Update of social security business benefits applicable in the COVID-19 crisis: new exemptions scheme

After approval of Royal Decree-Law 18/2020 on May 12, the instruments available to companies to reduce their immediate social security cost and minimize the economic impact of the COVID-19 crisis on them have been updated (see our Legal Flash here).

Although the moratorium on social security contributions and debt deferment has been maintained, the latest reform has introduced significant developments in the contributions exemption system for workers affected by a temporary redundancy plan (ERTE) due to force majeure. During the phased de-escalation process launched by the government, this development seeks to encourage bringing workers affected by these temporary redundancy plans back to work.

Following Royal Decree-Law 18/2020, social security benefits that companies can apply in view of the COVID-19 crisis have, therefore, been defined as follows:

1. Exemption from social security contributions for workers affected by temporary redundancy plans due to force majeure as a result of the COVID-19 crisis

Based on the contributions exemption regime introduced in Royal Decree-Law 8/2020 for workers affected by an ERTE due to force majeure as a result of COVID-19, Royal Decree-Law 18/2020 adds two issues in relation to this benefit:

• This exemption will be limited to May and June 2020; and

• The contributions exemption applies to workers whose contracts remain suspended as a result of the force majeure resulting from COVID-19 and to those getting back to work from the ERTE due to force majeure resulting from the health crisis, during May and June. This is based on the distinction also included in this Royal Decree-Law between a total temporary redundancy plan due to force majeure and a partial temporary redundancy plan due to force majeure.

The social security contributions exemption has been put together in the following terms after approval of Royal Decree-Law 18/2020:

• Scope of application of the exemption: companies with active total temporary redundancy plans due to force majeure may apply an exemption of the business social security contribution and the joint collection items for May and June 2020 with regard to the affected workers, in the same percentages as up to now:
  
  • 100% if the company had fewer than 50 workers on February 29, 2020.
    
  • 75% for other companies.
    
    As companies currently applying partial temporary redundancy plans due to force majeure start to bring workers back to restore their activity during the de-escalation process, they may apply the following exemptions on business social security contributions and joint collection items for May and June 2020:
    
  • For returning workers: if the company had fewer than 50 workers on February 29, 2020: 85% for May and 70% for June. For other companies, 60% for May and 45% for June.
    
  • For workers whose contracts remain entirely suspended: if the company had fewer than 50 workers on February 29, 2020: 60% for May and 45% for June. For other companies, 45% for May and 30% for June.

• Application: this exemption will be applied after a sworn statement from the company on whether its cause of force majeure remains total or is now partial, and it must be applied for by reporting the corresponding keys through the RED system.

• Job preservation commitment: this contribution exemption will still require the commitment to maintain jobs in the six months following the resumption of activity (even if it is partial), under Additional Provision 6 of Royal Decree-Law 8/2020.

• Incompatibility: the moratorium on social security contributions, envisaged in article 34 of Royal Decree-Law 11/2020, remains incompatible

2. Moratoria en el pago de las cuotas y aplazamiento en las deudas de Seguridad Social

Regarding the moratorium on social security contributions and  the special system for deferring social security debts, envisaged in articles 34 and 35 of Royal Decree-Law 11/2020, the terms applicable up to now remain in effect:

• Moratorium on social security contributions under article 34 of Royal Decree-Law 11/2020
  
  • Scope of application of the moratorium: this six-month interest-free moratorium will apply to business social security contributions and joint collection items accrued between April and June 2020.
    
    However, only companies whose activity has not been suspended by the declaration of the state of emergency under Royal Decree 463/2020 and are in one of the 12 specific sectors of activity, such as retail (not affected by the state of emergency) or farming activities, all defined in Ministerial Order ISM/371/2020, of April 24, will be entitled to the moratorium..
    
  • Incompatibilities: this measure will also remain incompatible with the exemption from social security contributions under a temporary redundancy plan due to force majeure as a result of COVID-19, and with the deferment of social security debts envisaged in article 35 of Royal Decree-Law 11/2000. 
    
  • Application: companies must expressly apply for this measure individually for each contribution account code within the first 10 calendar days of the contributions’ regulatory periods for which the moratorium is requested. In other words, with regard to the contributions for which this benefit can still be applied for, that application would have to be made in the first 10 calendar days of June (for the May contribution) and the first 10 days of July (for the June contribution).  

• Deferment of payment of social security debts under article 34 of Royal Decree-Law 11/2020
  
  • Scope of application of the deferment: Companies with no other current social security deferment may apply to defer social security debts payable in April, May, and June 2020; 0.5% interest will be applied to the deferred amounts (instead of the current default interest rate of 3.75%). They must also secure the payment (with a guarantee, for example) above certain amounts.
    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: in addition to the requirement not to have any other social security deferment in effect, this measure will be incompatible with the moratorium on social contributions.
    
  • Application: companies must also apply for this deferment within the first 10 calendar days of each of the regulatory periods for paying the debts to which the deferment refers. Therefore, today, it would only be possible to apply for this deferment with regard to the contributions payable in June, in which case they must be applied for in the first 10 days of that month.