What is an ERTE: how it works, who can apply it, and what the worker earns

An ERTE is a temporary employment regulation file, the procedure that allows a company to suspend its employees' contracts or reduce their hours for a specified period when there are economic, technical, organisational, production or force majeure reasons. During this period, workers do not provide services, or do so to a lesser extent, but the employment relationship remains intact and the company does not have to pay severance for dismissal. What an ERTE is has been one of the most common questions among employers, self-employed individuals, and employees since the pandemic, when this mechanism became the main cushion for thousands of Spanish companies that needed to retain their workforce without being able to sustain normal activity.

How an ERTE works

The key to the ERTE is its temporary nature. The company commits to recovering activity and reintegrating workers when the situation allows. It can affect the entire workforce or just a part, specific departments or certain shifts, and can be applied in two ways: as a total suspension of contracts, where the employee stops working for the agreed period, or as a reduction of hours, where the person works fewer hours and receives a salary proportional to the hours actually worked.

It is important to distinguish it from other figures. An ERTE is not equivalent to a dismissal, because the contract is not terminated, nor is it a medical leave or voluntary leave, because it does not arise from a personal decision of the worker. It is also not a pre-retirement. It is a collective measure that the company adopts for reasons beyond the will of its employees and is regulated in the Workers' Statute, specifically in Article 47.

Causes that justify it

The law allows for an ERTE to be presented when the company is experiencing economic difficulties, such as losses or a drop in income, or when it introduces technical changes in its equipment or production processes. It is also accepted for organisational reasons, such as internal restructuring, and for production causes, for example, a lack of orders or the accumulation of stock that forces work lines to stop. These four causes are known as ETOP in labour jargon.

There is also the ERTE for force majeure, which is activated when an extraordinary and unpredictable event prevents activity. A fire, a flood, or a natural disaster that renders the premises unusable are common examples. In this case, the company must prove that the cause is real and unavoidable, and it is the labour authority that decides on the application.

What the worker earns during an ERTE

While the suspension or reduction of hours lasts, the affected person can receive unemployment benefits managed by the SEPE. The amount is calculated based on the worker's regulatory base and generally amounts to 70% during the first 180 days of benefits and 50% thereafter. In cases of reduced hours, the salary is reduced in proportion to the hours not worked, and the benefit compensates part of that loss.

Additionally, the company benefits from exemptions on Social Security contributions while keeping the workforce in ERTE. The percentage of exemption depends on the size of the company and the reason justifying the file, and is usually higher in SMEs. This advantage is one of the reasons why many companies opt for this figure instead of collective dismissal.

Steps the company must follow

To apply for an ERTE, the company follows a procedure with several phases that are important to know:

1. Document the alleged cause, with accounting, production or market data that supports it.
2. Open a consultation period with the legal representation of the workers, or with a union committee if there is no committee. This phase cannot last more than fifteen days in companies with fewer than fifty workers, nor more than thirty in the rest.
3. Reach an agreement with the representation of the workforce. If there is no agreement, the company can make the decision, but must communicate it to the labour authority, which in cases of force majeure is the one who resolves.
4. Submit the application for benefits and inform the affected parties to the SEPE, so that employees can receive payment from the first day of suspension.

The Labour and Social Security Inspectorate can review the file at any time. If it detects that the cause is not real or that the procedures have not been followed, it can demand the withdrawal of the measure and reclaim any amounts unduly received.

What an affected worker should consider

The employee does not need to accept an ERTE alone. The decision goes through the consultation period and negotiation with their representatives, so it is useful to find out which committee or union is involved in the process. It is also advisable to check that the start date, duration, and percentage of impact are written down in the company's communication, and to ask for clarifications if something does not add up.

An ERTE has a duration agreed upon or established in the resolution, and the company must reintegrate the workforce when that period ends or when activity recovers. If the company decides to extend it, it will have to start the procedure again, with the corresponding consultation period. For those working in an SME or self-employed with staff in charge, knowing how this figure works allows for anticipating the impact on payroll and better planning for the following weeks.