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25 May 2020

Lay-offs due to coronavirus

As we are all aware, the times of pandemic emergency state require from each entrepreneur a thorough analysis of financial capacity and a forecast of financial liquidity for the nearest future. The damage made by the COVID-19 crisis to the labor market will most likely be significant and long-term.

Layoffs are seen as the last resort for entrepreneurs who must balance business losses and ensure the survival of the entire company, and thus other jobs not covered by the layoff program.

The reasons for layoffs can not only be the financial problems of the company, but also the inability to perform employee duties due to nationwide quarantine restrictions.

Layoffs due to coronavirus – most important aspects

Layoffs can mean temporal, partial, or full release from the obligation to perform work. In case of temporary layoff, the duty to pay remuneration as well as the worker’s obligation to perform work is suspended for a limited time, specified in the layoff notice.

Regarding sick leave due to sickness, the employee is fully entitled to sick leave and sick benefits (this also applies when an employee has been ordered to self-quarantine by the authorities). The employer is obliged to pay sick pay during this the sick leave or quarantine period – when the layoff period starts, the NAV is obliged to pay.

How to manage layoffs during the pandemic state

First of all, the layoffs should be performed with maintaining the highest standards of empathy and understanding for the situation in which employees find themselves.

Before deciding about the layoffs or permanent reduction of the company’s workforce, make sure to remember to thoroughly consider the following aspects:

  • Are layoffs necessary? Are there other possibilities to maintain the expected level of revenue with unchanged staff?
  • Is there a possibility for the staff shifts within the organization that will increase productivity in the sectors of a company that in particular needs support during a pandemic?
  • Research the possibilities of support and co-financing offered by the government – there may be programs guaranteeing financial support during the coronavirus crisis, ensuring survival provided that the level of employment remains unchanged.

Remember that if you are about to lay off 10 employees, you must notify NAV.

Justifiable reasons for layoffs due to the pandemic

Coronavirus pandemic may provide undisputed reasons for the layoffs. Such concrete reasons may be:

  • Temporary but long-term (or without a specific time frame) closure of the workplace, resulting in the inability to perform work.
  • Complete stagnation in the production or distribution of products due to
    • the factual inability to provide materials or products by the contractor,
    • inability to sell the products due to quarantine prescription or nationwide governmental lockdown o trade outlets.
  • Termination of assignments or complete lack or cancellation of orders made by the customers of contractors;
  • The lockdown in operation for the whole branch/industry due to the governmental emergency provisions.

The governmental special provisions during the pandemic emergency state often affect the entrepreneurs financially due to the lower or nonexistent trade ratios and revenues, but also physically, when, for example, the given workplaces are shut down nationwide with the help of temporary Act.

The layoff decision must be grounded in important reasons and presented to the employee in a form of official notice. Due to the corona situation, the employer will only pay wages for two days after you have laid-off employees (after the notice period).

Layoff notice for NAV

Generally, the employee must be notified about the layoff within 14 days in advance, before the reduction applies. However, in certain situations the notice can be delivered within two working days.

The layoff notice must contain the following information:

  • Reason for laying off employees.
  • The date of notification the employee about the layoff.
  • Starting date and duration of the layoff.
  • The name of the person being laid off.
  • The nature of the layoff (temporary, partial, or full).
  • Information about the agreement with employees (whether they agree for terms of layoff)
  • When the employee started in the company

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