The Corona virus affects entire businesses due to declining demand, shortage of supply and operational restrictions. Switzerland provides short-time work compensation and financial support.

The Corona virus affects the entire world and its population. Employers suffer particularly from the effects of the virus. Demand is declining significantly in many areas, supply shortages are no longer a rarity and as a result of the latest announcements by various governments, entire industries are affected by operational restrictions or even a shut-down.

The economic consequences of the Corona virus are no longer to be underestimated. Therefore, the Federal Council announced on 13 March 2020 that the State grants financial support in the form of economic emergency assistance and short-time work compensation.

In this alert, we want to give an overview on the financial support that can be expected from the State in the foreseeable future and highlight the conditions that must be met in order to be eligible for short-time work compensation.

What happens if businesses close?

If an employer voluntarily closes its business in order to protect its employees from a possible infection, the employees generally retain their right to remuneration. As a result of the closure, the employees are released form their duty to perform work (provided they cannot work in the home-office), but the employer must continue to pay salaries.

If businesses are closed due to an official measure – such as the measure announced by the Federal Council on 16 March 2020 – nothing changes regarding the above-mentioned consequences. If employees cannot work in the home-office, they are exempt from their duty to perform work. The employer, however, is still obliged to pay salaries.

In which cases can compensation for short-time work be applied for?

If working hours must be reduced or operations must be shut down completely, employees are generally entitled to compensation for short-time work if:

  • they are liable for unemployment insurance contributions,
  • the work loss is based on economic reasons, inevitable and amounts to at least 10% of working hours normally performed by the employees,
  • the employment relationship has not been terminated yet, and
  • the work loss is likely to be of temporary nature and it can be expected that short-time work will maintain jobs.

Short-time work is subject to the consent of the concerned employees.

Who is not eligible for compensation of short-time work?

Employees whose employment relationship is terminated and who are within the notice period, employees with a fixed-term employment contract, employees in an apprenticeship and temporary workers are – pursuant to current regulations – not entitled to short-time work compensation.

The State Secretariat for Economic Affairs (SECO) is currently examining an expansion of the right to short-time work compensation for employees with fixed-term contracts (without the possibility of termination) and for temporary workers. Such an expansion requires an amendment to the law. The Federal Council is expecting SECO’s report by 20 March 2020.

How is short-time work compensation applied for?

If an employer intends to claim short-time work compensation for its employees, it must in principle notify the cantonal unemployment insurance fund ten days before the start of short-time work using the official form. Within three months after the end of each accounting period the employer asserts the entire claim for compensation of its employees. An accounting period is usually one month.

Responsible is the canton in which the employer has its registered office.

To how much amounts short-time work compensation?

The short-time work allowance is 80% of the loss of earnings. According to the Federal Council’s announcement of 13 March 2020 the State has earmarked (for now) an aggregate amount of eight billion Swiss Francs for financial assistance in the form of short-time work compensation.

What will change regarding short-time work compensation?

On 13 March 2020 the Federal Council announced that the waiting period for short-time work is reduced to one day until 30 September 2020 (in contrast to the current waiting period of two to three days). This means that employers only must bear the loss of work of one day independently before they are entitled to financial assistance.

For particularly affected companies, the Federal Council together with the Federal Department of Finance examine the possibility of additional financial support (e.g. bridge financing for liquidity purposes) as a hardship regulation up to one billion Swiss Francs. The relevant modalities shall be examined by 1 April 2020.

Are you prepared?

If the requirements to receive short-time work compensation are met, the employer shall inform its employees and seek their consent before notifying the cantonal unemployment fund using the required form.

What to expect?

The Federal Council, the State Secretariat for Economic Affairs (SECO) and further institutions are currently examining additional financial assistance opportunities. Further announcements are expected. We recommend closely monitoring the developments.

EY is your partner for this challenge

We discuss with you in a personal meeting or remotely:

  • how to deal with the consequences of Covid-19 in your everyday work,
  • and, if necessary, how you can mitigate the economic consequences of supply shortages and operational restrictions.

Feel free to contact us at any time!