Short-time work and loss of income: the impact on occupational retirement provision

The aim of the package of measures adopted by the Federal Council was to support the Swiss economy, preserve jobs, safeguard wages and provide a cushion for the self-employed. Liquidity injections were given to companies, and access to short-time work compensation was expanded and simplified. Since some groups were not entitled to short-time work compensation, the Confederation agreed on a separate package of measures based on the provisions of the income compensation regulations.

As of the end of August, the Swiss Federal Council resolved to modify the regulations relating to unemployment insurance with regard to COVID-19. This marked an end to the majority of the emergency legal measures introduced in April 2020 in the area of short-time work compensation and a return to the original system. Even so, the following aspects will remain in force until the end of March 2021: the simplified application process for prior notification of short-time working as well as the provision that accrued overtime does not have to be used up before drawing compensation.

According to the amendment of the COVID-19 legislation recently passed by the Swiss Federal Council, other modifications to the regulations are currently under consultation. The following changes are planned: the waiting period is to be removed. In addition, the accounting periods in which the loss of working hours exceeds 85 percent of company working hours are no longer to be considered. Finally, the entitlement to short-time work compensation is to be formally extended to include people in temporary employment and apprentices. The Swiss Federal Council will make a formal decision about this on January 20, 2021, but despite this, the planned measures will come into force on the intended date.

Short-time work compensation is used to preserve jobs and secure wage payments in the event of a temporary loss of work. Short-time work must be applied for by the employer. However, the eligible employees must consent to it. The basic requirement is that at least 10 percent of work is lost over four continuous weeks. Short-time compensation is calculated as follows:

A loss of working hours due to measures ordered by the authorities (such as the containment of the coronavirus) is normally sufficient, and will lead to compensation if the other requirements are met. There is one exception to this: there is no entitlement to compensation if the company can take advantage of other sales opportunities and thus continue to use an employee's full capacity, or if a private insurance company will cover the losses.

In principle, employees who are liable to pay unemployment insurance contributions, who have completed compulsory education and who have not yet reached the AHV retirement age are entitled to file a claim.

The special emergency regulations for the expansion of the groups entitled to claim compensation ended on August 31, 2020, with the modification of the regulations relating to unemployment insurance with regard to COVID-19. The simplified application process, as well as the provision that overtime does not have to be used up before drawing compensation, have been extended. They will remain in force until the end of March 2021.

The entitlement to claim for short-time compensation has now been removed for:

• employees with temporary employment contracts (entitled to claim until the end of August 2020)
• persons who are considered to be at particular risk because, for example, they suffer from cardiovascular disease, chronic respiratory problems or cancer, and who the employer could not offer adequate precautionary measures, in spite of every effort on its part, because of the operational situation (entitled to claim until the end of June 2020)
• students (entitled to claim until the end of May 2020)
• persons in a position similar to that of an employer (e.g., people employed by their own limited corporation or joint-stock company, shareholders and members of the highest executive body), including spouses or registered partners (entitled to claim until the end of May 2020)

On December 18, 2020, the Federal Parliament agreed on an additional article in the COVID-19 Act. According to this, persons with an income of up to 3,470 Swiss francs will get 100 percent compensation in the event of short-time working. For an income of between 3,470 and 4,340 francs, short-time compensation in the event of full loss of earnings is also 3,470 Swiss francs; partial losses of earnings will be compensated proportionately. Part-time wages are categorized on the basis of a wage extrapolated from a full-time job. From 4,340 francs, the compensation is calculated at 80 percent of the eligible loss of working hours, limited to a maximum of 12,350 Swiss francs per month. (explanation) If a different insurance benefit is already being paid, there is no longer any entitlement to short-time work compensation.

The Swiss Federal Council resolved to remove the waiting period for the payment of short-time compensation. A shortened waiting period of one day has been in force since September 1.

The cancellation of the prior notification period was rescinded by the Swiss Federal Council as of June 1, 2020. Since then, short-time working has again had to be notified ten days in advance.

The short-time work compensation can now be claimed for a maximum of eighteen months within two years.

Good to know: all social security contributions must be calculated based on 100 percent of a person's salary. The employer will be reimbursed by the unemployment insurance fund for its share of social security contributions. What does this mean for contributions to occupational retirement provision? In order to avoid gaps in an employee's occupational retirement provision, contributions remain due at the same level. Employers' reserves may be used for the payment of the employees' contributions in 2020.

You can apply for short-time work with the relevant cantonal office (KAST), or now online at https://www.job-room.ch/home/company.

Compensation for loss of income serves to mitigate the economic consequences of lost earnings. In accordance with the provisions of the income compensation regulations, the new COVID-19 Act gives the Federal Council and the cantons the competence to legislate measures to contain the coronavirus. The economic consequences of these measures are also to be covered by the coronavirus income compensation, which can be claimed until June 30, 2021.

The compensation for loss of income is calculated at 80 percent of the average income subject to AHV contributions which was achieved before the start of the compensation claim. The insured wages are limited to a maximum of 88,200 Swiss francs per year, which is equivalent to a maximum monthly amount of 7,350 Swiss francs. This would provide a daily allowance of 196 francs per day. The compensation for loss of income is subsidiary. This means that if a person who is entitled to claim already receives benefits from another social or private insurance, they have no right, or at most a partial right, to compensation. In the case of continued payment of wages, the employer is entitled to file a claim.

• Start/end for self-employed people: once all the requirements are met (from September 17, 2020, at the earliest), daily allowances will be paid for as long as the officially ordered measures last.
• Start/end for parents: from the fourth day after all the requirements have been met (from September 20, 2020, at the earliest), until an alternative care solution is found or the measure is lifted, and a maximum of 30 daily allowances are paid out for those who are self-employed. In most cases, the first three days are covered by the employer's continued salary payments.
• Start/end for people in quarantine: as soon as all conditions have been met (from September 17, 2020, at the earliest), a maximum of ten daily allowances will be paid until the quarantine is lifted.

For self-employed people who have already received compensation on the basis of the legal principles applying until September 16, 2020, the basis for the compensation calculation remains the same from September 17, 2020.

The compensation of loss of income is subject to the obligation to pay contributions under social security law. This means that the usual contributions for AHV, disability insurance, income replacement insurance and, if applicable, unemployment insurance are deducted. The AHV compensation funds can grant employers and self-employed persons a payment deferment for six months without interest on arrears. In the pension fund, insured earnings are not adjusted as long as the employer's obligation to the continued payment of wages exists in accordance with the Swiss Code of Obligations, Art. 324a. The full contributions are therefore still due.

The employee must apply for compensation of the coronavirus-related loss of income from their responsible AHV compensation fund it is paid out as a daily allowance.