As a result of the pandemic, the Swedish government presented a proposal on measures relating to the coronavirus, which was passed by the parliament. The decision means that the government can allow deferment of tax and social insurance fee payments and cover an increased proportion of the costs of short-time working. Short-time work is not the same as a normal lay-off, but a special measure designed to retain competence during a period of crisis, such as the corona pandemic. Short-time work means that an employee has a temporary reduction of salary and working hours, and the cost of this is shared between the employee, the employer and the state.
An employee’s working hours can be reduced by 20, 40 or 60 per cent, but the employee will still receive over 90% of their normal salary.
What sets this new proposal caused by the corona crisis apart from the 2013 Act on Support for Short-Time Work is that the government has now decided to cover a significantly larger share of the costs for employers. The new regulations do not mean that employers must implement reduced hours lay-offs, but they provide better conditions for those who wish to do so, thereby creating better prospects for employers to be able to retain their staff and then increase working hours and production when the situation improves.
The new regulations on reduced hours lay-offs will come into force on 7 April, but will be applicable from 16 March. The new regulations on reduced hours lay-offs will apply throughout 2020.
The new rules on short-time working have not yet been passed by the parliament, but we expect them to come into force as described above.
Since 2013, there has been a legislation in place on short-time working, and this was introduced after the financial crisis of 2008-09. So far it has never been used, and it has been criticised for not offering the same benefits as competing countries' corresponding laws for temporary or longer economic downturns.
Under current regulations, state support to employers for short-time work cannot be paid during an employee’s notice period. Therefore, the central agreements that we have signed contain provisions which mean that any employee who has been made redundant due to a shortage of work or has chosen to resign for reasons other than that the employer has begun a redundancy or dismissal process cannot be covered by short-time work agreements. The central agreements are applicable until further notice in accordance with the terms of the collective agreement.
However, the government has now proposed a legislative amendment (Bill 2019/20:132) with the effect that the state support may also be payable during a notice period in 2020. If this Bill is passed by the parliament, the matter will need to be addressed by the labour market partners, who will need to make relevant changes to the central collective agreements
There are three fixed levels of reduced working hours in the proposal: 20, 40 or 60 per cent, which means cost reductions of 19, 36 and 53% for the employer in the three respective cases.
For a 20% reduction in working hours, the salary reduction will be 4%; for a 40% reduction in working hours, the salary reduction will be 6%; and for a 60% reduction in working hours, the salary reduction will be 7.5%. The proposal includes a salary cap of SEK 44,000. This means that the employer may in principle be liable for salary costs above that amount.
Even if you work for an employer who does not have a collective agreement, you can still agree with your employer to reduce your working hours and salary, and your employer can receive state support for short-time working in certain conditions.
Companies that can demonstrate difficulties in meeting the financial challenges that occur in the wake of Covid-19. The difficulties must therefore be the result of circumstances outside the employer's control and have a specific adverse effecting on the company's business. The employer must have used other available measures to reduce labour costs. Companies may not be subject to corporate restructuring or be insolvent at the time of application.
What is important for companies to consider when applying for support?
Financial support is applied for through Tillväxtverket, the Swedish Agency for Economic and Regional Growth. The Agency encourages those companies that seek support to describe what they are doing actively to remain competitive and drive the business forward. They can describe both the current situation and whether there are particular negative effects that can be attributed to government decisions. There is also scope to describe efforts made to develop the company and staff during the crisis, such as distance learning for technical skills development.
One condition for the state to provide this financial support is that there are central collective agreements between the labour market partners and that labour market partners at local level enter into a collective agreement on short-time working. The collective agreement applies to everyone who is covered by it, and if the local parties agree that employees are to have reduced hours and salaries, this is to apply even if it goes against the wishes of an individual member.
For an employer who does not have a collective agreement, the following conditions must be met in order to be able to receive compensation for reduced hours layoffs:
Companies apply for compensation to Tillväxtverket, the Swedish Agency for Economic and Regional Growth, and it is this Agency which has the responsibility to represent the state on this matter. The Agency’s website has more information about short-time working and laying off staff with reduced hours.