COVID-19: Short-time work in 5 questions and answers

In view of the measures taken by the Swiss authorities in connection with the coronavirus, companies may consider resorting to short-time work, or „reduced working time“, as provided by article 31 and following of the Federal Act on Unemployment Insurance. As of 25 March 2020, approx. 500’000 workers are already subject to short-time work due to the coronavirus, which makes short-time work a key element in the fight against the negative economic impacts of the epidemic.

Five practical questions related to short-time work will be answered below, according to the status of the measures notified by the Federal Council on 25 March 2020.

1. Are companies eligible for coronavirus-related short-time work benefits?

When the activity of the company’s employees is suspended or reduced due to measures taken by the authorities or other circumstances beyond the control of the employer, or for economic or cyclical reasons (e.g. a decrease in the order book or turnover), the employer may receive short-time work compensation if all the following conditions are met:

  • the loss of work is likely to be temporary and the governmental support for reduced working hours can be expected to maintain jobs;
  • the work schedule is controllable;
  • the loss of work constitutes at least 10% of the total hours normally worked by the workers during the period for which the account is drawn up;
  • the loss of work is not attributable to circumstances that fall within the normal operating risk of the employer;
  • the employees concerned consent to this measure (i.e. they agree to waive part of their regular wages).

In addition, there must be an adequate causal relationship between the loss of work and the occurrence of the virus. A general reference to the coronavirus is not sufficient to justify a claim for compensation.

2. Who is entitled to short-time working compensation under the new guidelines?

The Federal Council amended the ordinary scope of application of the law in the context of the extraordinary measures taken in connection with the COVID 19 epidemic. Notwithstanding the provisions of the law, the following persons, who are normally excluded, are therefore entitled to compensation

  • employees with a fixed-term contract;
  • temporary workers;
  • apprentices;
  • persons who determine the decisions taken by the employer – or can significantly influence them – in their capacity as a partner, member of a governing body of the enterprise or holder of a financial participation in the enterprise, as well as their spouses, with the restriction that they are entitled to a lump sum compensation of CHF 3’320 per month (on the basis of a full-time equivalent) only.

Employees who suspend their employment for personal reasons such as illness, fear of contagion with the virus or family obligations (e.g. to care for a sick family member or children following the closure of schools and day-care centers) are not entitled to short-time work compensation.

It should be noted that foreign workers with a place of work in Switzerland are also entitled to the allowance regardless of their place of residence and residence status, as long as they are subject to the Swiss social security system. Cross-border workers, for example, are entitled to a short-time work allowance from the first day they take up an activity subject to Swiss unemployment insurance contributions provided they meet the other conditions set out above. By contrast, workers posted from a Swiss employer to other countries for a longer period of time cannot benefit from short-time work allowances.

3. What is the amount and duration of the compensation?

The short-time work compensation covers 80% of the recognizable loss of earnings. For example, if the working hours are reduced by 100%, 80% of the salary will be covered. The maximum insured income is CHF 148’200 per year.

The short-time work compensation can be paid for a maximum of twelve months (complete or commenced) out of a period of two years. A registration is valid for a maximum of six months (the statutory duration of three months has been extended by the Federal Council) and must be renewed if the reduction of working hours persists. Companies with a work reduction of more than 85% can only receive compensation for a maximum of four months.

It should be noted that the waiting period provided by law (maximum three days), which had initially been reduced to one day, was completely abolished by the Federal Counsel, with effect as of 17 March 2020.

4. As an employer, how do I get compensated?

a. Calculate the probable reduction of the working hours for each affected employee. The reduction must be at least 10% of the hours normally worked by all employees eligible to receive short-time work benefits, after deducting paid and unpaid absences.

b. Submit the preregistration for short-time work benefits to the competent cantonal authority, i.e. the authority of the canton in which the company or part of the company concerned is located, credibly stating the reasons why the expected reduction of working hours is to be attributed to the occurrence of the coronavirus. For sales companies with locations in different cantons, the preregistration for all employees must be submitted in the canton where the company has its headquarters.

We have compiled a list with all addresses of the competent cantonal authorities, indicating which authorities accept preregistrations by email, letter post or online forms. Please note that some cantons only accept preregistrations via email. For the electronic submission the preregistrations can either be signed electronically or a copy can be signed by hand and then scanned. The preregistration can also be submitted by telephone, if it is afterwards immediately confirmed in writing.

Instead of using the standard form available on the website of the State Secretariat for Economic Affairs (SECO), make sure to use the coronavirus-specific form that has been made available.

A retroactive preregistration is not possible. However, since the deadline of three days (prior to the implementation of short-time work) for the preregistration for short-time work benefits has been abolished by the Federal Council, short-time work can start immediately with the submission of the preregistration.

c. Apply for compensation by submitting the completed coronavirus-specific form including all the relevant documentation to the unemployment office of your choice. The employer must calculate all the effective working hours lost and submit appropriate documentation such as time sheets, payroll journals etc.

In order to support businesses facing a liquidity shortage, the Federal Council has pointed out that the salaries due may be paid by means of an advance on compensation payments. However, the details of such an advance have yet to be determined. It should also be noted that the right to compensation lapses if it is not exercised within 3 months of the period claimed.

5. What are the employer’s obligations?

The employer has an obligation to:

  • pay each employee, on the regular pay date, an amount corresponding to 80% of the loss of earnings due to the reduction of working hours. In the event of a partial reduction in working hours (e.g. from 100% to 50%), the employer must pay the employee the full salary corresponding to the reduced part (50%) plus 80% of the lost part (80% of 50% = 40%), i.e. in this case a total payable of 90% of the usual salary;
  • continue to pay social insurance contributions in full (in accordance with legal and contractual provisions, as if working hours and salary were normal); it is however stipulated that the payment of these contributions may be deferred interest-free for a certain period in accordance with the decisions of the federal authorities;
  • record and control the daily working hours and absences. Employees must be required to report daily hours worked, including overtime, and all other absences such as leave, illness, accidents or military service. Working time must be controllable at all times;
  • cooperate free of charge with the implementation of the law and provide the unemployment office with all the information it needs to determine the right to compensation and calculate the amount of the compensation;
  • apply for the payment of benefits as soon as possible but at the latest within 3 months from the period claimed;
  • obtain each concerned employee’s consent to the short-time work (or, where applicable, that of the employee representation body);
  • retain all documents for 5 years.