Government approves measures to promote job stability in Spain
Published on 28th Jul 2023
RED Mechanism is aimed at preventing job losses in adverse economic situations
The RED Mechanism, which is developed in Royal Decree 608/2023, of 11 July, allows companies to adopt measures to reduce working hours and suspend employment contracts when exceptional situations of a macroeconomic, cyclical or sectoral nature arise, which require measures to adjust the level of employment. The activation of the RED Mechanism requires the agreement of the Council of Ministers, and its duration is limited.
Company and employee guarantees
During the application of the RED Mechanism, affected employees will be able to access a benefit of up to 70% of their salary, without the need to fulfil any prerequisites and maintaining their contributions.
For companies, there are bonuses on social security contributions, as well as exemption from the payment of wages for the duration of the suspension.
Limitations on companies
Companies using the RED Mechanism will be subject to strict control by the Labour and Social Security Inspectorate, and must respect the following limitations;
- During the application of the RED Mechanism, they may not work overtime or hire new staff (except for training contracts, subject to certain requirements). In addition, companies must carry out training actions aimed at improving the professional skills of the affected employees and promoting their employability.
- After the termination of the RED Mechanism, companies may not lay off employees for six months after the end of the RED Mechanism implementation period.
Failure to comply with these restrictions will result in the repayment of all benefits received by each worker concerned. In addition, the regulations require that, in the event that the company closes one or more workplaces (when this entails the definitive cessation of activity and the dismissal of 50 or more employees), it must notify the competent labour authority at the Ministry of Labour and Social Economy, through the Directorate General of Labour, six months prior to the notification of the start of the consultation period.
