- Application: Companies must expressly apply for this debt deferment within the first 10 calendar days of each of the regulatory periods for paying the debts to which the deferment refers.
This post is also available in: Español