In Europe, the second wave of the coronavirus has since September prompted the re-introduction of social distancing measures, restrictions to economic activity, telework, curfews and lockdowns. Without certainty on the duration of the health crisis and its knock-on effects on the economy, governments have been re assessing the status of social security benefits and measures introduced since the onset of the pandemic.
Measures to maintain and protect employment were among the immediate responses when the pandemic hit in the months of March and April. Many of these emergency responses were time-limited to around three months. When it became evident that the economic impact and uncertainty would continue longer, a second phase of the employment-related social security response in June and July consisted of the temporary extension and adaptation of emergency measures in the context of lower infection rates. Taking into account financing considerations, some countries reduced the generosity of benefits, targeted them to the sectors most affected and initiated transition arrangements to more regular benefit programmes.
Putting a sudden stop to the phased exit from COVID-19-related employment support measures, the second wave of the pandemic required governments to once again extend various temporary schemes, generalize them and allow for greater flexibility and access. Simplified administrative processes, broadened definitions of eligible groups, and top-ups to existing benefits have been common types of adjustments.
At the same time, the horizon for the end of the special COVID-19 employment protection measures has been expanded considerably, with special schemes now foreseen to be phased out at some point in 2021 only.
Figure 1 below shows a simplified timeline illustrating the evolution of some special COVID-19 employment protection measures in a selection of countries, including the most prominent adjustments for each programme. Building on previous articles by the International Social Security Association (ISSA) published in March and July, this article reviews the latest developments in the context of the second wave of the pandemic in October and November, with a specific focus on employment protection and measures for the self-employed.
Employment protection measures: adaptations to the second wave
A number of social security measures have been adopted by European countries to maintain jobs, alleviate the economic crisis and prevent higher unemployment since the onset of the crisis:
- Short-term work, also known as partial unemployment schemes.
- Temporary layoffs, also known as furlough schemes (as in Denmark and the United Kingdom).
- Complementary measures, including emergency cash transfers, training incentives, additional subsidies for some sectors or flexibility concerning certain benefit rules.
While these schemes have evolved throughout the crisis period, recent adjustments as part of the responses to the second wave can be classified as follows:
- Increase in the benefit levels or support for employers, which refers in particular to higher replacement rates and/or higher subsidies.
- Easier access to benefits, such as shorter administrative procedures and the relaxation of eligibility conditions.
- Extension of schemes, particularly in terms of economic sectors, types of workers covered and in time, with many schemes extended far into the year 2021.
- Support to workers to adapt to a longer-term crisis, including measures to support re-skilling, higher benefits for workers on short-term work for a long time or the permission to work with another employer during the receipt of short-term work benefits.
In late September, France confirmed that the special provisions for partial unemployment first introduced in March would be extended until mid-2021. Coverage has been expanded to include other types of workers such as employees on daily or hourly package-type contracts. The access to the scheme has been shortened to 48 hours after the application by employers.
Similarly, Germany will continue implementing the COVID-19 short-time work scheme with an increased replacement rate, from 60 per cent of net income to 70 per cent (77 per cent if with a child), and increasing to 80 per cent (or 87 per cent if with a child) after the seventh month of being in the scheme. This COVID-19-“Kurzarbeit” policy will be in place until end December 2021 which is estimated to preserve at least one million jobs. A provision that allows the take-up of second jobs to earn pre-pandemic income levels is in place until December 2020.
Spain also extended its short-term work scheme (Expedientes de Regulación Temporal de Empleo – ERTEs) until end-January 2021. Employees receive the unemployment cash benefit when placed in an ERTE which, under normal circumstances, depletes accrued entitlement to this cash benefit. However, as announced in March, persons subscribed to ERTEs will not use up the accredited right to unemployment benefits. Instead of the replacement rate decreasing to 50 per cent from 70 per cent after six months, it will remain at this level throughout the period until January 2021.
At the beginning of November, the United Kingdom extended the Job Support Scheme (better known as the furlough scheme) introduced earlier this year until March 2021. The subsidy for employers will increase under new conditions, and employees will continue receiving 80 per cent of their current salary (up to 2,500 Great Britain Pound – GBP). Notably, flexibility introduced in June and valid to end of December allows recipients to work part-time for their employer, similar to what is the case in a short-time work scheme that is not part of the regular legislation in the UK.
As the UK, Denmark has no equivalent to the short-time work model. A wage compensation scheme for the private sector that allowed employers to keep their workforce on furlough was introduced from 9 March to 8 June, and later extended to 29 August. This scheme was replaced from September by a new one allowing for the flexible distribution of available work among the employees of a company, with reduced working hours being compensated by unemployment insurance, this time until end of December 2020 and April 2021 in certain cases.
Somewhat at odds with the temporary nature of employment protection schemes but reflecting the longer-term benefit receipt and an increasing concern about the future of some of the jobs that are meant to be protected, professional and vocational training is increasingly incentivized in Denmark, Germany and Spain as a complement to job protection schemes, and to qualify workers for new jobs. In October, the Austrian Public Employment Service (AMS) also introduced a subsidy for further professional training.
Coverage of the self-employed: adaptations to the second wave
In light of the economic impact of the second wave, new benefits and adjustments to existing programmes also proved necessary with regard to the self-employed. Broadly, the types of measures are equivalent to the support for employees under job-retention programmes.
The Government of Spain established an extraordinary new cash benefit for self-employed persons who had to temporarily stop working due to mandatory business closures. From October 2020 to January 2021, self-employed workers are eligible to receive 50 per cent of the minimum contribution base that corresponds to their sector of activity. The amount is increased by 20 per cent for large families, and reduced to 40 per cent in case of other eligible household members. Social security contributions are covered by the government for these months.
In Germany, the government announced an extraordinary cash benefit for self-employed workers and businesses for the month of November. The subsidy will cover up to 75 per cent of the expected sales in November.
Introduced in March, France provided access to a solidarity fund for the self-employed, including artists, and for small businesses in the most hard-hit sectors. Originally accessible only to businesses with up to 10 employees and with revenues under one million euros in the last fiscal year, access to this monthly benefit was extended to businesses with 20, and finally 50 employees. Initially, the cash benefit was for those with an expected loss of income of at least 70 per cent. The threshold was lowered to 50 per cent effective October, and coverage was extended to further businesses affected. For businesses or the self-employed who are at risk of bankruptcy, the fund can supplement with another cash benefit of up to 5,000 euro (EUR).
In the UK, the Self-Employment Income Support Scheme (SEISS) has been extended to provide two more payments to cover the periods from November 2020 to January 2021 (first payment) and February to April 2021 (second payment). Paired up with the extension, the government also announced the increase in the replacement rate, from 40 per cent to 80 per cent of average monthly profits.
Since participation in an unemployment insurance fund is voluntary in Denmark, the government encouraged the self-employed to join through relaxed conditions to access the benefit. If they paid 12 months of membership fees retrospectively, and committed to remain as members for another 12 months, then they would have immediate access to unemployment insurance.
The analysis of social security measures to maintain employment and support the self-employed as well as previous ISSA articles on the matter demonstrate a unique feature of the COVID-19 crisis that is extremely difficult to manage for governments and social security institutions: uncertainty.
Following a bold emergency response during the months of March to June and a gradual exit strategy for special measures formulated and implemented cautiously during the months of July to September, the second wave of COVID-19 infections required the re-introduction, generalization and extension of employment protection measures and special support for the self-employed.
At the same time, the increasingly prolonged receipt of typically short-term benefits and efforts to enhance employability in a context of uncertainty has led to adaptations of the schemes in place. The increased focus on re-skilling of workers in short-term work is just one example of this development.
Finally, even as countries want to sooner rather than later be able to control the immediate health crisis, the impact of the crisis on the labour market is expected to persist. In addition, the economic recovery will likely accelerate the trend to a digital economy and the related labour-market transformations. Balancing concerns about the financial sustainability of programmes with the aim to respond to labour-market needs, the gradual phasing out of special measures and their transitioning to regular programmes will be a challenge for 2021 and beyond.
In this process, it is essential that the positive lessons of the crisis response be taken into account to achieve a long-term strengthening of the coverage of the self-employed, the support for atypical workers and a better coordination of different schemes.
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