Swedish government proposes support employers with short time work allowance

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Date:
31 Mar 2020

By:
Jenny Hellberg, Knut Elmstedt

The Swedish government has announced proposals to support employers and employees where short working time is introduced as a result of the coronavirus epidemic. They will enter into force by 7 April 2020 but with effect from 16 March 2020.  


Short-time work allowance means that an employer’s personnel costs can be reduced by up to 50% and at the same time the employee receives 90% of his or her salary. The State covers up to three-quarters of the cost. This is a measure that many help companies under severe pressure due to the COVID-19 outbreak.  

What does short time work allowance (korttidspermittering) mean?   

A short time work allowance is when employees’ working time is reduced for a limited period and the salary is decreased during the same period. The proposal is for a state contribution where the government will be paying up to 50% of employees’ salaries.   

How can an employer be eligible for the new contribution?  

First of all, the short time work allowance requires an agreement in order to obtain the state contribution. The company therefore has to agree with employees about the reduced hours and salary.  

That means that if the employer is bound by a CBA, the reductions must be agreed in a central and local CBA. If the employer is not bound by a CBA  a minimum of 70% of the employees at the geographical workplace must have agreed in writing.    

Application to the Swedish Agency for Economic and Regional Growth  

A condition for contribution is that the employer applies to the Swedish Agency for Economic and Regional Growth. If the contribution is accepted, the following cumulative conditions must be fulfilled:   

  1. The employer has temporary and serious financial problems.  
  2. The financial problems are caused by circumstances outside the employer's control. 
  3. The financial problems could not reasonably have been foreseen or avoided. 
  4. The employer should have used other available measures to cut costs regarding the employees.  

More details regarding what the application needs to include will be issued through a decree. This has not yet been communicated, but it will include what kind of information the employer needs to prove the financial problems among other information. Note that the employer must be able to show that it is possible to go back to business as usual. That means that the problems have to be of a temporary nature. The employer should, for example, provide in the application reasonable evidence that the intention is to go back to full production with regular working time after the period of short time work allowance.   

Point 4 above should be be highlighted in particular. According to the government, these different alternative measures may include changes in the work schedule but also dismissal of employees who are not permanent employees and who are not deemed to be critical to the business, i.e. consultants, hired staff or temporary employees. This assessment must be made on a case-by-case basis by each employer. It is important that an employer that applies for approval can describe why a certain measure is or is not available given the nature of the business.   

What is the level of contribution? 

In summary, the proposal means the following in cost savings and distribution of costs for employers, employees and the government:   

Level

Reduction of hours

Salary decrease 

Employer 

Government

The employer’s reduction of costs for the work force

1 20  4% 1%  15% -19% 
2 40 6% 

4% 

30%  - 36% 
3 60  7.5%  7.5%  45% - 53% 

 

The contribution can be paid for six months. This may be extended for three months.   

The levels above are fixed and cannot be changed through a central or local CBA or agreement.     

What can employers do now?   

  • Analyse the business. What may the effects be in the short and long term?   
  • What about the workforce and the need for it? Could it be enough to conclude an agreement on reduction of hours or do you need to consider dismissals due to redundancy?   
  • If you decide to proceed with the short time work allowance, initiate a dialogue with the trade union and/or the employees. 
  • If you decide to proceed with dismissals due to redundancy, request consultations with trade unions and give notice to the Public Employment Service (if at least five employees are concerned or if, during a period of 90 days, it can be assumed at least 20 employees will be involved).