Short-time work allowance

Sweden
Phase: Management
Type:
  • Income support for workers
  • Working time flexibility
Last modified: 08 January, 2021
Native name:

Korttidsarbete (korttidspermittering)

English name:

Short-time working allowance

Coverage/Eligibility

The short-time working allowance scheme is open to all companies of the private sector who face temporary and severe economic difficulties.

 

 

Main characteristics

Support for short-time working (also known as short-time layoffs) is regulated in the Act (2013:948) on short-time working (Lag (2013:948) om stöd vid korttidsarbete). Short-time working means that employers can reduce their employees’ working hours and receive financial support from the central government to compensate for a significant part of the costs for retaining the employee.

This instrument was introduced in 2014, some years after the financial crisis in 2008. Under current legislation, support to short-time working is a temporary measurement in the sense that it can only be activated in a deep recession or if the risk for such is imminent. An additional requirement is that the activation of this support scheme does not impede structural change in the economy (Statens offentliga utredningar, 2018). However, in March 2020 the government proposed changes to the Act on short-time working (2013:948) that would make it possible for companies facing significant and temporary financial challenges to apply for support even if this measure has not been activated due to economic crisis (Government Offices of Sweden, 2020). 

The short-time working scheme was activated in April 2020 due to the COVID-19 pandemic for the first time. This scheme has been one of the central COVID-19 related policy measures used in Sweden. Individual employers facing serious financial difficulties that could not reasonably have been foreseen or avoided can now apply for financial support for a limited period. 

Also, temporary amendments to the Act on short-time working (2013:948) that decrease the costs of the use of the short-time working scheme for employers and employees have been made. Under these temporary provisions, working time can be reduced by up to 60% except for June and July 2020 when working time can be reduced up to 80%. In the currently applied scheme, 20-60% reduction in working hours decreases the costs of the employer by 19-53%. The state covers up to 45% of the costs (except for June and July 2020 when working time can be reduced up to 80% and the state covers up to 60% of the costs) (Tillväxtverket, 2020).

The application to receive support opened on 7 April 2020 but will be retroactively applied to as early as from 16 March. This temporary provision is in force until the end of 2020. 

As part of the package of measures to mitigate the economic impact of the COVID-19 outbreak for companies, the Swedish government has also introduced a temporary reduction of employers’ social security contributions for the period 1 March to 30 June 2020. Employers were only obliged to pay the old-age pension contribution (ålderspensionsavgift) (10.21%). This reduction applies to up to 30 employees and on that portion of the employee’s wage that does not exceed SEK 25,000 (approximately €2,400) per month. This entails tax relief of up to SEK 5,300 (approximately €500) per employee and month. The proposal’s cost to public finances is estimated to SEK 33 billion (approximately €3.3 million). This measure could be used by companies receiving short-term working allowance, new-start job subsidies and other types of financial support from the central government.

Funding

  • National funds

Involved actors

National government
Legal framework and funding
Other
The Swedish Agency for Economic and Regional Growth (Tillväxtverket) is the administering authority for the short-time working scheme.

Effectiveness

According to database of the Swedish Agency for Economic and Regional Growth, they had received 74,700 applications by 15 June 2020. Two months later, in August 2020, the number of applications was 81,300. 

In August 2020, the number of employees covered by this measure was approximately 570,000. The amount of financial support granted for companies by August 2020 was SEK 27 billion (approximately €2.6 billion). 

The estimated financial support that will be paid out to companies during 2020 SEK 95 billion/ €9.5 billion (Dagens Nyheter, 2020). 

Strengths

The short-time working scheme increases flexibility in the labour market - employers' facing significant temporary financial difficulties may cut down the working hours of their employees instead of dismissing them.

Weaknesses

The current Swedish short-time working scheme can be only be activated in a deep recession or if risk for such is imminent (Statens offentliga utredningar, 2018). This has been critisised for not being competitive - in many other European countries these schemes are permanent and more flexible. This is considered to be a disanvantage for companies based in Sweden. As it has been mentioned above, the government has recently proposed changes to the Act on short-time working (2013:948) that make this scheme permanent in the sense that would make it possible for individual companies facing significant and temporary financial challenges to apply for support, even if this measure has not been activated due to economic crisis (Government Offices of Sweden, 2020). 

Examples

No information available.
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