COVID-19: Short-Time Work in 5 Questions and Answers

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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. Up until today, almost two million workers were already or are 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 (status as of 26 January 2021).

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 had extended the scope of application of the short-time working compensation in several steps in the context of the extraordinary measures taken in connection with the COVID-19 epidemic. The extended scope of application applied retroactively from 1 March 2020 and was limited until 31 August 2020. Notwithstanding the provisions of the Federal Act on Unemployment Insurance, the following persons, who are normally excluded, were for that period of time entitled to compensation

  • employees with a fixed-term contract;
  • temporary workers;
  • apprentices (the entitlement to compensation ends on 31 May 2020);
  • 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 and the entitlement to compensation ends on 31 May 2020;
  • on-call workers, whose level of employment fluctuates by more than 20%, provided they work for at least six months in the company that applied for short-time work.

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.

Starting from 1 September 2020, the extended scope of application does not apply to the same extent anymore. Instead, the statutory rules of Art. 31- 33 of the Federal Act on Unemployment Insurance are generally applicable again. An exception is made for the workload of vocational trainers in connection with the training of apprentices, if the company can prove that the training cannot be guaranteed in the event of inadequate supervision (see Art. 8j COVID-19 Ordinance on Unemployment Insurance). These working hours spent on the training of apprentices are to be treated as creditable absence from work and are therefore not to be included in the actual hours worked in the application for compensation. Moreover, the extended scope of application for on-call workers remains applicable (see Art. 8f COVID-19 Ordinance on Unemployment Insurance).

On 20 January 2020, the Federal Council has decided to extend the measures again and to amend certain provision of the COVID-19 Ordinance on Unemployment Insurance. In this regard, the scope of application was again extended for employees with a fixed-term contract as well as apprentices for the period of time between 1 January 2021 and 30 June 2021 (see Art. 4 COVID-19 Ordinance on Unemployment Insurance). Apprentices may only be subject to a short-time working compensation, if their education is still ensured, the business had to close due to an official order and if there is no other financial coverage for the apprentices’ salary.

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 up until 31 August 2020. The Federal Council has decided to extend the maximum compensation to 18 months, as of 1 September 2020 until 31 December 2020. The maximum duration of the short-time work compensation of four months for companies with a loss of working hours of more than 85% was abolished by the Federal Council first until 31 August 2020 and later prolonged until 31 March 2021. Starting from 1 September 2020, the usual statutory rules apply again, however the accounting periods between 1 March 2020 and 31 March 2021, in which the loss of working hours exceeded 85%, will not be counted towards the maximum amount of four months.

It should be noted that the waiting period provided by law (maximum three days), was completely abolished by the Federal Council, retroactively applicable from 1 March 2020. This provision was at first only applicable until 31 August 2020, but the Federal Council decided on 20 January 2021 to extend the applicability until 31 March 2021. However, the employer does not need to make any amendments due to the retroactive adjustments. The form to apply for compensation will be adjusted by the unemployment office and any differences will be paid out directly to the employer.

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. 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.

From now on, the preregistration can be submitted directly by using an electronic form (only available in German, French and Italian) provided by the E-Services of Jobroom (SECO). The organisational chart of the entire company must be attached or uploaded as a PDF document. If the preregistration concerns only a business unit (Betriebsabteilung), it should be noted that the number of employees per business unit must be mentioned on the chart as well.

If an online submission is not possible, the pregistration can still be submitted to the competent cantonal authority by email or letter post, using the coronavirus-specific form.

The preregistration must state the reasons why the expected reduction of working hours is to be attributed to the occurrence of the coronavirus in a substantiated manner.

A retroactive preregistration is not possible. Up until 31 May 2020, short-time work could start immediately with the submission of the preregistration, due to the decision of the Federal Council to abolish the deadline of ten days (prior to the implementation of short-time work) for the preregistration for short-time work benefits. However, regarding preregistrations for short-time work benefits, which are submitted as of 1 June 2020, the deadline of ten days after the submission must again be awaited, until the short-time work can start.

Up until 31 August 2020, a registration was 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. With the extensive abolition of all facilitations from 1 September 2020, the maximum approval period of three months applies again. Accordingly, short-time work permits that had already been valid for more than three months at this date lost their validity, and permits of longer duration were reduced to a period of three months. If the reduction of working hours continues after 1 September 2020 or after the expiry of the reduced permit period, the company must submit a new preregistration.

c. Apply for compensation by submitting the completed electronic form (login required) or the coronavirus-specific form including all the relevant documentation to the unemployment office of your choice. If an online submission is not possible, the coronavirus-specific form can be handed in by e-mail or letter post. Upon submission, it is recommended to consult the website of the chosen unemployment office, because additional forms or documents might be required. To ensure that the payments are executed as quickly as possible, the loss of earnings is calculated summarily. The loss of earnings corresponds to the reduction of the working hours in relation to the sum of the earnings of all eligible persons and must be substantiated by appropriate documentation such as time sheets, payroll journals etc. Further assistance for the completion of the form can be found in a separate article (available in German and French). The summary procedure remains applicable until 31 March 2021.

Due to an amendment by the Federal Council, the income of interim employment or self-employment does no longer have to be reported to the employer and be deducted from the short-time work benefits. Further, any overtime hours generated outside the short-time working phases are not to be deducted from the reduced working hours. Both simplification measures apply until 31 March 2021.

In order to support businesses facing a liquidity shortage, the Federal Council has ordered that the salaries due may be paid by means of an advance on compensation payments. However, the details of such an advance are not yet determined. Businesses, which require an advance on compensation, should contact their chosen unemployment office.

Furthermore, the COVID-19 Act adopted by the Parliament on 25 September 2020 includes facilitating provisions regarding the amount of the compensation. According to Art. 17a of the COVID-19 Act, all employees with a monthly salary of up to CHF 3’470 are entitled to 100% short-time work compensation (instead of 80%) and for employees with a salary between CHF 3’470 and CHF 4’340 the short-time work compensation amounts to CHF 3’470 in case of a full loss of working hours. If working hours are reduced only to some extent during the short-time working phases, the compensation will be proportionally calculated. The regular compensation of 80% of the reduced working hours applies consequently for all employees with a monthly salary starting from CHF 4’340. This provision is retroactively applicable from 1 December 2020 until 31 March 2021.

Finally, 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 (while the maximum insured salary of CHF 148,200 is to be respected). 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 amount of 90% of the usual salary (please note Art. 17a COVID-19 Act for salaries up to CHF 4’340, see Question 4);
  • 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 short-time work (or, where applicable, that of the employee representation body);
  • retain all documents for 5 years.

This article is also available in German and French.

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