The Swiss economy, especially the tourism industry, has been feeling the effects of the coronavirus for several weeks (see our recent post "Coronavirus – What employers should know"). Now that the coronavirus has reached Switzerland, it is expected that the virus and the further measures to be taken due to the virus (up to and including quarantines), respectively, will have (serious) financial and operational consequences for other industries and employers. Under certain circumstances – which are outlined below – employers can counteract these consequences by a timely application for the introduction of so-called reduced working hours ("RWH"; "Kurzarbeit"). Also, the State Secretariat for Economic Affairs ("SECO") announced over the weekend that companies may apply for the introduction of RWH due to the coronavirus and its effects on the economy and/or businesses.

Definition of RWH

RWH is defined as the temporary reduction (or even complete cessation) of work within a business (or business part) ordered by the employer for generally economic reasons (e.g. loss of orders) with a corresponding reduction in the salary to be paid by the employer.

Introducing RWH is subject to the prior authorization by the competent cantonal labor office and to the express consent of the employees.

If the conditions for the introduction of RWH are met, the Unemployment Insurance ("UI") covers a part of the salary costs of employers introducing RWH in case of a short-term stoppage with the aim to prevent redundancies (so-called "RWH Benefits"; "Kurzarbeitsentschädigung").

Requirements for the introduction of RWH

1. Recognizable loss of work / Records regarding working times

RWH Benefits are paid only in case RWH is introduced in case of a recognizable loss of work, meaning a loss of work which:

(i) is due to economic reasons and unavoidable (which may include economic reasons due to the coronavirus);

(ii) amounts to at least 10% of the total working hours being normally performed by the employees of the business (or business part) within an accounting period (i.e. 1 calendar month); and

(iii) is (presumably) temporary and RWH may be expected to protect the affected employees' jobs.

In addition, it must be possible to determine/measure the loss of work for which RWH benefits are being claimed. It is therefore essential that the employer has detailed records of the employees' working times, i.e. regarding: (i) daily working hours (incl. overtime) normally performed, (ii) hours not worked due to the loss of work and (iii) employees' normal absences from work (due to sickness, holidays etc.).

2. Eligible employees

RWH Benefits may generally only be claimed for affected employees who are subject to payment of UI contributions and are in active employment of an unlimited duration. Not eligible for RWH Benefits are, inter alia, employees with fixed-term employment contracts, temporary workers, employees only working "on call" and employees whose employment relationship has already been terminated (i.e. during the notice period).

Eligible employees are entitled to receive RWH Benefits covering up to 80% of their salaries. Unlike unemployment benefits, RWH Benefits are paid to the employer. But, RWH Benefits may only be claimed for employees with their express consent. If employees refuse to consent to RWH, then the employer remains obliged to paying their full (100%) contractual remuneration.

Procedure

1. Application for RWH

The employer has to apply for the introduction of RWH with the competent cantonal labor office at least 10 days in advance and select an UI Fund ("Arbeitslosenkasse") for claiming RWH Benefits. In the application, the employer has to provide detailed information and documentation regarding: (i) its business and employees, (ii) the necessity and reasons for RWH (including the past and expected future development of the business) and (iii) the presumed extent and duration of RWH.

The labor office may grant authorization for RWH for a duration of up to 3 months. In case RWH exceeds this duration, a new application has to be made.

2. Claiming RWH Benefits

Notwithstanding the authorization of RWH and the employees' consent thereto, the employer is obliged to pay 80% of the employees' salaries (and their regular and full social security contributions) at the normal pay date.

In turn, the employer may − and is required to do so within 3 months − claim RWH Benefits for each accounting period (i.e. 1 calendar month) from the UI Fund. For each employee, such claim has to indicate in detail the employee's contractual/normal working time and the employee's loss of work.