Social plan obligation – What companies and employees need to know

• Employment Law
• Private Clients
• SME

For a long time, the obligation to implement a social plan was not regulated by law in Switzerland. It was not until 1 January 2014 that a social plan became mandatory for mass redundancies above a certain company size. Until then, social plans were concluded by companies in connection with a number of redundancies for operational reasons either on the basis of collective labour agreements or on a voluntary basis as part of social responsibility.

This article summarises the cases in which a social plan obligation exists under the current law, how social plans are concluded and which elements are typically included in social plans.

Definition and applicability of social plan obligation

The law defines a social plan as an agreement in which the employer and the employees or their representatives define measures to avoid redundancies in the event of collective redundancies, to limit their number and to mitigate their consequences (see Art. 335h CO).

However, according to the regulations that came into force on 1 January 2014, not all employers are obliged to agree a social plan in the event of mass redundancies, but only companies that usually employ at least 250 employees and intend to lay off at least 30 employees within 30 days for reasons that have no connection with the employees . This means that even larger companies are not obliged to conclude a redundancy scheme if, for example, «only» 20 employees are dismissed for operational reasons within 30 days. This can lead to unsatisfaying results if, as a result of two independent «reorganisations» just a few months apart, one population in the company benefits from a social plan in which the statutory thresholds are reached, while the other population does not benefit a few months before or after. Employers can counter this by treating all redundancies for operational reasons in the same way by generally applying the social plan for all affected employees. However, there is no obligation to do so due to the statutory provisions.

Negotiating parties of social plan obligation

Employers cannot negotiate a social plan with each employee individually. The legislator stipulates that the employer negotiates either with the employee associations involved in the collective labour agreement, if it is a party to this collective labour agreement, or with the employee representative body; or finally directly with the employees, if there is no employee representative body. In the latter case, negotiating partners should be appointed as delegates for the company concerned.

Typical elements of a social plan

The law does not stipulate the content of a social plan and leaves it up to the negotiating parties to decide which elements are agreed. The only legal restriction is that the social plan must not jeopardise the continued existence of the company. The employer must be in a financial position to fulfil the conditions of the social compensation plan. It can also make sense to tailor the social plan to the needs of the workforce affected.

Therefore, the negotiating parties have freedom of contract in principle. However, if no agreement can be reached on the content of the social compensation plan, the negotiating parties are required by law to call upon an arbitration tribunal to define the content of the social compensation plan. However, this poses practical problems, as proceedings before an arbitration tribunal can take a very long time (and employees may be dependent on ‘cushioning’ the consequences of the dismissal at an earlier stage). There is also the question of who has to bear the costs of the proceedings. In order to avoid disputes as far as possible, a transparent social partnership based on mutual trust and good, open negotiations are of high importance. The same applies to parallel consultations in the context of collective redundancies.

Typical elements of the social plan are severance payments, extended notice periods, granting of outplacement or internal placement services, early retirement, hardship provisions, etc. Furthermore, the scope of application of the social plan should be clearly defined in terms of time, place and person in order to avoid disputes regarding the applicability of the social plan.