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New ERTE (Temporary Labour Force Adjustment Plan), RED mechanism. How does it work?

The RED mechanism allows companies reducing the working hours or suspending the contracts of their workers with benefits in terms of contributions.

Royal Decree-Law 4/2022 regulates the functioning of the RED mechanism to guarantee employment stability and the transformation of the labour market. It establishes procedures that provide flexibility to companies in difficult situations, with the aim of avoiding dismissals and ensuring the training and recycling of the workers affected.

The RED Fund has been set up to meet the requirements of workers and companies that need to take advantage of the RED Mechanisms. After a transitional regime, the management of this fund will be the responsibility of the SEPE (State Public Employment Service)

What is the RED Procedure?

It is a new type of Temporary Labour Force Adjustment Plan that must be activated by the Council of Ministers. After implementation, the affected companies may voluntarily apply to the labour authority for either a reduction in working hours or the suspension of employment contracts, while the RED Mechanism for that sector is activated. The procedure is subject to the provisions of art. 47 bis of the E.T. (worker’s statute) with benefits in contributions and provisions.

Article 47 bis of the Workers' Statute

"The RED Procedure for Employment Flexibility and Stabilisation is an instrument for employment flexibility and stabilisation which, once activated by the Council of Ministers, will allow companies to apply for measures to reduce working hours and suspend work contracts".

Objective of the RED Procedure

The main target of this procedure is to provide companies with tools that allow them to adjust to situations of crisis or cyclical changes in demand, providing employment stability.

It aims to reduce the high temporary nature of the Spanish labour market.

Modalities of the RED Procedure

The RED Procedure consists of two different modes:

  • Cyclical: which is applied in the event of a general macroeconomic situation that makes it advisable to adopt additional stabilisation measures. It has a maximum duration of one year.

  • Sectoral: it can be applied when there are permanent changes in a certain branch or sectors of activity that generate retraining needs and professional transition processes for workers. This method has an initial duration of one year and two possible extensions of six months each.

These measures pretend to avoid the immediate dismissals that adverse economic, technical, organizational or production reasons could entail.

If you have any doubts about this new method, please contact us without obligation. Our Labour Department will be delighted to help you.

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