The Swedish Government's proposed crisis package to secure Swedish businesses and jobs

1. Introduction

On 16 March 2020, the Swedish Government announced additional measures proposed in order to
help Swedish businesses to mitigate the financial difficulties that may ensue due to the outbreak of
the coronavirus (Covid-19). The proposed measures include different forms of state funded financial
support in order to offer businesses an alternative to dismissals and to help reduce short-term liquidity
issues. These measures will be subject to a formal decision by the Swedish Parliament this coming
Thursday, on 19 March 2020.


2. New regulations regarding short time working arrangements

State funded financial support for short time working arrangements was previously an option available
for businesses only during times of particularly severe recession, but the Government now proposes
that such financial support shall be available for businesses to apply for should they temporarily face
financial difficulties due to the coronavirus. Businesses shall have the option to apply with the Swedish
Agency for Economic and Regional Growth for approval for state funded financial support when using
short time working arrangements. A short time working arrangement is an alternative to dismissal and
means that the business and its employees agree that the employees temporarily shall have reduced
hours of work and salary. Employees can have their ordinary hours of work reduced by 20, 40 or 60
percent and they may retain a higher salary than what would correspond to their new hours of work.
The financial support from the state is meant to cover the additional cost that may arise.

Furthermore, the Government proposes to temporarily adopt specific regulations regarding short time
working arrangements that shall apply during 2020. Short time working arrangements subject to these
specific regulations are referred to as short-term layoffs and shall entitle employees to retain more
than 90 percent of their salary even if their hours of work are reduced by 20, 40 or 60 percent. The
state funded financial support shall cover most of the cost for the reduced working hours during this
period, which entails that businesses may temporarily cut their salary costs by about half.

The financial support paid by the state is calculated based on the employee's ordinary salary, however,
without consideration of any salary in excess of SEK 40 000 per month. The financial support will mainly
be paid out for a period of up to six months, but an additional extension of up to three months' support
will be possible should the financial difficulties subsist.

According to the Government's proposal, the new regulations shall enter into effect on 7 April 2020
but shall be applied retroactively from 16 March 2020. As such, the new regulations on short time
working arrangements and so-called short-term layoffs will provide businesses with alternatives to
dismissal should it be necessary to temporarily discontinue operations.

Allocation of costs for short time working arrangements according to the Swedish Ministry of Finance

Level

Reduction of
working hours

Reduction of
salary

Employer

State

Employer's reduced
cost of labour

1

20

4%

1%

15%

-19%

2

40

6%

4%

30%

-36%

3

60

7,5%

7,5%

45%

-53%

 

3. Further information on eligibility for financial support when applying short time working arrangements 

The requirements that shall be fulfilled by a business to be eligible for financial support when using
short time working arrangements include the following:

  • The business shall be in a state of temporary and serious financial difficulty caused by circumstances that the business cannot control and that the business could not reasonably have foreseen or avoided (e.g. a pandemic) and due to which the business has adopted other available measures to reduce the cost of labour.
  • The business shall not be subject to company reconstruction or insolvency etc.
  • The business shall not be subject to a trade ban or a claim registered with the Swedish Enforcement Authority to pay debts in relation to tax or social security contributions or other such charges.
  • The business shall have been registered with the Swedish Tax Agency as an employer at least the three months preceding the month when the Agency for Economic and Regional Growth shall consider the application for financial support.
  • The application for financial support may only concern employees:
    • who have been employed by the business for at least three months prior to the month when the Agency for Economic and Regional Growth shall consider the application for financial support;
    • who have been engaged at least to the same extent as they shall be engaged during the period of the short time working arrangement;
    • for whom the business is liable to pay social security contributions; and
    • who are not considered members of the employer's family.
  • The short time working arrangement shall include a reduction of hours of work by 20, 40 or 60 percent and of salary by 4, 6 or 7.5 percent.
  • If the business is bound by a collective bargaining agreement:
    • the employer shall be bound by a collective bargaining agreement regarding use of short time working arrangements approved by a central employee organization;
    • details regarding the use of short time working arrangements shall be concluded in a local collective bargaining agreement; and
    • the reduced hours of work and salary shall be compliant with the statutory levels set forth above.
  • If the business is not bound by a collective bargaining agreement:
    • a written agreement regarding use of a short time working arrangement shall be entered by the employer and employee at a time after which it has become necessary to apply such an arrangement;
    • at least 70 percent of the eligible employees of the relevant business unit shall participate in the short time working arrangement;
    • the level of reduction of the hours of work and salary shall apply equally to all participants belonging to the same business unit; and
    • the reduced hours of work and salary shall be compliant with the statutory levels set forth above.

4. Businesses will temporarily be entitled to receive compensation for sick pay

The Government proposes that the state temporarily assumes all cost in relation to sick pay paid out
during April and May 2020. The temporary measure is intended to be carried out by extended
application of present regulations regarding compensation payable by the state when business' suffer
extensive sick pay costs. This should entail that businesses will not be required to apply to receive any
compensation and that compensation for sick pay will be based on the businesses' declared social
contributions and PAYE forms.

5. Liquidity reinforcement

The Government proposes that businesses shall have the option to apply with the Swedish Tax Agency
for respite to pay social security contributions, preliminary tax and value added tax relating to
accounting periods from January until September 2020. Payment respite may cover three months' tax
payments and shall last for up to one year. During the period of respite, a fee amounting to 0.3 percent
shall monthly accrue based on the amount for which the business has obtained respite.
The Government proposes that the new regulations shall enter into effect on 7 April 2020 but it shall
be retroactively applicable as of 1 January 2020, which entails that businesses will have the option to
apply for retroactive respite and have already paid tax for February and March paid back.


6. Final words

Cederquist's employment team closely monitors further development of and information regarding
new regulations and measures that will help support businesses to mitigate the negative impact of the
coronavirus outbreak and do contact us should you have any questions in relation to the above or
other matters concerning employment.

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