Short-time work

With immediate effect the Federal Council permits the strong franc as a reason for short-time work (Kurzarbeit)

Currency fluctuations are generally considered to be normal operation risk. The abolition of the minimum exchange rate limit by the Swiss National Bank and the resulting appreciation of the franc, however, have caused short-term distress for many companies. The Federal Council has therefore decided to allow the strong franc as a reason for short-time work with immediate effect.

The State Secretariat for Economic Affairs SECO advised the implementing authorities of the unemployment insurance on 27 January 2015, to immediately approve requests for compensation for short-time work due to exchange rate fluctuations.

1. What is short-time work?

In short-time work the working hours are reduced and the employee accordingly receives less pay. The unemployment insurance covers 80% of the lost income. The money will be paid to the employer, which passes it on to its employees. The short-time compensation is calculated on the basis of the pensionable salary, which is limited by law to CHF 10,500 per month.

Employment contracts are not modified for short-time working.
Short-time work is used in times of weak economic stimulus when circumstances arise in a business or part of a business which are not the responsibility of the employer and which result in temporary over-capacity, for example because orders are cancelled or reduced. It is a tool to absorb such temporary over-capacity and thus avoid personnel layoffs.

2.  Conditions for the introduction of short-time work

For the employer to qualify for short-time working hours, the following conditions must be met simultaneously:

  • The affected employees agree with the implementation of short-time work, which is usually associated with a loss of wages. The employer must continue to pay full normal wages to any employees who refuse their consent (if he does not have to dismiss them).
  • The loss of work corresponds to at least 10% of the normal working hours per accounting period (an accounting period is a calendar month).
  • The loss of work is due to economic reasons or exchange rate fluctuations and is unavoidable;
  • the loss of work is expected to be temporary, so that jobs can be retained by implementing short-time work.

A claim for compensation for short-time work exists only for employees who have a permanent and non-terminated employment relationship and are obliged to pay contributions for unemployment insurance or have not reached the required minimum age for the AHV contributions.

It should be noted that during short-time work the statutory and contractual social security contributions must be paid in full, e.g. on the basis of the full salary. The employee's contributions are deducted directly from the salary. The unemployment insurance refunds to the employer that proportion of employer's contributions to the AHV, IV, EO and ALV corresponding to the lost time.

3. Application for short-time work

The employer must submit a pre-registration on the form provided for this purpose to the competent cantonal authority at least 10 days before the beginning of the short-time work.

The cantonal authority of the canton in which the business or business division has been established has responsibility. The pre-registration must state the reasons for the need for short-time work. The employer has to demonstrate that the above listed conditions have been met by providing information and documents on the company, the employees, and particularly on the changes in the order situation and the expected development in the course of business. The permit is usually granted for three months and then another pre-registration must be submitted.

If the cantonal authority authorizes the short-time work, the employer must apply to the selected unemployment insurance for compensation for short-time work using the official form. The application for short-time work compensation is to be filed within three months of the end of the relevant payroll period. Non-compliance with this three-month period will result in loss of the entitlement. Until the unemployment office pays the short-time work compensation, the employer has to pay its employees  80% of the lost income.

In particular, the application must contain the accounting of the short-time work which states, among other things, the contractual and reduced working hours for each employee.

4. Important: The business‘ control of working hours

The recording of working hours in the establishment is of great importance. Particularly important and a potential  pitfall in the context of short-time work is the operational control of working hours. This must be sufficiently guaranteed, e.g., by a time clock or hourly reports.

The competent authority does not control whether the working hours control is sufficient. However, the SECO can carry out random spot checks and it does. If SECO comes to the conclusion that the working hours check is insufficient, it will reclaim the compensation paid.

5. Summary

In summary, the change in practice is to be welcomed. Short-time work can be beneficial for both employer and employee. The employees keep their jobs and full social protection. Employers can avoid the loss of know-how and costs through staff turnover. In addition, the employees remain available if the situation improves. However, short-time work is no help for those companies whose order situation is still good but who have to suffer the higher costs.

Authors

Dania Salvisberg-Schneider
Dania Salvisberg-Schneider, Advokatin

dsalvisberg@vischer.com

 

Gili Fridland Svensson
Gili Fridland Svensson, LL.M., Advokatin

gfridland@vischer.com

VISCHER AG