ILO Policy Brief on COVID-19

Pillar 2: Supporting enterprises, jobs and incomes

Efforts to contain the spread of the virus have disrupted production flows, caused demand for non-essential goods and services to plummet, and forced enterprises around the world to suspend or scale down operations.

Efforts to contain the spread of the virus have disrupted production flows, caused demand for non-essential goods and services to plummet, and forced enterprises around the world to suspend or scale down operations. Small and medium-sized enterprises (SMEs) and own account workers have been those hit hardest.1 The jobs and incomes of millions of workers are at risk. Moreover, the pandemic is bringing to light existing high levels of inequality2  and working poverty and the absence of labour and social protection for many workers, especially those engaged in the informal economy.3 

Rapid and well-designed policy measures to support enterprises, jobs and incomes are essential to contain the economic and social fallout of the pandemic. SMEs play a vital role both in the immediate response to the crisis and in the medium term by propelling a sustainable and resilient recovery. The measures adopted by governments should therefore include immediate support for enterprises in the sectors most affected and for workers and households facing job and income losses. The exact combination of measures will vary depending on national circumstances, including the structure of the economy, existing trends in inequality, and the economic and social policies that are already in place.4

Governments, together with employers’ and workers’ organizations, must act swiftly to support enterprises, jobs and incomes. Most advanced economies, along with many developing economies, have adopted extraordinary measures aimed at helping enterprises to maintain jobs, cushioning households against temporary drops in income, ensuring adequate levels of social protection and stabilizing credit and financial markets.5 Further large scale measures are still necessary, though.

Provide various types of relief, including financial and tax relief, for enterprises

The response to the crisis calls for a strong focus on supporting business continuity6  to save as many jobs as possible and to pave the way towards a smoother and quicker recovery by preventing permanent business closures. In developing countries, mitigating the contraction of the formal private sector is essential to prevent a rise in poverty. Implementing public works policies across labour-intensive sectors to avoid such a scenario should be a priority. Measures in support of formal enterprises must be executed alongside measures to help micro- and small enterprises in the informal sector, as in many countries these employ the majority of the population. Enterprises operating in the informal economy have limited capacities. Because of their poor chances of survival otherwise, they need to receive tailored support.7

Measures to help enterprises cover their fixed costs during the crisis need to be introduced swiftly. Getting cash to firms promptly so that they can pay their bills and their workers’ wages and repay their loans is vital. Possible measures include the waiver of payments due, grants, tax incentives, making credit available, employment-intensive investment and government procurement with preference given to SMEs, including women-owned enterprises.8 

Governments need to coordinate the restrictions they introduce so that enterprises continue to have access to essential business inputs and other goods and services. The quickest payment channels, including “mobile money” and other digital payment services, must be operationalized and the payment of outstanding balances to the private sector must be expedited.

Governments can support enterprises in the reconversion of their facilities to produce specific goods and provide specific services that are required to protect the public and essential workers. Some multinationals and large national enterprises have already embarked on such reconversion.

Suitable mechanisms are required to channel financial and other support to enterprises – for example, by setting up rapid and effective digital market platforms for investment, inputs, final products and technologies; providing special emergency funds; and promoting the transfer of technology and expertise. Governments need to make it easier for new enterprises to be set up and for existing enterprises to alter their business model in response to the pandemic.9 

Implement employment retention measures

Employment retention measures provide incentives to employers to hold on to workers even if a firm has to close or decrease its activity. The main objective is to keep workers on the payroll so that enterprises are ready to resume activity as soon as the restrictions have been eased or lifted. Such measures may include work sharing and shorter working weeks, wage subsidies, temporary suspensions of tax payments and social security contributions, and making access to various forms of business support conditional on the retention of workers. In some cases, employers may receive subsidies for guaranteeing that laid off employees can return to work for them again once the situation improves. Enterprises with a number of different production lines or subsidiaries may relocate workers to higher-demand lines – for example, as part of the repurposing of production to manufacture medical and other products needed for the response to the pandemic. Such measures are suitable for enterprises of all sizes, and they have already been widely implemented in European countries, helping to preserve employment relationships and facilitating the recovery phase.

Work sharing is a reduction of working time that involves spreading a reduced volume of work over the same number of workers to avoid layoffs. In the context of the COVID-19 pandemic, a number of key issues need to be addressed in order to ensure inclusiveness and equity when introducing work-sharing arrangements (e.g. Which specific workers should be covered? To what extent should working hours be reduced and the corresponding wages be decreased? How should the reduced hours of work be distributed over time ? How long will the arrangements be in place? What levels of employment will be maintained?) Where “time saving accounts” exist, some of the hours accumulated can be struck off as a way of retaining workers. All of these measures should be guided by dynamic social dialogue between employers’ organizations and trade unions to ensure that their design and implementation are based on consensus and tailored to the workplaces involved. The social partners have been negotiating and implementing short-hour work schemes in various European countries. Through collective bargaining such schemes have been introduced at industry level and in specific companies. The measures for reduced working hours recently adopted in the European Union in response to the pandemic were all negotiated between trade unions, employers’ organizations and governments.

It is important that decreased earnings be compensated for through wage supplements. Substantial reductions in both hours of work and wages can cause serious hardship, particularly among low-wage workers. In Austria, a recently adopted measure provides for the lowest paid workers receiving 90 per cent of their normal wages, middle earners receiving 85 per cent and higher earners receiving 80 per cent.10 

Employment retention measures can be linked effectively to the provision of new training opportunities for workers. For example, online courses can be offered to help develop workers’ skills so that they are more adaptable and can transition quickly to different jobs once normal activity resumes. During the recovery, reduced working hours can be combined with periods of training leave and the use of tailored work-based learning and online courses to maximize the return on training investments. The provision of such training can be delivered in many different ways, including online learning platforms, work-based learning, multi channelled career guidance and digitally supported recognition of prior learning, especially in developing countries.11 

Measures to retain workers depend on the country’s social protection system, notably on the availability and scope of unemployment insurance.12  Most countries operating work sharing schemes rely on short-time work benefits administered and financed through the national unemployment insurance programme, often supplemented by resources from the general government budget. Other countries use direct tax financing of wage subsidies (provided as either a lump sum or as a percentage of a worker’s pay up to a particular ceiling) to preserve existing jobs. In Denmark, the Government will fund 75 per cent of wages up to 23,000 Danish kroner (ca. €3,000) if a company refrains from making workers redundant.13

Given the funding implications and the exclusion of the vast number of informal enterprises from the ambit of employment retention measures, the implementation of such measures may be challenging in many developing countries, particularly in those already affected by fragility. An alternative to employment retention measures for these countries is the provision of temporary job opportunities, notably through public employment programmes. For example, employment-intensive investment programmes can be leveraged to provide temporary work for women and men facing job losses or reduced incomes while promoting social cohesion in communities.14

Employment retention measures should also cover migrants and refugees.15  Providing equal opportunities can increase productivity and reduce societal tensions.

Extend social protection to everyone

The crisis has drawn attention once again to the importance of ensuring universal access to social protection systems, including social protection floors, that provide comprehensive and adequate benefits meeting people’s needs.16  Countries that in the past decades have invested sufficient resources in building universal social protection systems have been able to quickly scale up existing mechanisms, including registry and delivery mechanisms, and to extend protection to population groups that were previously not covered. Countries that do not yet have robust social protection systems in place are in a more difficult situation, but many have started to extend health protection and income support to those affected by the crisis. Some of these countries will need international support to complement their own efforts and help sustain them.17  In both advanced and developing economies, those who lack social protection – including part-time and temporary workers, micro-entrepreneurs and the self-employed, many of whom are operating in the informal economy and/or may be migrant workers – have been hit particularly hard by job and income losses.

As of 17 April 2020, 108 countries and territories had implemented social protection measures as part of their response to the COVID 19 crisis, especially in the areas of health protection, unemployment protection, sickness benefits and social assistance.18  This has helped to ensure inclusive and effective access to health care and income security, thereby supporting jobs, livelihoods and incomes, notably among those in a vulnerable situation.19 

In responding to the crisis, some countries have introduced ad-hoc sickness benefits financed by general taxation to cover workers who are not entitled to sickness benefits otherwise, while others are rolling out cash transfers that reach some groups of informal workers. As part of a recovery strategy, countries can draw on the ILO’s experience and body of standards or guidance on how to turn these stop-gap measures into more permanent components of a rights-based social protection system.20  Anchoring social protection schemes/programmes in national legislation will promote transparency and accountability, and ensure sustainable and equitable financing mechanisms.

While the crisis has expedited much-needed reform by compelling numerous governments to temporarily extend social protection to previously uncovered groups, these temporary measures will need to be transformed into sustainable social protection mechanisms in line with international social security standards once the recovery is under way. This will help to promote social justice and build more resilient economies and societies.

1 ILO Monitor: COVID-19 and the World of Work, updated regularly, provides current estimates of the impact of the virus on workers and enterprises
2 Patrick Belser: COVID-19 cruelly highlights inequalities and threatens to deepen them (ILO, March 30, 2020)
3 ILO: COVID-19 crisis and the informal economy: Immediate responses and policy challenges (May 5, 2020)
4 ILO: Interventions to support enterprises during the COVID-19 pandemic and recovery (April 16, 2020)
5 ILO: Country policy responses (2020)
6 ILO:Interventions to support enterprises during the COVID-19 pandemic and recovery (April 16, 2020)
7 For more information on Enterprises’ responses
8 See ILOITC E-Learning Course: Supporting SMEs during COVID-19
9 ILO: Restructuring for recovery and resilience in response to the COVID-19 crisis (April, 2020)
10 ILO Country Policy Responses; Austria.
11 See ILO: Distance Learning in the Time of COVID-19 (May 2020)
12 See ILO: World Social Protection Report 2017-19, chapter 3.2.
13 ILO Country Policy Responses, Denmark.
14 ILO: Coping with double casualties: How to support the working poor in low-income countries in response to COVID-19 (April 29, 2020), supra.
15 ILO Policy Brief: Protecting migrant workers during the COVID-19 pandemic (April 30, 2020)
16 ILO: Universal Social Protection for Human Dignity, Social Justice and Sustainable Development: General Survey Concerning the Social Protection Floors Recommendation, 2012 (No. 202) (Geneva, 2019); ILO : Universal Social Protection: Key Concepts and International Framework’. Social Protection for All Issue Brief (Geneva, 2019)
17 See ILO tools and resources support countries in this endeavour: Social Protection Response to the Covid-19 Crisis
18 For an overview on social protection policy responses to COVID-19, see the ILO Social Protection Monitor
19 ILO: Social protection responses to the COVID-19 crisis-Country responses and policy considerations (April 23, 2020), supra; ILO: Social Protection Responses to the COVID-19 Crisis: Country Responses in Asia and the Pacific (March 25, 2020)
20 ILO Why International Labour Standards matter in a public health crisis (March 2020)