Coronavirus: Short-term layoffs scheme expanded

Already, the outbreak of the coronavirus has resulted in great economic consequences for many companies and employees. In order to aid companies and employees during this crisis, the Swedish government has – together with the Swedish social partners – implemented short-term layoffs. The scheme for short-term layoffs is built on an increased scheme for short-time work. The difference is that short-term layoffs include a significantly increased subsidy from the state, from the original one-third to three quarters. Furthermore, short-term layoffs will only be available between 16 March and 31 December 2020. The aim is to mitigate the effects of the coronavirus on the Swedish labour market.

The scheme for short-term layoffs enables companies to adjust to the current situation by temporarily being able to reduce employees’ working hours and salary, while simultaneously receiving state allowance corresponding to three quarters of the costs for the reduction of working hours. Because of the allowance, the companies’ employees can have their working hours reduced and still receive 88 – 96 % of their salary. The aim is for affected companies to be able to retain their staff and switch back up quickly when the situation turns.

Employers’ cost savings through short-term layoffs

When applying short-term layoffs, the allowance from the state will depend on how much the employees’ working hours are reduced. By the aid of allowance and salary reductions, eligible employers can reduce their salary costs by 19 – 72 %. Pursuant to this scheme, eligible employers' costs per laid off employee can be reduced by:

• 19 %, of which 4 % are salary reduction for the employee, if working hours are reduced by 20 %
• 36 %, of which 6 % are salary reduction for the employee, if working hours are reduced by 40 %
• 53 %, of which 7.5 % are salary reduction for the employee, if working hours are reduced by 60 %
• 72 %, of which 12 % are salary reduction for the employee, if working hours are reduced by 80 %*

* On 14 April 2020, the Swedish government proposed the implementation of a fourth level of short-term layoffs, which enables an 80 % reduction of working hours. This level is proposed to apply during May, June and July 2020. The proposal is proposed to enter into force on 1 June 2020 but to apply retrospectively from 1 May 2020.

The allowance is calculated on ordinary salary up to maximum SEK 44,000. According to the Swedish Agency for Economic and Regional Growth, any exceeding costs may be agreed upon between the parties, since such amounts are not governed by law.

Allowance under the scheme can be applied for from 7 April 2020, but the allowance can be granted retrospectively from 16 March 2020. Application is made to the Swedish Agency for Economic and Regional Growth. The allowance can be granted for six months, with possibility for extension for an additional three months.

Requirements for implementing short-term layoffs

In order to implement short-term layoffs, the company must have support in central and local collective agreements. If the company does not have a collective agreement, written agreements with minimum 70 % of the employees within the operating unit are required. In difference from if the company had a collective agreement, the same reduction of working hours and salary must then be applied for all employees within the operating unit who participate in the short-term layoffs.

Furthermore, the company must be able to demonstrate temporary and serious difficulties in meeting the financial challenges that result from the coronavirus. The difficulties must hence be caused by circumstances outside the company’s control and specifically affect the company’s operations. Additionally, the company must have used other available measures to reduce labour costs in order to be eligible. An example of such measures is dismissal of temporarily employed employees, consultants or hired staff who are not critical to the company’s operations. Lastly, at the time of the application, the company cannot be obligated to establish a balance sheet for liquidated purposes pursuant to the Swedish Companies Act, undergoing a business restructuring or be subject to bankruptcy.

After the application has been submitted

Even if the company applies for allowance for short-term layoffs, the employer maintains the responsibility to pay salary to the employees. During the agreed period of the short-term layoffs, the employer pays out the reduced salary that has been agreed. If the Swedish Agency for Economic and Regional Growth approves the application, a provisional allowance will be paid to the employer.

Three months after the approval of the application, the employer is responsible for making a notification for balancing to the Swedish Agency for Economic and Regional Growth. The aim of the balancing is to adjust the allowance which has already been paid out, amongst other with respect to the actual time worked by laid off employees. If the employees have been absent during the supporting period, the allowance shall be adjusted accordingly. The balancing will further enable for the company to apply for additional allowance.

Increased inspections of fraud

To prevent fraud, the Swedish government has proposed that the Swedish Tax Agency and the Swedish Agency for Economic and Regional Growth will be authorized to make control visits at companies which have applied for or received allowance for short-term layoffs. According to the proposal, an inspector may for example require that an individual who performs or can be assumed to perform work for the company verifies his or her identity. Thereafter, the inspector may ask questions concerning the business. The information provided may be compared with information received by the Swedish Agency for Economic and Regional Growth in the company’s application for allowance and in connection with balancing. The inspection may result in an obligation to repay granted allowance.

Further to the implementation of short-term layoffs, the Swedish government has introduced several other measures, among which are:

• The Swedish state takes over all costs for sick pay during April and May 2020;
• Respite with payment of employer’s contributions, deducted tax and VAT;
• Temporary reduction of employer’s contributions;
• Temporarily revoked qualifying deduction;
• Temporarily revoked requirement on doctor’s certificate up to day 14 of employees’ sickness period;
• Temporary discount for fixed rental costs in vulnerable sectors;
• Capital contributions to Almi Företagspartner and increased loan frame/credit guarantee ceiling for Svensk Exportkredit and Exportkreditnämnden to improve small and medium-sized companies’ and export companies’ opportunities to borrow money;
• State credit guarantees to airlines.