Paternity leave and its impact on companies

Heated subject
Beneficiaries
Application and duration of benefit payments
Amount and payment of daily allowances
Financing and cost
First step before parental leave?

Heated subject

Family policy and the role of the state in this respect has always been a hot topic in Switzerland. According to Organisation for Economic Cooperation and Development (OECD) statistics, Switzerland is one of the seven OECD member states which does not grant fathers paid leave. To change the situation, a popular initiative proposing four-weeks' paternity leave was filed in July 2017. Parliament rejected the initiative as too costly and adopted an indirect counter-proposal proposing two-weeks' paternity leave. At the end of January 2020, a referendum was launched by an inter-party committee against paternity leave.

Parliament's proposal was passed by referendum on 27 September 2020 and as a result fathers will be entitled to two weeks' paternity leave from 1 January 2021. This article explains the scope and concrete modalities of this new social insurance scheme and its impact on companies in Switzerland.

Beneficiaries

Only fathers in the legal sense will be entitled to paternity leave. It makes no difference whether filiation is established by marriage to the mother, recognition or a court ruling. However, the biological father of a child born to a mother married to another man will not be entitled to paternity leave due to the absence of a legal link between him and the child.

Legal fathers must also:

• be gainfully active (employed or self-employed) or receive unemployment, incapacity for work or invalidity benefits;
• be compulsorily insured for old age and invalidity during the nine months preceding the birth of the child; and
• have been gainfully employed (employed or self-employed) for at least five of the nine months preceding the birth of the child.

Moreover, adoption does not, as it stands, entitle fathers to paternity leave. A parliamentary initiative to change this situation is currently pending before the federal chambers.

Application and duration of benefit payments

If the conditions for entitlement are met, fathers wishing to take paternity leave must still apply for it with the competent compensation fund (usually the one that collected the father's contributions).

Fathers may choose to take paternity leave in the form of single working days (10 days) or a block of two weeks (14 days). Each day of paternity leave entitles the father to a daily allowance. If the leave is taken in the form of isolated days, each block of five days entitles the father to two additional daily allowances, so that regardless of how the paternity leave is taken, the total number of daily allowances is 14.

Fathers can also take fewer than 10 days' leave. Thus, for example, fathers may take:

• two weeks' paternity leave when the child is born (14 daily allowances); or
• three days' paternity leave at the birth and two days' leave a few weeks later (seven daily allowances).

In all cases, paternity leave must be taken within six months of a child's birth.

Amount and payment of daily allowances

The amount of paternity leave is calculated in the same way as maternity leave: 80% of gross monthly pay, but no more than Sfr196 per day. Thus, for example:

• an employee earning a gross monthly salary of Sfr5,750 is entitled to a daily allowance of Sfr153.34 ((5,750x0.8)/30). They are entitled to a maximum of 14 daily allowances, so that the maximum amount that can be paid to them is equivalent to Sfr2,146.67 (Sfr153.34x14); or
• an employee earning a gross monthly salary of Sfr8,500 is entitled to a daily allowance of Sfr196 ((Sfr8,500x0.8)/30=Sfr226.67 but the benefit is capped at Sfr196). They are entitled to a maximum of 14 daily allowances, so that the maximum amount that can be paid to them is Sfr2,744 (Sfr196x14).

If the employer still pays the father his salary, the former will be reimbursed by the competent compensation fund. On the other hand, if the employer does not pay the father his salary or if the father is self-employed, the latter will receive the allowances himself.

Financing and cost

Paternity leave is financed by income compensation allowances (APG), which are already used for military, civil service and maternity cases. The APG contribution rate will be increased from 0.45% to 0.50% of gross salary. Employees and employers each pay half of this contribution. Thus, for example:

• the additional cost for an employee with a monthly salary of Sfr5,750 is Sfr2.88 per month ((Sfr5,750/1,000)x0.5), of which Sfr1.44 is paid by the employer; and
• the additional cost for an employee with a monthly salary of Sfr8,500 is Sfr4.25 per month ((Sfr8,500/1,000)x0.5), of which Sfr2,125 is paid by the employer.

In total, the Federal Social Insurance Office estimates the cost of paternity leave will be Sfr230 million per year.

First step before parental leave?

Even before the vote on 27 September 2020, many voices were calling for more substantial parental leave, along the lines of the Nordic countries. For those in favour of parental leave, the acceptance of paternity leave is only a first step before the forthcoming launch of a parliamentary or popular initiative.

By contrast, several political parties and interest groups reject a further extension of social insurance. Their main argument relates to the excessive cost to companies, especially small and medium-sized enterprises, which would find it difficult to do without an employee for several weeks, let alone several months. Therefore, family policy and the role of the state in this respect will likely remain a hot topic in Switzerland in the coming years.

For more information please contact Rayan Houdrouge or Adrien Renaud at Lenz & Staehelin by telephone (+41 58 450 70 00) or email (rayan.houdrouge@lenzstaehelin.com or adrien.renaud@lenzstaehelin.com). The Lenz & Staehelin website can be accessed at www.lenzstaehelin.com.