Icelandic companies that have suffered substantial revenue losses due to the COVID-19 crisis will be given the opportunity to apply for government support to pay a portion of salary costs during the employee notice period, protecting workers’ rights and preventing a wave of corporate insolvencies. Support which allows workers to go part-time and receive top up payments from the government will be extended until the autumn, with amendments, and simpler rules on financial restructuring of businesses will be adopted enabling firms to seek protection easily.
The Government has approved three proposals in support of employees and companies. The aim of the proposals is to mitigate the damage caused by mass lay-offs and mass insolvencies, thereby protecting workers’ rights while fostering greater resilience in the economy as a whole.
- The option for full time workers to move to part-time with government support will be extended to 31 August, from its original finish date on 1 June. The livelihoods of tens of thousands of employees have been protected since this support measure took effect, but the economic outlook has changed markedly in the month or so. The part-time option allows employees to reduce their hours or salary to as low as 25%, or 50% from July onwards, and top up their earnings with support from the Government. An application must be filed for an extension, and the requirements for participation will be reviewed.
- Simpler rules on financial restructuring of companies will be temporarily put in place. The new rules will incorporate the basic elements of the current rules, with amendments aimed to simplify the process of seeking protection for companies while an assessment is made of their position, and until the outlook for the future is clarified. The amendments cover factors such as the requirements for financial restructuring, requests for restructuring and consideration of applications, deadlines, authorisations for measures, counterparties’ authorisations for cancellation, and non-performance clauses.
- In order to protect workers’ rights and avoid insolvencies, companies will be given the opportunity to apply for government support to pay a portion of salary costs for any staff member during their notice period. This support will take the form of payment up to ISK 633,000 per month for up to three months, plus vacation pay. It is limited to those companies that have suffered at least a 75% loss in revenue and are forecasting continued revenue losses at least through 2020. An estimated quarter of Icelandic companies are anticipated to be eligible for this support.Government support will be capped at a ratio of 85%. These employees will have priority access to jobs when business activities resume, and will retain certain specified accrued rights from that employer. Further measures will be put in place to assess or protect operational viability, participation in this measure, and right of recourse for the employees. This government support will be available from 1 May through 30 September.
Legislative bills on the proposals are being drafted by the Ministry of Social Affairs, Ministry of Finance and Economic Affairs, and Ministry of Justice, and relevant stakeholders will be consulted concerning the final structure of the programmes.