Temporary short-term working with state support

Employers can receive compensation from the state in conjunction with temporary short-term working. The employees’ working hours can be reduced with 20, 40 or 60%. The reductions in pay for the employees must be 4, 6 or 7.5% respectively depending on the reduction in working hours. Compensation from the state is available for monthly salaries up to SEK 44,000. State support can also be received during the employee’s notice period. The employee whose employment has been terminated is, however, entitled to retain his or her full wages and other employment benefits during the notice period. Reducing such an employee’s pay would therefore constitute a breach of the Swedish Employment Protection Act.

The Swedish government has also proposed an amendment to the new scheme for state supported temporary short-term work. According to the proposal, employers may reduce employees’ working hours by 80% and simultaneously reduce the employees’ salaries by 12%. The amendments are proposed to apply for three months as of 1 May 2020.

Employers not bound by a collective bargaining agreement must sign individual agreements with its employees on short-term work. At least 70% of the employees per operational unit must sign agreements entailing participation in the short-term work and they must contain the same level of reduction. It is not possible to apply this differently depending on which group or category the employees relate to. No consultations with trade unions will be required.

If the employer is bound by a collective bargaining agreement, there must be (a) a collective bargaining agreement concerning short-term work entered into or approved by a central employees’ organisation and (b) a local collective bargaining agreement with more detailed preconditions concerning the short-term work. There is no requirement that 70% of the employees in a particular operational unit take part in the short-term work.

It should be noted that some collective bargaining agreements entered into or approved by a central trade union, do not allow for local collective bargaining agreements to be entered into if the employer has proceeded with redundancies.

State support can only be received by employers that suffer from temporary and serious financial difficulties which could not reasonably have been foreseen or avoided through other measures available. Such measures include dismissing staff who are not employed on a permanent basis and who are not judged to be critical to the operations, such as consultants, hired-in workers or temporarily employed employees. Further, the Swedish government has proposed to add a clarification to the legislation regarding issuances of dividends and other similar outgoing payments and how such transactions affect employers’ entitlement to receive state support in conjunction with short-term work. The proposal aims to clarify that employers that issue dividends and other similar outgoing payments have not suffered from temporary and serious financial difficulties, having the consequence of such employers not being entitled to receive state support.

Employers must also be viable from a long-term perspective for support to be available. The employer must therefore show that the operations are profitable and that they may be profitable again after support has been granted by the Swedish Agency for Economic and Regional Growth (Sw. Tillväxtverket). This should be supported by historical figures, accounts of how the company has previously handled financial difficulties etc. Newly-formed companies can show this by providing sector-specific figures etc.

A comprehensive application to the Swedish Agency for Economic and Regional Growth will be required. It therefore falls upon the employer to show that it is likely that the, above mentioned, preconditions for support are met. The applications opened on 7 April 2020 and can be retroactively implemented from 16th March 2020.

The support period is limited to six calendar months and can be extended by an additional period of three months. The Swedish Agency for Economic and Regional Growth will, however, initially only accept a four-month support period. Employers must initiate the first month no later than 45 days following approval in respect of support from the Swedish Agency for Economic and Regional Growth, otherwise support will not be provided.

The Swedish Agency for Economic and Regional Growth will, according to the Swedish government’s latest proposal, be able to conduct unannounced inspections of the work places in which the employees participate in the short-term working scheme. Employers are obligated to make a reconciliation after support has been granted by the Swedish Agency for Economic and Regional Growth. The purpose of these reconciliations is to establish the definitive amount of financial support based on the actual implementation of the working hours during the support period.

Options for employers to consider during the Covid-19 crisis to reduce labour costs