Swiss employment takes big hit as Covid-19 batters economy

Restaurants and bars have been hit hard by the pandemic in Switzerland. Keystone / Peter Klaunzer

The Covid-19 pandemic caused a significant rise in unemployment in Switzerland last year. The massive use of short-time work measures helped mitigate the impact on businesses and workers, the authorities say.

The annual unemployment rate rose to 3.1% last year due to the Covid-19 pandemic, the State Secretariat for Economic Affairs (Seco) reported External linkon Friday. The 2019 figure was 2.3%.

“An average unemployment rate of only 3.1% for 2020 is to be welcomed under the circumstances,” declared Boris Zürcher, head of Seco’s Labour Directorate, at a press conference in Bern. In spring, Seco had predicted unemployment to rise to 4%.

The number of job seekers topped 260,000 at the end of December 2020, which represents a 34.9% increase on 2019 – the highest level since February 1997.

The sharp rise in unemployment from mid-March slowed over summer but picked up again towards the end of the year, Seco said.

Short-term working

Hotel and catering, transport, manufacturing and tourism sectors in particular have been hit hard by the pandemic. Many companies that have seen an alarming drop in revenue have resorted to short-time working to avoid redundancies. 

According to Seco, the “massive” use of short-time work prevented unemployment from rising even higher in the first half of the year.

What is short-time working?

In Switzerland, when a company finds itself in difficulty, it can temporarily reduce the working hours of its staff. The employees then work at a lower percentage and the employer pays a lower salary which is supplemented by unemployment insurance. 

The employees are compensated with 80% of the loss of income. So if the company reduces the activity rate from 100% (full-time) to 50%, the company pays this 50% and the unemployment insurance fund covers 80% of the remaining 50%. The employee thus receives 90% of their initial salary. The unemployment fund pays its share to the employer, who uses this amount to pay the wages of the employees. 

The company can also cease operations completely for a certain period. 

The number of workers receiving short-time work compensation rose from 5,000 in February to 1 million in March, before peaking at a record high of 1.3 million in April. Between May and September, the total figure declined sharply due to the relaxation of Covid restrictions in Switzerland.  The number of people benefiting from short-time compensation is expected to rise again this winter.

In total, CHF9.2 billion ($10-4 million) was paid out in short-time compensation in 2020, not including November and December. At the height of the crisis payments exceeded CHF100 million a day.