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Paying salaries in the COVID-19 crisis - Part 1

Paying salaries in the COVID-19 crisis - Part 1

Paying salaries in the COVID-19 crisis - Part 1

David Oberson | Partner,

Due to the current situation related to COVID-19, Swiss employers face many challenges. One area is salary payments. We have put together seven considerations for Swiss employers.

1. Secure your payroll function

You need to ensure that your payroll function can operate correctly in term of resources, know-how and technology. Your payroll team should have a back-up plan to mitigate the risks.

Due to the current situation, employee data protection and data security are key. As a result, your IT team should arrange to check remote access in light of increased home office work to ensure the right level of security. It is likely that criminals will abuse the current situation to access unsecured information.

If you use a third-party provider for your payroll, you should request a copy of the business continuity plan of your provider to avoid service interruption.

2. Unemployment benefits – reduced working hours (RHT – reduction de l’horaire de travail)

For partial unemployment benefits, up to CHF 8 billion is available from the unemployment insurance fund. The waiting period for partial unemployment has been reduced to one day until 30 September 2020.

In the event of loss of work (partial/technical unemployment) linked to the coronavirus epidemic, a claim for compensation for reduced working hours (RHT) can be filed with the unemployment office.

Further measures are introduced on a cantonal level such as simplification of application forms or faster examinations. Here are some examples of other actions to make this process easier for employers:

  • The days of deficiency are eliminated and paid for by the authorities.
  • Cash advances could be made after the claim and before the final statement.

Employers can claim these unemployment insurance benefits when the loss of work:

  • is inevitable or fleeting
  • reaches at least 10% of all hours normally worked
  • is unusual in the industry, profession or business
  • affects people who have a permanent contract
  • is independent of measures affecting the organization of the company
  • differs from public holidays or company vacations
  • is unrelated to a collective labor dispute

Potential benefits: The amount of compensation covers 80% of the salary taken into account. This maximum salary amount per employee is CHF 12,350 per month (CHF 148,200 on an annual basis).

3. Social security installments (AHV/AVS)

Due to potential cash flow issue, employers should review and reassess the total salary forecast for the year 2020 with the aim of adjusting the social security contribution installments. This measure will have a positive cash flow effect for employers.

4. Reduction of overtime

Employers should start monitoring overtime of employees and, if possible, reduce and/or compensate overtime as much as possible. This measure will immediately reduce personnel expenses (salaries and employer social contributions) in the profit and loss statement of the employers.

5. Reduction of employees’ workload

Depending on their financial situation, employers may consider reducing the workload of employees to ensure that they can keep the best talents within the firm. Of course, this measure involves many legal aspects which should be examined in detail before any action is taken.

6. Bank loans

SMEs in financial difficulty can benefit from bank loans guaranteed by surety for a total amount of 580 million Swiss francs. An amount of 10 million Swiss francs is also available to guarantee organizations’ exceptional administrative costs. Under the Federal Law on Financial Aid for Guarantee Organisations, four recognized organizations can provide guarantees of up to one million Swiss francs to companies of all sizes. Bank loans granted through these guarantees must be repaid. The Federal Council is easing the conditions. Until the end of 2020, it intends to cover the one-off costs of assessing applications as well as the risk premiums of companies for the first year of the guarantee.

7. Payments during absences

If an employee has to look after children because schools/daycare centers are closed, certain general principles apply. It is generally considered acceptable for an employee to stay at home for a few (typically 3) days. By then the employer may expect the employee to have found alternative childcare solutions. Thereafter the employee can no longer claim days off for childcare. Therefore, any additional absence would have to be considered a vacation day to be taken against the employee’s open vacation entitlement. The days could only be spent at home if the employer agrees. If the employee refuses to return to the office, the employer can impose disciplinary measures or even terminate the employee’s employment contract.

If quarantine was ordered by an authority but the employee is not sick and if it is not possible for the employee to work from home, it must be assessed, individually, whether the employer is obliged to continued salary payment. In the unfortunate scenario that an employee is unwell with coronavirus, the employee may and must stay away from work and is entitled to sick pay in accordance with Swiss law (Art. 324a Code of Obligations) or prevailing sick pay insurance.