31 March 2020
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The important link between the State and employers in the struggle against the Covid-19 pandemic

The outbreak of the COVID-19 pandemic pushed authorities to take measures to protect public health.  These measures have a growing impact on business activities in all countries affected by the coronavirus.  Furthermore, these measures caused employers to take multiple steps in order to maintain their business continuity. Because of these extraordinary circumstances, massive layoffs and other negative consequences on employees are surely to be expected. Despite all the efforts of the countries to boost their economies, it will be the employees who will be the most affected by the current situation. Thus, employees will suffer both from the pandemic’s potential effect on their health as well as from the economic uncertainty the pandemic caused.


The position of the employees in the state of emergency


Remote work/work from home

In line with state measures, some employers decided that their employees should temporarily replace their business premises with their homes. This change is possible if the tasks listed in their job descriptions can be fulfilled in an undisturbed manner outside the employer’s premises (see our article State of emergency and remote work of employees). Due to the state decisions made during the state of emergency, employers can just announce a resolution and allow an employee to work from home. Employees’ rights and obligations basically do not change due to this. This means that their base salary, working hours schedule, overtime work, rescheduling of working hours, night-time work, rest periods and leaves remain unchanged. Thus, everything stays the same, apart from the fact that employees do not need to come to the work premises, but can stay at home and do their jobs.


Harmonized work

The Decree on Organizing the Activity of Employers during the State of Emergency regulates what employers whose company’s nature of work does not allow them to organize work outside of their premises (remote work/work from home) are supposed to do during the state of emergency. These employers, need to harmonize their business activities with the conditions due to which the state of emergency is put in force (i.e. the pandemic), and conditions prescribed in this decree.


Unpaid leave

An employer may grant an employee leave without salary compensation, but only at the employee’s own request. Employers cannot request that employees take unpaid leave, nor can they place their employees on unpaid leave. For the duration of unpaid leave, the employee’s rights and duties relating to their employment relationship remain unchanged.


Paid leave in the state of emergency

During an interruption of work, i.e. reduction of volume of work caused by the state of emergency (i.e. the one that occurred without the employee’s fault), an employee is entitled to a salary compensation for the maximum of 45 workdays in a calendar year. The salary compensation is to amount to at least 60% of the average salary received in the 12 months preceding the decision, on condition that it may not be lower than the minimum salary. Therefore, an employer may direct an employee to a leave of absence for a period of 45 workdays, and after that period, it is necessary for the employer to file an application and obtain consent from the Minister in charge of the labor affairs (the Ministry of Labor, Employment, Veteran and Social affairs – the “Ministry”) if they want an extension. Considering that many employers, due to the pandemic and the current situation in the market, will send employees on paid leave as soon as possible, the Government adopted the Ministry’s proposal which consents to employers being able to place employees on paid leave exceeding 45 working days without the need for the employer to ask for an opinion from the trade union representative, before asking for an extension from the Ministry. This shortens the prescribed procedure of directing employees on paid leave exceeding 45 working days and reduces uncertainty until the final decision is adopted. The Ministry will electronically send their extension decision to employers, based on their justified application and electronically submitted documentation. The extension decision will be valid until the state of emergency is lifted.  Consequently, all employers who stopped work and directed their employees on paid leave will have the possibility to extend the paid leave until the state of emergency is lifted, without obtaining the opinion of the trade union representative.


Employee redundancy

In these extraordinary circumstances, it is very difficult to say how much liquidity there is in the Serbian economy to handle the pressure caused by the pandemic and the collapse of markets worldwide. In the past, the American JP Morgan Chase Institute estimated that the US small businesses have 27 days’ worth of cash reserves and that a quarter of businesses have reserves for less than two weeks. In Serbia, these cash reserves are likely to be much lower. Thus employers who face lack of liquidity and whose businesses suffered major losses due to the COVID-19 pandemic might make some drastic moves, including making their employees redundant. In our opinion, making employees redundant before losses actually manifest in the company’s business results would be against the law. (see our article Changes in employer’s business results with regard to the impact of COVID-19).  In case of redundancy, those who have been laid off, and who have been insured for at least 12 months without interruption or 18 months with interruptions, are entitled to unemployment benefits. If such a scenario of mass redundancies is to be avoided, the state should introduce a package of economic measures as soon as possible. One of the measures should concern taxes and contribution. Some expect that measures will go in that direction, predicting that if the state does not waive taxes and contributions during the state of emergency, there will be 200,000 – 300,000 people without any income to which the state will be obliged to pay welfare benefits. Because of this, companies, and above all small and micro enterprises and entrepreneurs, are now looking to see if the state will put forward some measures of assistance or if they should just close their businesses.


Announced measures in Serbia

One of the Government’s main measures to save the Serbian economy should include tangible financial assistance to the private sector workers in Serbia. It is expected that the state will pay RSD 30,000 per employee for micro and small enterprises and entrepreneurs over three months, while for medium and large enterprises the amount of aid will be RSD 15,000.  This means that the state will pay the minimum wage for all employees in all companies for the next three months. This measure is expected to be applied regardless if the companies were operational and paid salaries to their workers. It is also expected that the payment of taxes and contributions will be delayed for a period of three months, and will be deferred to be paid from next year, in 24 installments. Payment of corporate and property taxes should also be postponed, and the plan is to postpone the payment of income tax advance payments in the second quarter and to postpone the payment of property taxes for April, May and June, for legal persons and entrepreneurs. The government is also expected to provide favorable liquidity loans, with the interest rate around 3.5%, guaranteeing up to 80% of repayment, and with the grace period of 12 months. The condition for all these measures, as announced, will be that employers do not lay off more than 10% of their workforce, as of the declaration of the state of emergency.  Experts expect that these measures will include, among other things, a moratorium on dividend payments until the end of the year, except for public companies, as well as measures aimed at stimulation of domestic demand.  Furthermore, there are rumors that all citizens could be helped with a one-time payment of EUR 100, which would increase spending. Overall the monetary value of all measures targeted at the private sector is expected to around € 5 billion.


A detailed set of measures to support the economy and citizens and address the crisis caused by the global coronavirus pandemic will be presented on March 31, 2020.


For more information, please contact us via covid19@geciclaw.com.