You Can Lay off Staff, Cape Verde Govt Tells Public Companies

The deputy prime minister of Cape Verde said today that public companies affected by the crisis caused by the covid-19 pandemic will be able to resort to lay-offs, which will be
extended until September 30, but only with the authorisation of the government.

Presenting in parliament today the proposal with the fourth amendment to the law that instituted the simplified regime of suspension of the labour contract in Cabo Verde, launched
in April 2020 to mitigate the consequences of the economic crisis, providing for the payment
of 70 percent of wages to workers, Olavo Correia recalled that public companies could already resort to this mechanism, but that the government instructed them not to use it.

“Public companies can already currently resort to ‘lay-offs’ under the law. We are the ones preventing public companies from doing that,” he said.

The minister explained that in the new amendment presented today, which should be voted on in this parliamentary session that ends on Friday, a “clarification” is made, allowing public
companies that show losses of more than 70%, compared to 2019, to access the ‘lay-off’, but only when duly authorised by the supervisor.

“There is no point in creating panic on top of the crisis we are already experiencing,” said Olavo Correia, after being questioned by opposition MPs about the possible extension of ‘lay￾off’ to civil servants – which the ruler denied -, guaranteeing that what is being done is “a clarification in the law”.

“The country is experiencing today simply its biggest economic, financial and budgetary crisis in its history.

Since Cape Verde’s independence, the country has never been faced with an
economic, social, financial and budgetary situation of the magnitude we are facing today,” said Correia, who is also Finance Minister.

He also announced that the government will commission an independent study on how this simplified labour contract suspension scheme has been applied since April 2020, to detect possible non-compliances, also covering the sustainability of Cape Verdean social security, which through the National Institute of Social Security (INPS) is funding the lay-offs, stressing
that access to this scheme is “increasingly restrictive.

“At this moment, the Government is awaiting the study,” he said, when confronted with the possibility of companies being called to return funds that were allocated or used incorrectly.

Correia recalled that Cabo Verde had an unemployment rate of 14.5 percent in 2020, when the forecast, due to the impact of the crisis caused by covid-19, was for that rate to double, to around 20 percent.

“This instrument [‘lay-off’] had a great impact on mitigating the growth of unemployment in Cape Verde,” acknowledged Olavo Correia.

Cape Verde recorded an economic recession of 14.8 percent in 2020, due to the almost total absence of tourism, due to the limitations imposed by the covid-19 pandemic. During the speech in parliament, the governor acknowledged that the “economic recovery is still uncertain and will be slow,” despite the “light” transmitted by the global vaccination.

This new extension of the measure – the previous period ended on 30 June – only changes from the previous one, besides the deadline (until 30 September), its “scope”, now covering
public companies or institutions, whose adhesion to the ‘lay-off’ regime depends on the authorisation of the government.
It also covers private companies in the tourism sector, related activities, events and exporting
industries and services.

According to the April INPS report, a total of 4,857 workers — 2,503 of whom were women –had their work contracts suspended, a measure approved to mitigate the consequences of
the pandemic, a new monthly drop from 5,538 in March.

This is the lowest monthly record since the beginning of the pandemic, and compared to the peak of 16,034 workers on ‘lay-off’ in May last year, a month after the measure was approved.

According to the legislation that regulated this measure, the fourth period of the simplified
regime of suspension of the labour contract, which began on January 1, 2021, maintained the payment of 70% of the gross salary to workers, but decreased the burden on companies from 35% to 25% of that total.

With this government measure, payment was guaranteed from April 2020 until December 31 in equal parts (35% of income) by the employer and the State, through INPS, which manages workers’ pensions and contributions.

In addition, companies continue to be able to resort to partial work of employees placed on ‘lay-off’, with access “proportional and adapted to the type of contract”.

Meanwhile, the government approved a fifth three-month period of ‘lay-off’ in Cabo Verde, which was in force until 30 June, covering companies with falls in turnover of over 70 percent,
but compared to 2019, due to the effects of the covid-19 pandemic.

The measure is provided for in the new amendment to the law that instituted, from April 2020, in Cabo Verde, the simplified regime of suspension of the employment contract under
the covid-19 pandemic.

It defines that private companies and workers in the tourism sector and related activities,
events, industries and exporting services can access this support, “aimed at maintaining jobs
and mitigating business crisis situations.