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Short-time work – what’s next?

  • Adrian Tüscher, Partner |

In recent months, the Confederation has taken various measures with the "COVID-19 Ordinance on Unemployment Insurance" to protect as many employers as possible from the economic consequences of COVID-19.

The "COVID-19 Ordinance on Unemployment Insurance" will be repealed as of the end of August 2020, meaning a resumption of many of the normal rules relating to the application of short-time work, i.e. those in force before 1 March 2020.

However, the simplified procedure for applying for short-time work compensation (SWC), which has been in force since March 2020, will continue to apply until the end of 2020. Companies can continue to use simplified COVID-19 forms for pre-registration or settlement. Further, additional working hours will still not have be taken into account until the end of 2020.
 

  • Special regulations in connection with short-time work and COVID-19 will be lifted at the end of August 2020.
  • Simplified procedure for pre-registration and application will remain applicable until the end of 2020.
  • Additional working hours do not need to be taken into account until the end of 2020.

To be considered as of 1 September 2020

  • The entitlement period is extended to 18 months
  • The one-day waiting period is reintroduced
  • The simplified procedure for pre-registration and application for compensation will probably remain applicable until the end of 2020 (special COVID-19 forms can still be used)
  • Additional working hours still do not first need to be reduced before applying for SWC.
  • Leased workers, workers on fixed-term contracts and workers on call will no longer be entitled to short-time work compensation (under certain conditions, workers on call may still be entitled to SWC, but this is currently expected to be specified by the authorities),
  • A monthly loss of working hours of more than 85% can only be credited during a maximum of 4 accounting periods
  • Employees' income from interim employment will until the end of 2020 not be credited to the short-time working compensation

Regulations already in force since 1 June 2020

  • When submitting a pre-registration, a 10-day advance notification period must be observed.
  • Once a valid permit for short-time work has expired (e.g. in the case of permits limited to the date of dissolution of the COVID-19 Regulation on unemployment insurance, i.e. 31 August 2020), a new pre-registration must be made to continue short-time work, taking the pre-registration period into account.
  • Employees in employer-like positions and apprentices are no longer entitled to compensation for short-time work. 

SWC – we answer your common questions

What are the requirements for an application for short-time work compensation?

The loss of working hours must amount to at least 10% of the total working hours of the company or department concerned and must be due to governmental measures or other circumstances for which the employer is not responsible (e.g. loss of working hours due to COVID-19).

Can we apply for short-time work compensation for individual departments in our company?

Short-time work compensation can also be applied only for individual operating departments. An operating department is typically an organizational unit within the company that is under independent management or provides services that could also be provided by independent companies and offered on the market.

For example, a construction site or branch office could be such a department. It is advisable to assess on an individual basis if your unit meets the definition.

Who is entitled to short-time work compensation?

Employees who pay contributions to unemployment insurance or who have completed compulsory schooling but have not yet reached retirement age (including employees who are paid by the hour).

Who is not entitled to short-time work compensation?

As of 1 June or 1 September 2020, employees are (according to currently available information from the authorities) not entitled to SWC if:
 

  • They are in a terminated employment relationship
  • They do not consent to short-time work
  • Their loss of working hours cannot be determined (e.g. because no time recording system exists or because they do not record their working hours)
  • They work on call (under certain conditions, workers on call may still be entitled to SWC, but this is currently expected to be specified by the authorities),
  • They are in a fixed-term employment relationship
  • They are shareholders or have significant decision-making powers
  • They are in apprenticeship
  • They are leased

How long can I claim short-time work compensation?

Until 1 September 2020, SWC will be paid for a maximum of 12 months within the two-year framework. As of 1 September 2020, the entitlement period will be increased to 18 months. This provision on the increase of the entitlement period is expected to be applicable until 31 December 2021.

In addition, as of 1 September 2020, the provision that monthly work absences of more than 85% may only be taken into account for a maximum of four accounting periods will apply again. If the loss of working hours exceeds 85% in further accounting periods, SWC can be claimed.

We want to apply for short-time work compensation – what should we do?

The first mandatory step is for the employer to register in advance with the relevant cantonal office by submitting an official form. The pre-registration must be submitted at least 10 days before the start of short-time work.

If there are several branches or establishments, the advance notification is always submitted to the cantonal authority responsible for the head office.

The simplified process for pre-registration and settlement with unemployment insurance (which was introduced as a special measure in connection with COVID-19) is expected to remain applicable until the end of 2020. The simplified forms can therefore still to be used.

Can the employer order short-time work unilaterally?

No, the employees must agree to short-time work or SWC.

If employees do not agree, the employer must in principle continue to offer unrestricted work and, in the worst case, risk ordinary termination for economic reasons.

What salary do I need to pay as an employer and who pays the short-time work compensation?

The employer must pay the salary at the usual time. The hours lost due to short-time work must be paid at 80% of the salary and the hours worked at 100%. The employer is thus generally obliged to make an advance payment. The unemployment insurance fund subsequently compensates the employer for 80% of the lost hours. The employer must still deduct all contractual and statutory social security contributions on the basis of the full salary. The employer, but not the employees, will also be reimbursed for social security contributions (i.e. AHV/IV/EO and ALV).

Do overtime and accrued vacation have to be reduced?

Until the end of 2020, additional working hours* will not have to be reduced before SWC can be applied for. Thus, when applying for SWC, the extra hours will still not have to be taken into account.

Vacation credits do not have to be reduced before applying for SWC.

* “Additional working hours” are understood to be all paid or unpaid hours that exceed the contractually agreed working time.

What happens if employees earn more than the maximum insured salary of CHF 148,200 per year?

SWC covers 80% of the creditable loss of earnings of max. CHF 148,200, i.e. CHF 12,350 per month. If SWC is claimed for employees who earn more than CHF 12,350 gross per months, the employer must pay 100% of the portion of the salary in excess of CHF 12,350 (i.e. the uninsured salary) and not just 80% of the salary in excess of CHF 12,350.

Example: An employee earns CHF 15,000 gross per month (incl. 13th month's salary) and has a 100% workload. If short-time work of 50% is introduced for this employee, the SWC consists of 80% of 50% of the insured salary of CHF 12,350 per month (i.e. 80% of CHF 6,175). The SWC thus amounts to CHF 4,940. The employer has to pay 100% of the uninsured part of the salary attributable to the 50% short-time work. In our example this is CHF 1,325 (CHF 7,500 – CHF 6,175). The employee is therefore entitled to a total gross amount of CHF 13,765 (CHF 7,500 + CHF 4,940 + CHF 1,325).

What about vacation and other absences during short-time work?

Employees may take vacation during short-time work, but the employer must pay 100% of the salary for these days. SWC does not apply during other absences, such as those due to illness, accident or maternity. During such absences, the employer (or the insurance company) must pay 100% of the salary.

Are employees who are assigned/seconded to Switzerland eligible for short-time work compensation?

Usually, these employees would not qualify for SWC since they do not typically meet the criteria of having paid unemployment insurance contributions. There may be exceptions, however, for employees who are seconded from a country that has not entered into a social security treaty with Switzerland and who are therefore obliged to pay social security contributions in Switzerland.

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