More companies embrace 'partial unemployment'

Faced with plummeting sales revenues in recessionary times, an increasing number of Swiss companies are resorting to a "partial unemployment" scheme to reduce costs without letting go skilled employees. Last year, politicians were considering eliminating the programme that allows workers to collect benefits for lost hours, but it is now seen as a temporary stabilizing force as the economic slowdown takes hold. Responding to slumping sales, Swatch resorted this week to a national programme that allows Switzerland’s largest watchmaker to slash labour costs at one of its subsidiaries without sacking a single worker.

Universo, the manufacturer of minute and hour hands based in La Chaux-de-Fonds (Neuchâtel), announced it is cutting the work hours of 285 of its 350 employees by 50 percent for three months, starting September 1.
But under a federal programme, the workers at the specialized factory are eligible to collect unemployment benefits that cover 80 percent of the wages for their lost work hours.
The company is just one of several watchmakers and other industrial firms capitalizing on the “chomage partiel” programme that is helping to take the sting out of dire economic times.
More than 41,000 workers in Switzerland are now receiving benefits while working reduced hours, according to figures from the federal secretariat for the economy (Seco). And the numbers are increasing every month.
Similar schemes exist elsewhere in Europe in countries such as Germany and France, but it is a largely foreign concept in most Anglo-Saxon countries. “The plan gives companies time to readjust to the new situation,” Rita Baldegger, a spokeswoman from Seco told Swisster.
The worsening global economy has particularly hit Switzerland’s export industries – watchmaking included – which in recent months have seen orders plummet. Faced with a recessionary environment, the Swiss government recently boosted the period for which benefits can be collected under the partial unemployment plan to 18 months from 12 months.
Extended benefits will only be available until the end of 2011, when the government hopes to see the Swiss economy recovering, Baldegger said. The programme is particularly well suited to the watch industry, which just a few months ago was crying out for skilled employees to meet booming demand. Now that sales have retreated, companies can adjust their labour costs without letting go of their trained workers.
“It means the companies still hope for better times and they can hold on to their qualified employees,” Baldegger said. Hiring and training new employees is an expensive proposition so it is often in the interest of companies to resort to partial employment, she said. “It gives them the time and space to readjust their outlook.”
As recently as last summer, politicians were pondering getting rid of the partial unemployment scheme because so few companies were using it. The number of workers receiving benefits under the programme dwindled to 383 last August. But since then the number of company requests has grown from 45 to more than 2,200.
Companies have to seek approval from the cantons to use the programme with a pre-announcement three months ahead of the plan taking effect. Cantonal authorities investigate to ensure that the programme is being used for legitimate reasons, Baldegger said.
Businesses that want to shut down a plant to clean the premises, for example, cannot use the programme in this way, she said.
Meanwhile, workers who are placed on partial layoff remain fully eligible for regular unemployment benefits under Switzerland’s generous insurance scheme. Also administered by the cantons, the national plan provides 18 months of benefits and two years’ worth for those over the age of 55.
With unemployment expected to average 3.8 percent this year, rising to 5.2 percent next year, the programme is accumulating large deficits, which the partial unemployment scheme is only adding to.
It is currently financed through a two percent deduction from wages under an obligatory scheme, with costs shared equally by workers and employers. Eight years ago, the scheme was in the black and politicians adjusted payments in 2003 to provide benefits for an average of 100,000 unemployed at any one time, Baldegger said.
That number has risen beyond 125,000 and is climbing. With the insurance scheme now set to see a deficit of 10 billion francs by the end of 2010, law makers have introduced a project that would increase deductions to 2.3 percent, while increasing an extra one percent premium for high wage earners.
However, the hikes are not likely to be intorduced for a couple of years, Baldegger said. "It's certainly not going to be implemented as long as the crisis is going on," she said.