On March 16 the Swedish government presented measures to mitigate the economic consequences of the virus outbreak (Covid-19). The government intends to submit the proposal to Riksdagen (the Swedish Parliament) for a decision as early as 19 March 2020. Measures in the emergency package include a new system of short-time work allowance, the temporary overtaking of the costs of sick leave by the State and the deferral of corporate tax payments. The following is a brief description of the emergency package as well as other incentives taken. Also, we briefly explain some other aspects that are important to consider.
The government's proposed emergency package:
- Support for short-time work allowance - The employer's possibilites to receive financial support for short-time work is increasing. Employers' wage costs during such short-time work are reduced by up to 50 % due to the State covering a large part of the cost. The employee receives more than 90% of his/her salary. The proposal will be introduced on 7 April 2020, but will be effective retroactively from 16 March 2020.
- The cost of sick pay - The state temporarily takes the full cost of all sick pay costs during April and May. Self-employed are compensated by receiving a flat-rate sick pay from day 1 to 14. The government has also previously decided to scrap the day of unpaid sick leave between 11 March and 31 May. Thus, during this time the sick pay will be paid from the first sick day
- Deferral of payments - Companies may receive deferral with the payment of employer's contributions, preliminary tax on salary and VAT reported monthly or quarterly. Company deferral covers three months of tax payments and is provided for a maximum of 12 months. Deferral will not be granted to companies that mismanage their finances or have larger tax liabilities. The rules are proposed to take effect on 7 April 2020, but can be applied retroactively from 1 January 2020. This means that companies that have paid tax on their tax account for January to March can have the tax refunded from the Swedish Tax Agency.
Labour law aspects
Employers should already investigate whether they have the possibility to use short-time working and, in such case, how that should be organized within the company Regardless, it is a prerequisite that the employer and the employees or central and local employee organisation reach an agreement regarding short-time work. Below are three things you should consider regarding short-time work.
- Companies that see a need to introduce short-time work should initiate a dialogue on the issue with employees or employee organisations.
- The company should draw up a well-reasoned application with detailed information and supporting documents, as it is the employer who must show that the conditions for financial support are met.
- Finally, since there is a risk that the employer could be obligated to repay the support, in whole or in part, it is important that the system is used properly.
Contact us at Setterwalls and we will help you with the process.
Other topical issues:
- Force majeure - The spread of Covid-19 may constitute grounds for invoking force majeure — i.e. the possibility of being released from liability for breach of contract due to unavoidable and unpredictable events. Since there is no specific legal regulation on force majeure in Sweden, the starting point is the parties' agreements. Having said that, regulation may be different in other countries. It is therefore necessary to examine important agreements and to review whether there is a specific clause on force majeure, how it is formulated and what jurisdiction and which country's law applies. The question if force majeure is applicable must be assessed on a case-by-case basis. Contact us and we will help you determine if it is applicable to you.
- Corporate restructuring - For companies that already have major payment difficulties and are facing bankruptcy decisions, corporate restructuring may be a possible way out. During the duration of a corporate restructuring, enforcement may not, as a general rule, take place. The administrator normally draws up a proposal for a so-called public composition in which the company's total debts are written down and a percentage amount (at least 25 percent) is paid.
- The Swedish Riksbank's loans to companies - The Swedish Riksbank has decided to lend SEK 500 billion to Swedish banks. The money is lent to the banks, which in turn determines which companies can take part in the loans. Contact your bank to see if it might be relevant for you.
- GDPR - Information about employee illnesses is particularly sensitive. It may be appropriate to review your procedures regarding the processing of personal data.