Short-time working & coronavirus

Legal issues for employers and employees

Legal advice on short-time working and compensation for loss of earnings during the Corona pandemic

The situation surrounding the outbreak of the corona virus is currently preoccupying Switzerland as well as the rest of the world in equal measure. In Switzerland, the issue of short-time work is of great importance. From the employers' side, the question arises as to which conditions must be met for short-time work and how short-time work can be registered. Employees are primarily concerned with the regulation of short-time work compensation. The answers to these and other questions are explained below.

Information as of 14th December 2020.

Questions on “Short-time working”

  • Unemployment Insurance Act Art. 31ff. 
  • Ordinance on Compulsory Unemployment Insurance and Insolvency Compensation (Unemployment Insurance Ordinance, AVIV) Art. 46ff.
  • Federal Act on the Legal Basis for Federal Council Ordinances on the Management of the Covid 19 Epidemic (Covid 19 Act) Art. 17
  • Ordinance on measures in the field of unemployment insurance in connection with the coronavirus (Covid-19) (Covid-19 Ordinance on Unemployment Insurance)


The "COVID-19 Unemployment Insurance Ordinance" was repealed, with the exception of individual provisions, at the end of August 2020. This means, that the normal regulations in connection with the receipt of STWC, which were valid until 1 March 2020, are largely applicable again. 

However, the simplified procedure for claiming short-time allowance, which has been in force since March 2020, will probably continue to apply until the end of 2020. This means that the simplified forms COVID-19 can continue to be used for the pre-announcement as well as the settlement. Also, overtime worked will still not have to be taken into account until the end of 2020.

Short-time working is defined as the temporary reduction or total cessation of work in a company as a result of a decision taken by the employer and agreed with the affected employees. The employment contract of those affected remains in force. Short-time working usually arises for economic reasons.

It also occurs if the loss of working hours is due to a measure ordered by an authority or other circumstances for which the employer is not responsible.

Employees whose normal working hours have been reduced in part or down to 0% are entitled to short-time working compensation in accordance with Art. 31 para. 1 of the Unemployment Insurance Act (UIA) if:

  1. They pay compulsory unemployment insurance contributions (UI) or have not yet reached the minimum age for paying compulsory OASI contributions;
  2. They lose working hours for a qualifying reason (i.e. due to economic reasons or a measure ordered by an authority);
  3. They are in an employment relationship that has not been terminated; and
  4. The loss of working hours is likely to be temporary and it can be expected that short-time working will allow them to keep their jobs.

The other prerequisites for the granting of STWC are:

  1. The loss of working hours must amount to at least 10 per cent of the total hours normally worked by the employees of the enterprise per accounting period (so-called minimum loss of working hours);
  2. A system of work time control is in place (stamp card, work time reporting, etc.);
  3. The loss of working hours is not caused by events that are considered a normal operational risk. SECO has made explicit that a coronavirus occurrence is not a normal operational risk.

A loss of working hours is not considered chargeable if an affected employee does not agree with the short-time work. As a result, the employee must continue to be paid as normal. However, there is a risk of dismissal due to the refusal.

In the case of the coronavirus, one looks at whether the loss of working hours is due to an official measure (such as a city lockdown or the suspension of certain public transport connections) or to economic reasons (such as a decline in demand due to fears of infection).

Short-time working compensation applies to a loss of working hours caused by an official measure or other circumstances for which the employer is not responsible. The affected employers must be unable to prevent the loss of working hours by means of appropriate, economically viable measures, as well as unable to hold a third party liable for the loss.

A loss of working hours for economic reasons also entails a right to compensation if it is unavoidable. Economic reasons include both cyclical and structural factors that result in a decline in demand and sales.

The loss of working hours does not qualify for compensation if the affected employee refuses short-time working. In such a case, the employee must continue to receive normal remuneration. But a refusal does give rise to a risk of termination.

The STWC amounts to 80% of the qualifying loss of salary. The waiting period for receiving STWC was cancelled until the end of August 2020 (i.e. companies no longer bore a deductible). The Federal Council has decided to reduce the waiting period, which was provided for in the regular law and will be valid again from then on, from usually two or three days to one day as of 1 September 2020. This means that the employer will have to bear the wage costs for at least the amount of the STWC for one day per month (= payroll period) before receiving the STWC. The payment of the STWC is made directly to the employer by the unemployment insurance funds. The employer must pay the employee 80% of the loss of earnings on the ordinary payday.

As of June 2020, employees who are spouses or registered partners of the employer, as well as persons who have a significant influence on the decision-making of the employer (such as shareholders, members of the highest decision-making body of the company or persons with a financial interest in the company) are no longer entitled to STWC.

On the other hand, on-call workers whose degree of employment is subject to strong fluctuations (more than 20%) are entitled to short-time work compensation, provided that they have been working for an indefinite period for at least 6 months in the company that is registering short-time work. This change came into force retroactively from 1 September 2020. It thus ensures an entitlement for this group of persons without interruption since March 2020. Their entitlement is limited until 30 June 2021.

Employers must claim compensation for their employees from the relevant unemployment insurance fund within three months of the end of each calendar month.

In principle, the STWC is paid for a maximum of twelve calendar months within a two-year period. However, the Federal Council has extended the maximum period by six months. This means that the STWC is paid for a maximum of eighteen calendar months. This regulation applies until 31 December 2021.

On 12 August 2020, the Federal Council decided to temporarily maintain the simplified procedure for short-time work compensation under the COVID-19 Unemployment Insurance Ordinance. As a result, employees will still not have to deduct their overtime accumulated outside the short-time work phase from their work absences before short-time work can be claimed. Holiday credits will also not be taken into account for the determination of a chargeable loss of working hours. Thus, employees do not have to first reduce their holidays before a claim for STWC arises. This regulation regarding overtime and holidays is valid until 31 December 2020.

As soon as an employee's original work is completely discontinued for longer than one month, the employee is obliged to look for suitable interim employment. The acceptance of interim employment requires the employer's consent in any case, but this may not be refused in principle or only if the employee would not be able to meet his or her obligations under the employment contract as a result. However, employees no longer have to report income earned through interim employment to the employer and income from interim employment is not taken into account when calculating loss of earnings (this regulation is valid until 31 December 2020). 

The amount of the compensation is determined on the basis of the contractually agreed salary for the last pay day period prior to commencement of short-time working. The relevant pay includes, in addition to basic salary, compensation for holidays and public holidays, commissions and contractually agreed gratifications such as the 13th month salary or bonuses. If the bonus amount remains uncertain, it is not considered as relevant salary. When the bonus payment is made, there can be a new calculation and a retrospective payment may be requested.

However, the maximum amount of the relevant salary corresponds to the maximum amount of compulsory accident insurance (currently: CHF 148,200.00 per year or CHF 12,350.00 per month).

No, because in this case the loss of earnings is not (directly) attributable to official measures.

However, according to the “COVID-19 Ordinance on Loss of Earnings” of 20 March 2020, parents who have to stop working to look after their children or persons who must self-isolate may apply for a daily allowance from the compensation office. The prerequisites are as follows:

  1. Parents who have to look after their children aged no more than 12 are eligible;
  2. They must be employed or self-employed when they stop working;
  3. and they must have OASI.

Parents who have to interrupt their gainful employment to look after their child during the school holidays are only entitled to claim if the facility designated for the care has been closed or the person designated for it has been quarantined. The daily allowance from the compensation fund is subsidiary to other social insurance benefits and to continued salary payments from the employer. This means that it is only applied if no other such compensation is received.

Entitlement to the daily allowance arises as soon as all requirements have been met, but for persons with caring responsibilities only on the 4th day after all requirements have been met. A maximum of 10 daily allowances shall be paid to persons in quarantine.

In the event of quarantine within the meaning of Art. 2 of the Covid 19 Regulation Measures in the Field of International Movement of Persons of 2 July 2020, there is no entitlement to compensation.

The daily allowance is equivalent to 80% of the average earned income, up to a maximum of CHF 196.00 per day (for every five daily allowances, an additional two daily allowances are paid, so weekends are also taken into account). The daily allowance is paid at the end of each month and must be claimed by the beneficiary from the competent compensation office. The competent compensation office is the one that collects the OASI contributions. If the employer continues to pay the salary despite the loss of earnings, the employer may claim the compensation for loss of earnings himself/herself.

The Federal Council has decided to maintain the simplified procedure for the advance notification of short-time work and the summary procedure for the settlement of short-time work compensation until the end of December 2020. Therefore, until 31 December 2020, only the so-called "STWC COVID-19 process" is valid for the processing of the STWC and only the COVID-19 forms are to be used for the settlement of the short-time work compensation.

The pre-announcement must be submitted 10 days before the start of the requested short-time work. The date of dispatch of the e-mail or the postmark or the date of submission to the eService shall apply. On the form, you must indicate the unemployment insurance fund with which you wish to settle the short-time work compensation.

The pre-registration can be submitted online via eService.

Alternatively, you can download the form in Excel format and submit it either by e-mail to kurzarbeit@was-luzern.ch or by post:

WAS Wirtschaft Arbeit Soziales
wira Lucerne
Cantonal Office (KAST) and Legal Department
Bürgenstrasse 12
P.O. Box
6002 Lucerne
 

As of 1 September 2020, a maximum authorisation period of 3 months for short-time work will apply again. Consequently, permits that are older than 3 months at that time will lose their validity. The companies affected by this must submit a new advance notification of short-time work.

If further difficulties with regard to the utilisation of employees can be expected to last longer than 3 months, another one should be applied for shortly before the expiry of the previous authorisation for the coming 3 months.

No, but self-employed persons are entitled to loss of earnings compensation if they suffer such a loss as a result of the measures taken by the Federal Council to combat the spread of the coronavirus (e.g. business closure, event ban, lost customers). This regulation is expected to apply until 30 June 2021. A number of conditions must be met for such a claim. If you have any further questions, please do not hesitate to contact our law firm or the cantonal authorities.

The compensation is paid in the form of daily allowances. The daily allowance amounts to 80% of the average income earned up to a ceiling of CHF 196.00 per day (two additional daily allowances are paid for each five-day allowance period, so weekends are covered). It is paid at the end of each month and must be claimed by the eligible person from the competent compensation office, that is, the office that collects the OASI contributions.

Loss of earnings compensation is secondary to other social insurance benefits. This means that it only applies if no other compensation is received.

The COVID-19 Regulation also extends the entitlement to STWC to persons in fixed-term employment, in apprenticeships or in the service of a temporary work organisation. For persons in apprenticeships, the extraordinary entitlement to STWC will cease at the end of May 2020. For persons in fixed-term employment relationships without a contractually agreed termination option or in the service of a temporary work organisation, the extraordinary entitlement to STWC will cease at the end of August 2020.

For hourly-paid workers, the same eligibility requirements apply as for monthly-paid workers. Thus, there is only an entitlement to short-time allowance if there is a contractually agreed working time. On 28 October 2020, the Federal Council decided to amend the Covid 19 Unemployment Insurance Ordinance. With the amendment, employees on call will be entitled to short-time work compensation under certain conditions. The amendment will enter into force retroactively from 1 September 2020.

Persons who are self-employed primarily in the cultural sector and are resident in Switzerland, on request, receive compensation for loss of earnings for the financial loss arising from the cancellation or postponement of events and projects or company closures following government measures combating the coronavirus. In addition, persons whose gainful employment is significantly restricted due to measures against the Corona virus and who suffer a loss of salary or income are entitled to Corona income compensation. The significant restriction is defined by a loss of turnover of at least 55 per cent compared to the average of the years 2015 to 2019. The persons concerned must declare and justify how the loss of turnover is attributable to measures to combat the Covid 19 pandemic.

Such compensation is capped at 80% of the financial loss. The entitlement to compensation expires on 30 June 2021.

Applications for compensation for loss of earnings must be submitted to the competent authorities designated by the cantons.

Affected persons can also apply for emergency aid to cover the immediate cost of living if they are unable to meet their own living costs due to the state's coronavirus restrictions. The emergency payout amounts to a maximum of CHF 196.00 per day.

Applications for emergency aid can be submitted to the association Suisseculture Sociale until 30 November 2021.

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