COVID-19: Employment Retention Measures – Lessons from Other Countries

by Mariyam Naufa

The devastating effects of the COVID-19 pandemic on the global labour market is expected to be far-reaching and unprecedented. Massive losses are already expected across several high-risk sectors including accommodation and food services, real estate, manufacturing, wholesale and retail.¹ The International Labour Organization (ILO) has called upon countries to move fast and decisively since it is the right and urgent measures that will make a difference between survival and collapse of the labour markets following the pandemic.²

It, therefore, begs the question of what measures can be implemented at a policy level that can mitigate the effects of COVID-19 on the Maldivian labour market. To this effect, this article will explore in detail decisive measures introduced and implemented by governments worldwide to help businesses to retain their employees.

 
The Need for Employment Retention Measures

The Employment Act³ ssets out the fundamental principles relating to employment law of the Maldives. The latest amendment to the Act was brought about in the year 2016. While the Act can be commended for many things, the Act is silent on key employment issues that require precise guidance in law such as redundancies, lay-offs and short-time working arrangements. The commonplace view therefore is that the Act and regulations made pursuant to it are far from being sufficient to provide any adequate relief to employees and enterprises to protect livelihoods and business continuity by retaining employees during the pandemic situation.

As of 1 April 2020, the estimates of the ILO show that in the second quarter of 2020, the pandemic is expected to cut 6.7 per cent of working hours globally – equivalent to 195 million full-time workers.⁴ Despite the lack of adequate legal avenues to turn and despite the warnings of experts, to this date, no selective and specific measure to support businesses to retain employees in their jobs has been introduced in the Maldives.

Employment Retention Measures Introduced by Other Nations

Owing to the projections of devastating effects on labour markets, governments worldwide have introduced and implemented numerous legislative and regulatory measures specifically designed to ameliorate the pernicious effects of the pandemic on their labour markets by helping businesses to retain their employees. Broadly speaking, legislative and regulatory measures introduced by governments fall into three main categories:

• Temporary Bans of Dismissals
• Flexible Working Hours and Leaves
• Financial Support to Retain Employees

Temporary Bans of Dismissals

In the wake of the COVID-19 outbreak, few countries have implemented measures to prevent or restrict employers from implementing cost-cutting measures that may adversely affect the rights of employees. Such preventive measures usually are in the form of temporary bans on terminations of employment agreements.

In India, the Ministry of Labour & Employment on 20 March 2020, issued an advisory recommending private and public sector employers to refrain from terminating the contracts of their employees and deducting wages.⁵ On 17 March 2020, the government of Italy introduced measures by way of a Law Decree (Cure Italy Decree)⁶, and prohibited employers from terminating employment contracts even for redundancy reasons, for 60 days after 17 March 2020. Interestingly, the Spanish government has taken the stand that the economic downturn caused by the outbreak of the COVID-19 is not sufficient to make redundant employees – although businesses can file for temporary lay-offs.⁷ Essentially, this means economical and organisational issues arising out of COVID-19 pandemic will not be considered as “justified reasons” for dismissing employees. This is because, under previously enacted Decree,⁸ COVID-19 related reasons are considered as “temporary causes” which could justify temporary lay-offs but could not justify permanent termination of employment contracts.

Flexible Working Hours and Leaves

Another main category of measures implemented by governments is easing the legal requirements around varying the working hours and leave entitlements of employees. Typically, this is made available in countries through short-time work schemes and programs that allow affected employers to temporarily reduce the hours worked by their employees under the current pandemic situation. Most countries have introduced flexible working hours and leave schemes along with financial support schemes (discussed in detail below) to support businesses to pay their employees for hours not worked by employees.

For instance, owing to the success of the Kurzarbeitergeld scheme during the 2008-2009 financial crisis, the German government has decided to rely on the same scheme this time around as well, but with loosened eligibility criteria.⁹ The scheme allows businesses to send their employees home or reduce the working hours after obtaining the consent of employees. The government then gives businesses money to pay a significant portion of the normal pay of employees – 60% to employees without dependents & 67% to employees with dependents. Ultimately, the scheme is designed to enable employers to maintain the workforce without making the employees redundant.

Interestingly, the Australian government has opted for a sectoral approach and introduced flexibilities around the working hours of employees in the hospitality industry. With the decision delivered by the Fair Work Commission of Australia on 25 March 2020¹⁰, employers in the hospitality industry can now direct their employees to work fewer hours and proportionately reduce the pay of those employees. According to the decision, employers are only required to give notice as much as practically possible when altering the working hours of employees. The decision effectively made it legal for employers in the hospitality industry of Australia to avert the consent requirements and require an employee to work for short-time even where an employee does not agree to be put on short-time work.

Other jurisdictions that have developed some flexibilities leave include the UK¹¹ where employees are allowed to carry for their unutilized holiday for 2 years. Further, owing to the spread of the COVID-19, the UK has eased the availability of Statutory Sick Pay (SSP), and now employees can claim SSP if they have been diagnosed or if they are staying at home because of COVID-19. Further, arrangements have been made via an online portal for employees that have been advised to stay at home to obtain an ‘isolation note’– this replaces the usual need to provide ‘sick note’ after 7 days of sickness absence.

Most recently, at a regional level, the European Commission has announced to introduce a new financial assistance scheme – Support to mitigate Unemployment Risks in an Emergency (SURE).¹² Under the scheme, the European Union will be providing financial assistance in the form of loans to Member States to help protect jobs and workers affected by the pandemic. Notably, the scheme is specifically designed to help the Member States to cover costs directly related to short-time work schemes.

Financial Support to Retain Employees

In most of the countries, access to these packages are available for a broad group of employers, and the eligibility criteria are rather lenient. For instance, even though priority is likely to be given to businesses whose operations have been severely hit, all UK employers, small or large, charitable or non-profit are eligible to apply¹³ for the Coronavirus Job Retention Scheme (or “Furlough¹⁴ Scheme”) introduced by the UK Government on 20 March 2020. The scheme is a temporary scheme designed to help businesses to furlough employees that are unable to retain their employees because of operations being severely affected by the COVID-19 outbreak. Under the scheme, employers are allowed to furlough employees for a minimum period of three weeks at a time and apply for a grant (not a loan) that covers 80% of their monthly wages, up to £2,500 per month, plus employer’s National Insurance Contributions (NIC) and auto-enrolled pension contributions. Consent of employees is still required for employers to put employees on furlough. In practice, affected employers can furlough all or a group of employees and submit the information of the furloughed employees to the responsible government authority – HMRC, and HMRC will reimburse 80% of the furloughed employees’ wage costs.

However, some countries have also introduced strict eligibility thresholds for businesses to be able to for the packages. Australia, for instance, introduced a USD 130 billion support package with “jobkeeper payment” – a new wage subsidy of 70% of national median wages to businesses that keep jobs of employees.¹⁵ To be eligible to apply for the package, businesses with a turnover of less than USD 1 billion are required to show that they have lost more than 30% and employers with a  turnover of USD 1 billion or more are required to show that there has been at least 50% reduction in turnover.¹⁶

 

Key Observations

An evaluation of the country efforts reveals the focus placed to cover costs directly related to the retention of employees in their jobs. Some countries have even gone as far as explicitly banning dismissals altogether until the lockdowns are lifted and the pandemic ends. Notably, even in countries where there is no explicit ban on dismissals, employers will still be required to establish that redundancies and dismissals made owing to the pandemic situation were also in line with requirements established in employment law. Generally, this means, as in any other situation, employers may be required to consult, discuss, give notice and explore suitable alternatives. In practice, therefore, where an employer dismisses an employee alleging redundancy as a result of the COVID-19 outbreak and if the government has put in place clear alternative options to explore such as job retention schemes or flexible working hours, employers will be required to establish that they at least considered those alternative options before making employees redundant. Irrespective of the distinctive measures introduced and implemented by various governments,  the common thread running through all such measures is the importance placed on expediting legislative and regulatory responses to limit the effects of this global health crisis on employees and workers.

The primary focus of the financial assistance schemes introduced by the government of Maldives is to assist businesses to overcome working capital disruptions arising as a result of the COVID-19 outbreak. As per the Ministry of Finance, businesses that has dismissed Maldivian employees or forced Maldivian employees to opt for no-pay leave will not be eligible for the loan financing scheme introduced through the Bank of Maldives.¹⁷ However, we are yet to see the details of how this will be applied in practice, how effective this would turn out to be or what the implications are if an employer dismisses employees or forces employees to opt for no-pay or reduced pay-leave after the loan financing is secured.

What is clear is that, to incentivise and support businesses to retain their employees, countries worldwide have introduced decisive employment retention measures in the form of job retention schemes to subsidise wages, flexible working hours and leave schemes to cater for the unique needs of businesses and employees during the pandemic with the specified aim of supporting businesses to retain employees. To implement these measures in the Maldives, implementation of coordinated and comprehensive legislative and regulatory responses specifically designed to support businesses to retain employees is required.