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Short-term work as a result of COVID-19: What employers need to know

The Swedish government has presented a new proposal to financially support short-term work to help companies who struggle financially during the current COVID-19 crisis. This article aims to inform the companies about what they need to know in this regard. 

Background to short-term work

The presented measures are proposed to come into force on April 7, 2020 but will be applicable retroactively from March 16, 2020 and valid throughout 2020. The support can be applied for a six-month period with the possibility to apply for a three-month extension.

The measures are based on a previously proposed scheme for short-term work, but the degree of subsidy is greatly increased. The government’s share of the cost, within a framework for compensation, is increased from one-third to three-quarters of the cost. The proposal means that the employer's salary costs can be halved while the employee still receives more than 90 percent of the salary. An income ceiling of SEK 44,000 per month is proposed. The Swedish Agency for Economic and Regional Growth (Sw: Tillväxtverket) will be responsible for handling applications and deciding on support for short-term leave.  

 

Which companies can apply for the compensation?

Companies will need to show temporary and serious financial difficulties in coping with the challenges that have arisen in the wake of the COVID-19 crisis that these difficulties are caused by circumstances beyond the employer's control, specifically affecting the company's operations.

 

Under what conditions can a company seek compensation?

  • For companies with collective agreements, the central or local collective agreement must allow short-term layoffs. Trade union negotiations are mandatory. For companies that are not bound by collective agreements a written agreement with at least 70 per cent of employees at one operating unit is required.
  • The employer must have exhausted all other available measures to reduce labor costs, including dismissal of non-critical staff who are temporarily employed (if possible).
  • Companies that at the time of the application are undergoing restructuring or are insolvent are not eligible to receive the allowance.

 

Which employees are eligible for the compensation?

  • Employees who have been paid three months before the Growth Agency's approval, i.e. not newly employed employees.
  • Employees for whom employers are obliged to pay employer social contributions during the supported month(s).

 

What does the application process look like?

The Swedish Agency for Economic and Regional Growth will provide continuous information on the application process. Support can be provided if the listed conditions are fulfilled and will be paid after the Growth Agency has approved an application. Applications will be handled promptly. Upon approval, the employer is obliged to provide a reconciliation within a certain time to determine final support. If rejected, a decision may be appealed to the Administrative Court.

How can KPMG help hard-pressed companies?

We stay updated on the framework for the short-term leave and we are in continuous contact with the Agency for Economic and Regional Growth. Although applications do not open until April 7, there are several preparatory measures that can be taken now. KPMG can assist with:

  • Advice and review of a company's qualifications for applying for short-term leave compensation.
  • Assess whether collective agreements allow for short-term leave/layoffs and, if necessary, give advice and support in negotiations with trade unions.
  • Advice to companies that are not bound by a collective bargaining agreement when drafting an agreement on short-term layoffs and possible negotiations with the employees.
  • Advice on the dismissal process for employees in non-critical functions who are temporarily employed.
  • Preparatory actions and assistance in the actual application process.
  • Following up the application to the Agency for Economic and Regional Growth and appeal of decisions.
  • Advice on business-critical staffing levels and forecast of possible remuneration based on layoff outcomes.
  • Advice on measures to reduce labor costs through, among other things, dismissal of non-critical staff, for example temporary staff and staff in probationary employment.
  • Assessing the effect of layoffs on employees' total compensation (i.e. benefits and benefits in addition to basic salary).
  • Advice on forecasts of changed future cash flow and liquidity requirements as a result of laying off staff.