Covid-19 pandemic & regulatory and administrative response measures (otherwise how to avoid a “shut down” in the times of “lockdown”)
*What is mentioned in this briefing note is based on what has been announced until 31.3.2020. It will be issued updated from time to time.
I. Introduction
The pandemic related to the global spread of coronavirus dramatically increases the chances of facing the world’s largest recession since 1929. Characteristic is the fact that the organization of the Olympic Games was postponed for the first time since the Second World War. The projected fall in the GDP of post-industrial societies is causing vertigo. This fact alone demonstrates the seriousness of the phenomenon and the global scale of the impact of the disease. Almost all States have taken measures to deal with the transmission of the virus, with a common component of these the – direct or indirect – restriction of the movement of persons combined with the prohibition of the operating of places where the gathering of people is favoured. Inevitably, these arrangements have shaken the economic life and entire sectors of economic activity are facing the spectre of collapse, with the inevitable consequence of shrinking jobs. At the same time, counterparties are invited to meet their contractual commitments, which were concluded based on a different reality.
In this context and in an attempt to deal with these phenomena, the Greek Government has issued Acts of Legislative Content and corresponding Ministerial Decisions, by which introduces even provisions which are first called upon to be implemented.
II. The measures adopted in particular
Following a first interpretative review of the above, the main points to be highlighted are summarized as follows:
1.Businesses which interrupt their operation by a government decision
In this category, it all started for all kinds of shops operating in department stores of mall type, then followed by retail stores while horizontal is the prohibition of the operation of hotel accommodation up to 30.4.2020.
Businesses which face an administrative prohibition of operation may suspend the employment contracts of part or all of their staff, who work for them during the 21.3.2020 and for a continuous irrevocable period of 45 calendar days. Employers have one month to implement the suspension measure, i.e. from 21.3.2020 to 20.4.2020 taking into account the progress of the phenomenon. Fixed-term employment contracts which have not expired until 21.3.2020 may be suspended. At the end of the suspension period, the contract of employment shall continue for the agreed period which falls short after the completion of the period of their suspension.
Private sector employers making use of the above regulation are expressly prohibited from terminating employment contracts for all their staff and, if it is carried out, it shall be invalid. The detailed periodic statements will be submitted by the undertakings, but the insurance contributions will be borne by the State. The Easter 2020 gift becomes due on 30.6.2020 and is borne by the employer only in proportion to the time that the employment contract has not been suspended.
Furthermore, these undertakings are exempted from the obligation to pay 40% of the total rent of their professional establishment for the months of March and April 2020, by way of derogation from the applicable provisions on leases, benefit that applies to all types of leasing contracts too, even to leasing contracts of movable equipment. It goes without saying that the rental companies do not, by means of this regulation, rent adjustment rights according to the articles 288, 388 of the Greek Civil Code. Finally, provision is made for suspension on the payment of tax and insurance liabilities or a 25 % discount in the case of payment in time, excluding expressly VAT and withholding taxes. It is important to note, however, that the above concern undertakings occupied by the government ban and not those that closed one or more stores following a business decision.
2.Enterprises significantly affected under the main Activity Code Number
Following the current rules, businesses that are significantly affected by the pandemic can also make use of these facilities. In accordance with the legislature’s criterion, which has been reasonably criticised, eligibility shall be determined on the basis of the main Activity Code Number of the undertaking. In this view, however, on the basis of a categorization serving statistical purposes, undertakings which are faced with a precipitation of their turnover are excluded, with a typical example of establishments whose aim is to prepare food and drink for consumption, which were prohibited from operating with seated customers, but their activity is allowed at the level of delivery and/or take away. As the pandemic is ongoing, new Activity Code Numbers are added to the affected sectors and more economic sectors are covered.
In such cases, in addition to the above possibility of suspending employment contracts, the new provisions focus on how existing employment contracts are managed, with a view to maintaining jobs. Thus, in the case of part-time contracts, rotating employment and availability, the possibility by law and without pre-procedure of the undertaking to operate with a long-term ‘security personnel’ is added if cumulatively a) occupies (continuously or intermittently) each employee for at least two weeks with a reference period per month and b)includes in this form of business’ operation the 50% of its staff with a reference period per week. Finally, provision is made by law, for the mobility of the worker within the same group of undertakings, of a minor substantial importance in so far as this clause is normally common in employment contracts.
3. Freelancers and individual enterprises
By decision of the Minister of Labour and Social Affairs, measures are provided for the freelancers, self-employed persons, and owners of individual enterprises, concerning the suspension of the time limit for the payment of insurance contributions, arrears to social security institutions, and the abovementioned discount of 25% with the abovementioned restrictions. From 6.4.2020 freelancers, self-employed persons and employers occupying up to 5 employees, who are beneficiaries of EUR 800 will be able to participate in the support measure, in a relevant Form that they will find in “ERGANI”.
4. What is provided for the employees
Employees whose employment contract is suspended, either because of a prohibition on the operation of the undertaking by order of a public authority, or as a result of the application of the above, they are beneficiaries of that exceptional financial aid, as a special-purpose compensation amounting to EUR 800. They are also entitled to a reduction in the rent of their main residence according to the above. The arrangements shall also apply to workers whose employment contract has been terminated either by termination or by voluntary withdrawal from 1.3.2020 to 20.3.2020. Any unpaid leave agreed with undertakings which have been closed by a public authority mandate to employees shall be automatically withdrawn from 28.3.2020. The contracts of these employees shall be suspended and the employees are beneficiaries of the special-purpose compensation.
5. Addressing and managing existing contractual obligations
Counterparties are required to refer to their contractual texts and to consider any clauses which are exculpable to their obligations, in particular as regards force majeure events. In the absence of such provision, the principles of good faith, business practices and the loss of the legal basis may be invoked on a case-by-case basis.
Special mention should be made concerning the time of payment of the securities and in particular the time of appearance of the cheques to be paid to the bank and consequently the obligation to have a sufficient fund. From 30 March 2020 until 31 May 2020, for the Activity Code Numbers of undertakings which have either suspended their activity pursuant to regulatory acts of the Administration, or have been drastically affected, the time limits for the maturity, display and payment of securities is suspended by 75 days from the date indicated on each security. The provisions of the preceding citation shall also apply to undertakings whose Activity Code Numbers are to be included in the abovementioned Decisions in April 2020 from the day following the date of publication of the inclusion of the Activity Code Number Concerned in the affected undertakings.
ΙΙΙ. The three protection frameworks
For the month of March, those undertakings included in the protection framework as affected (i.e. in the Activity Code Numbers announced on 26/3/2020), employees and their owners receive the benefits mentioned above. A prerequisite for the integration of enterprises in the framework of protection is the maintenance of the jobs of all their employees.
For the month of April, more businesses are included in the existing framework (now called Framework 1), while two new protection frameworks covering a wider number of enterprises but providing a smaller range of facilities, are being created.
Especially:
Protection Framework 1
Those companies included at “Framework 1” receive, and also their employees and owners, the following benefits for the month of April. A prerequisite for the integration of enterprises in the framework of protection is the maintenance of the jobs of all their employees.
• For businesses it is possible to suspend until 31/08/2020 the payment of debts from VAT declarations, as well as instalments of certified debts, which are payable to the Public Tax Offices, until 30/4/2020. For instalments of established debts to the tax administration payable in the month of April, a 25% discount is allowed if paid on time. In addition (for April only) it is possible to set off a rate of 25% of the value of VAT (payable in the month of April) which will be paid in full and on time until 30/4/2020, with debts of the same persons who are established or are to be established by the tax administration and which are payable from May onwards. For undertakings which have been included since April, the above applies if the March VAT obligations have been paid.
• Possibility of suspending the payment of insurance contributions (employee’s and employer’s), payable in the month of April, until 31/10/2020 and of instalments of established debts to the Social Security Institution until 31/07/2020. The suspension concerns all the insurance contributions of the employees of the undertaking.
• Especially for companies that have closed under a government order, a 40% discount is granted on the rent for the month of April. For owners who lease properties to these businesses, the deadlines for the payment of established debts to the Public Tax Offices payable until 30/4/2020 with the possibility of a 25% discount, if paid on time, are extended until 31/8/2020. For employees of such undertakings which have been closed by a State order and whose employment contract is temporarily suspended, there is a right of 40% discount on the property they rent, provided that it is a principal residence. Similarly, for the owners of the main residence, the deadlines for the payment of established debts to the Public Tax Offices payable by 31/3/2020 with the possibility of a 25% discount if paid on time, are extended until 31/8/2020.
• Special-purpose compensation of EUR 800 for 45 days and full coverage of insurance contributions, on nominal salary, for employees whose employment contract is temporarily suspended.
• In addition, employees whose employment contract is temporarily suspended, provision is made for the possibility of suspending payment of established April debts to the tax administration for 4 months, with a 25% discount if paid on time.
• Special purpose compensation of EUR 800 for 45 days for freelancers, self-employed and business owners (all legal forms other than S.A.) who occupy up to 5 persons (provided that they have not submitted zero VAT declarations in the last six months). In the case of a company, a unique compensation is paid into the professional bank account of the legal person. For scientists-freelancers, a 30-day distance-training programme is planned, with a remuneration of 600 €.
• For freelanvers, self-employed persons and scientists-freelancers, it is possible to suspend payment until 31/08/2020 of debts from VAT declarations, as well as the instalments of the established debts payable to the Public Tax Offices, until 30/4/2020. For instalments of established debts to the tax administration payable in the month of April, a 25% discount is allowed if paid on time. In addition, it is possible to set off a rate of 25% of the value of VAT (payable in the month of April) which will be paid in full and on time until 30/4/2020, with debts of the same persons established or to be established by the tax administration and payable from May onwards. For freelancers, self-employed and scientists-freelancers who have been enrolled since April, the above applies if the March VAT obligations have been paid.
• Possibility of suspending the payment of insurance contributions for freelancers, self-employed and scientists-freelancers, payable in the month of April, in four monthly instalments starting from 30/09/2020. For the above insurance contributions, a 25% reduction is allowed if paid on time. Also, suspension of instalments of established debts to the Social Security Institution payable in the month of April, until 31/07/2020.
• Undertakings belonging to this framework have the right to extend the payment of the Easter gift until 30 June 2020. For employees who have been temporarily suspended from an employment contract, the percentage of the gift corresponding to the days when the employee is temporarily suspended from his contract will be covered by the State budget.
Protection Framework 2 (framework for industry, wholesale, insurance, audit and stock exchange)
Those companies included in Framework 2 receive the following benefits for the month of April. A prerequisite for the integration of enterprises in the framework of protection is the maintenance of the jobs of all their employees.
• For undertakings it is possible to suspend payment of debts from VAT declarations, until 31/08/2020 as well as of instalments of established debts, payable to the Public Tax Offices, until 30/4/2020. For instalments of established debts to the tax administration payable in the month of April, a 25% discount is allowed if paid on time. In addition, it is possible to set off a rate of 25% of the value of VAT (payable in the month of April) which will be paid in full and on time until 30/4/2020, with debts of the same persons established or to be established by the tax administration and payable from May onwards. For undertakings which have been included since April, the above applies if the March VAT obligations have been paid.
• Special-purpose compensation of EUR 800 for 45 days and full coverage of insurance contributions, on nominal wages, for employees whose employment contract is temporarily suspended.
• In addition, foe the employees whose employment contract is temporarily suspended, provision is made for the possibility of suspending payment of established April debts to the tax administration for 4 months, with the possibility of a 25% reduction if paid on time.
• Special purpose compensation of EUR 800 for 45 days for freelancers, self-employed and business owners (all legal forms other than S.A.) who occupy up to 5 persons (provided that they have not submitted zero VAT declarations in the last six months). In the case of a company, a unique compensation is paid into the professional bank account of the legal person.
• For freelancers, self-employed persons, it is possible to suspend payment of debts from VAT declarations, until 31/08/2020 , as well as of the instalments of the established debts, which are payable to the Public Tax Offices by 30/4/2020. For instalments of established debts to the tax administration payable in the month of April, a 25% discount is allowed if paid on time. In addition, it is possible to set off 25% of the value of VAT (payable in April) which will be paid in full and on time until 30/4/2020, with debts of the same persons which are or are about to be established by the tax administration and which are payable from May onwards. For freelancers, self-employed and scientist-freelancers who have been enrolled since April, the above applies if the March VAT obligations have been paid.
• Undertakings belonging to this framework have the right to extend the payment of the Easter gift until 30 June 2020. For employees who have been temporarily suspended from an employment contract, the percentage of the gift corresponding to the days when the employee is temporarily suspended from his contract will be covered by the State budget.
Protection Framework 3 (framework for energy, petrol stations, waste management and infrastructure projects)
Those companies included in Framework 3 receive the following benefits for the month of April. A prerequisite for the integration of enterprises in the framework of protection is the maintenance of the jobs of all their employees.
• Special-purpose compensation of EUR 800 for 45 days and full coverage of insurance contributions, on the nominal salary, for employees whose employment contract is temporarily suspended.
• In addition, employees whose employment contract is temporarily suspended may be suspended from paying established April debts to the tax administration for 4 months, with the possibility of a 25% reduction if paid on time.
• Special purpose compensation of EUR 800 for 45 days for freelancers, self-employed and business owners (all legal forms other than S.A.) up to 5 persons (provided that they have not submitted zero VAT returns in the last six months). In the case of a company, unique compensation is paid into the professional bank account of the legal person.
• Undertakings belonging to this framework have the right to extend the payment of the Easter gift until 30 June 2020. For employees who have been temporarily suspended from an employment contract, the percentage of the gift corresponding to the days when the employee is temporarily suspended from his contract, it will be covered by the State budget.
IV. Conclusion
In conclusion, there is no doubt that a period of pandemic of historic magnitude, apart from the priceless loss of human lives, has consequences on the economy, the scope of which at this stage is impossible to be predicted. A common understanding between the State, the businesses and the employees is necessary, with the common goal to reduce and share the damage of this adventure. Especially the Greek economy relies on small and medium-sized enterprises that are not impersonal, as possibly a multinational organization and the next day will find employers and employees looking for the restart point. So let’s hope the temporary ‘lock down’ doesn’t turn into a definitive «shut down» and let’s hope it will be limited to time and extent, let’s each one of us take from his post the appropriate information and decisions when the time for resuscitation and the life-saving first deep breath comes.