Switzerland | Legal requirements for short-time work in the context of the coronavirus
With regard to the conditions that need to be satisfied in order to be eligible for short-time work and its procedure, the Swiss Federal Council has introduced certain relaxations.
Many companies currently face the situation that there is less work available or had even to close due to measures imposed by the Swiss Federal Council or triggered otherwise by the coronavirus crisis.
As there is less or no work available, employers may find themselves forced to dismiss certain employees in order to save costs. Short-time work compensation aims at the maintenance of jobs in such situations of financial distress.
If the conditions for short-time work are met (see below), the unemployment insurance fund covers, to a certain extent and during a certain period of time, the salary of employees affected by reduced/suspended working hours. This eases the financial burden on the employers.
With regard to the conditions that need to be satisfied in order to be entitled for short-time work and its procedure, the Swiss Federal Council has relaxed and abolished certain conditions. In addition, the Swiss Federal Council granted financial support with regard to short-time work compensation.
As of 6 March 2020, approximately 1.45 million applications (which corresponds to roughly 29% of the total number of employees employed in Switzerland) by around 131,000 companies have been filed.
II. Legal aspects
1. Which are the requirements for short-time work compensation?
When the normal working hours of the company’s employees are suspended or reduced due to official measures (such as shutdown of companies or the issuance of quarantine) or for economic reasons (such as a drop in demand), the employers may be entitled for short-time work compensation if the following conditions are complied with:
- the employment relationship has not been terminated;
- the loss of work is likely to be of temporary nature and it is expected that the jobs are maintained by the introduction of short-time work;
- the working hours can be verified;
- the loss of work amounts to at least 10% of the hours usually worked during the payroll period (Abrechnungsperiode);
- the loss of work is not caused by circumstances that fall within the normal operating risk of the employer (according to SECO, the coronavirus and its effects are not attributable to the normal operating risk); and
- the employees affected have to agree to short-time work (partial reduction in salary, see below).
In addition, the employer must show that there is an adequate causal relationship between the loss of work and the occurrence of the coronavirus.
2. Who is entitled to short-time work compensation?
Due to the extraordinary situation, the scope of persons being eligible for short-time work has been extended by the Swiss Federal Council to include the following persons:
- employees on employment contracts for a fixed duration;
- temporary employees; and
- persons in a position similar to employers (eg members of a governing body) as well as the spouses or registered partners who work in the company (for those persons a flat rate of CHF 3,320 for a full-time position applies).
Short-time work is still not possible for
- employees who have been given notice or who have given notice;
- employees whose working hours are not sufficiently verifiable;
- employees who work “on call”; and
- employees who do not agree to short-time work.
3. Which is the application procedure, amount and duration for short-time work?
The employer must submit an advance notification for short-time work with the cantonal employment office, where the company’s registered seat is located (in its application, the employer must also select the unemployment insurance fund). Swiss law stipulates that the responsible cantonal employment office must, in principle, be notified at least ten days (or, as an exception, three days) in advance. This means that short-time work normally comes into effect ten days after the advance notification has been filed. This ten-day deadline for advance notification has been cancelled by the Swiss Federal Council. Thus, short-time work can start immediately upon advance notification.
The approval for short-time in the context of the coronavirus by the competent cantonal employment office is valid for six months. The statutory duration of three months has been extended by the Swiss Federal Council to six months in order to reduce the number of applications filed and to speed up the application procedure.
If the cantonal employment office approves short-time work, the employer must apply with the unemployment insurance fund for the payment of short time-work compensation within three months after the end of each payroll period (a payroll period is usually one month). Swiss law provides that employers must pay up to three waiting days during each payroll period (waiting period). This waiting period has been abolished by the Swiss Federal Council. Thus, employers will, in principle, no longer have to contribute to the loss of working hours.
Short-time work compensation covers 80% of the loss of earnings calculated based on the insured salary. The insured salary corresponds, in principle, to the latest salary received before the start of short-time work. The maximum insured income corresponds to CHF 12,350 per month (CHF 148,200 per year). Thus, the employee has to bear a drop in salary of 20%.
Short-time work compensation will be paid for a maximum of twelve payroll periods during a period of two years. In the event of loss of work of more than 85%, an employer can only receive compensation for a maximum of four payroll periods.
In addition, in order to facilitate access to short-time work compensation, the Swiss Federal Council decided that employees have no longer to reduce their overtime before employers’ can benefit from short-time work compensation.
Marco ToniPartner Attorney at law
Marco Toni, attorney at law, is a partner in our Zurich office. He focuses on domestic and international M&A transactions, private equity, corporate governance and general corporate, stock exchange and capital markets laws.T: +41 43 434 67 15 M: +41 79 557 62 15 E: email@example.com