How Does The “Kurzarbeit” Program Work in Romania?

The Romanian Government has recently adopted through an Emergency Ordinance an adapted short-time work scheme intended to keep businesses and jobs afloat.

With the pandemic causing extraordinary economic pain, many European countries have adopted own versions of the so-called German system “Kurzarbeit”, translated as “short-time work”. This state-founded safety net is intended to lower unemployment risks and comes as a support for local companies, being considered a mechanism that deals with transitory shocks.

Designed as an insurance against labor market risks, this mechanism can be defined as a unilateral temporary reduction of the working time, as set in each individual employment contract, which intends to maintain an existing labor relationship.

How does Kurzarbeit work?

From a practical point of view, the newly adopted regulation allows businesses facing a temporary and unavoidable shortfall of orders to lower the working hours of their employees no more than 50% of the fixed working hours as negotiated and covered by the employment contract, this being applicable for different working schemes, including shift working or unequal working hours programs. In this manner, solely the employer’s decision can modify the already fixed contractual terms, but such decision might only be applied for at least 5 consecutive working days and must also fix the working program for the entire month.

What procedures must employers follow?

Before adopting such measures, employers must comply with a set of compulsory rules, therefore employers must inform and consult with the employees’ union/the employees’ representatives or the employees themselves, as the case may be, prior to the communication of the decision that adopts such measures.

However, the employers’ decision must be notified to the employees at least 5 days before its effective enforcement and the submission of such change within employees’ general registry must be noted at least one day prior to its applicability.

What employees and employers need to know

During the short-time work scheme, employees benefit from a partial compensation for the loss of earnings by the temporary cut in working hours, the allowance being equal to 75% of the difference between the gross salary stated in the employment contract and the net salary related to the actual worked hours. The employer is responsible to pay this allowance and must apply afterwards to get reimbursed by the state from the unemployment insurance budget. Recovering these amounts from government funds is permitted only if (i) at least 10% of its workforce have their working hours cut and (ii) the company’s turnover has decreased significantly.

While the government struggles with the economic fallout of the coronavirus pandemic, this measure could be considered as a regional effort to support both employees and employers, which encourages retention of well-trained workforce allowing a quicker economic recovery.