Background information

Royal Decree-Law 4/2022, of 15 March, approves the procedure and the constitution of the RED Fund for the application of Temporary Redundancy Proceedings (ERTE); this deploys article 47 bis of the Workers' Statute, the result of the agreement on labour reform. The measure aims to allow companies belonging to sectors that have undergone structural and permanent changes to adopt transition and retraining measures. In this way, companies are encouraged to use flexibility to overcome situations of structural difficulty, derived from changes that are expressly described as permanent, and not to take measures based on the dismissal of workers.

The RED Fund has also been approved to meet the budgetary needs of this mechanism.

At the same time, in March 2022 the RED Mechanism was activated (in practice) for the travel agencies sector. Royal Decree 608/2023 of 11 July, implements the RED Employment Flexibility and Stabilisation Mechanism.

Content of measure

The RED Mechanism is a measure of flexibility and stabilisation of employment and is activated by the Council of Ministers for a sector of the economy or for a specific time cycle. In other words, this type of ERTE (Temporary Redundancy Proceeding) can have a cyclical or sectoral dimension, and must be activated by the Council of Ministers, after informing the most representative organisations.

Therefore, two types of ERTE RED are established: cyclical, which will provide companies with a stable framework in the event of a temporary or cyclical fall in demand due to macroeconomic causes, in order to avoid immediate dismissals following the 'shock', and sectoral, which will provide support for the retraining of workers in companies and sectors in transition that require permanent changes.

In the case of cyclical REDs, firms will be able to suspend part of their workforce for up to one year instead of laying them off. During this period of suspension, incentives will be provided for the training of workers, and exemptions from social security contributions are established.

With regard to sectoral REDs, these will have to be accompanied by a retraining plan. To avoid traditional employment adjustment, the company can activate this mechanism for a maximum period of one year (six months, with the possibility of extending for a further six months), and facilitate the transfer of its workers to another company by means of their retraining. To this end, the host company will also receive a 50% bonus for six months.

This new regulation, which is the result of the labour reform agreed with the social partners, implements new internal flexibility mechanisms in companies to avoid redundancies, revising the current ERTE (Temporary Redundancy Proceeding) model.

The measures that can be authorised to the company are the temporary suspension of the work contract or the reduction of the working day of the workers.

During these measures, workers will receive social protection.

During the application of the RED Mechanism, each worker may only be affected by a reduction in working time or a suspension of his/her contract (it is not possible to apply both at the same time).

To start the process, the company must send a request to the corresponding labour authority, as well as inform the legal representation of the workers. The company's management must inform the workers or their representatives of its intention to initiate the RED Mechanism process. Once the workers' representative committee has been set up (or once the deadline for this has passed), the company will send the notification of the start of the consultation period.

In the case of the sectoral mechanism, the company must present a retraining plan for the people affected (training actions).

On the other hand, it must be added that in March 2022 the Spanish Government activated (in practice) the RED Mechanism for the travel agencies sector exclusively (as it was particularly affected during the pandemic, and had not recovered). In December 2022 there were 933 workers affected by this scheme.

Finally, Royal Decree 608/2023 of 11 July, which implements the RED Mechanism, establishes the exemptions from Social Security contributions that companies will be able to take advantage of in both modalities, once the RED Mechanism is activated (which allows companies to apply for measures to reduce working hours and suspend employment contracts):

In the cyclical modality, during the first four months, companies will be able to benefit from a 60% exemption on contributions; 30% between the fifth and eighth month, and 20% from the ninth month onwards.

In the sectoral modality, there will be a 40% exemption conditional on the implementation of training activities.

Use of measure

In March 2022, the Spanish Government activated (in practice) the RED Mechanism for the travel agencies sector exclusively. In December 2022 there were 933 workers affected by this scheme. ( Statistical data from Social Security Databases, 2024 ).

Target groups

Workers	Businesses	Citizens
Applies to all workers	Applies to all businesses	Does not apply to citizens

Actors and funding

Actors	Funding
National government Social partners jointly	National funds

Social partners

Social partners' role in designing the measure and form of involvement:

	Trade unions	Employers' organisations
Role	Agreed (outcome) incl. social partner initiative	Agreed (outcome) incl. social partner initiative
Form	Consultation through tripartite or bipartite social dialogue bodies	Consultation through tripartite or bipartite social dialogue bodies

Social partners' role in the implementation, monitoring and assessment phase:

• Social partners jointly
• Main level of involvement: Peak or cross-sectoral level

Involvement

In December 2021, the Government, the trade unions CCOO (Comisiones Obreras) and UGT (Unión General de Trabajadores) and the employers' organisations CEOE (Confederación Española de Organizaciones Empresariales) and CEPYME (Confederación Española de PYMEs) reached an agreement on the structural reform of the labour market in Spain. As a result of this negotiation and this agreement, the RED mechanism was born, to address cyclical or sectoral crises with negotiated internal flexibility, training and retraining of workers, and avoiding dismissals.

Views and reactions

The trade unions UGT and CCOO are very satisfied with the agreement reached in December 2021, after more than nine months of negotiations (since March 2021), which includes internal flexibility measures as alternatives to dismissals, through the RED Mechanism. This mechanism reduces redundancies by enabling temporary working time adjustment formulas. Business representatives (CEOE and CEPYME) are also satisfied with this mechanism, especially because of the discounts on social security contributions included for companies.

Sources

• 15 March 2022: Real Decreto-ley 4/2022, de 15 de marzo (www.boe.es)
• 31 October 2022: Information on the PES website (www.sepe.es)