Implementing paternity leave correctly

Raymond Simmen Leader Payroll & Employment Solutions Switzerland, PwC Switzerland 16 Oct 2020

In the referendum of 27 September 2020, a clear majority of Swiss voters, 60.3%, backed the introduction of two weeks’ paid paternity leave. This will require amendments to not only the Loss of Earnings Compensation Act (LECA), but also provisions in the Swiss Code of Obligations (CO) and various other federal acts. These amendments are expected to enter into force on 1 January 2021.

Fathers must use their new fortnight of paternity leave within six months of their child’s birth, which they can do as a single two-week block or as individual days. As the employer, you will need to apply for compensation for loss of earnings from the applicable social security administration office, as it is not paid out automatically.

No other entitlements will be restricted during the leave. As an employer, you are not permitted to reduce your employee’s holiday entitlement. If you terminate the employment contract of a new father, his notice period will be extended by the number of remaining paternity leave days.

Eligibility

Paternity leave is available to all self-employed and employed fathers and those who receive daily allowances from unemployment, social or private insurance schemes. The Federal Council will determine eligibility requirements for men who do not fall into any of these categories due to incapacity to work or unemployment. To be eligible, fathers must be the legal fathers of children born after 31 December 2020. No paternity leave will be granted in the event of adoption. Fathers must also have been insured under the mandatory old-age and survivors’ insurance scheme (AHV) in the nine months immediately preceding the birth and must have been gainfully employed for at least five months during this period, meaning that the requirements are the same as for paid maternity leave. The length of insurance requirement will be reduced if the child is born before the end of the ninth month of pregnancy. For Swiss and EU/EFTA citizens, employment in an EU/EFTA country will be counted for this purpose. Entitlement will cease entirely if daily allowances have been exhausted, if paternity is denied, or upon the death of the father or the child.

Compensation

The social security administration office pays compensation in the form of a daily allowance either directly to the father or to your company, provided that you continue to pay the father’s salary during his paternity leave. You must therefore determine how you will handle paternity leave in practice and incorporate this into your payroll systems. If the father takes his leave in one block, 14 daily allowances will be paid. If he takes individual days, two additional days will be paid for every five taken.

Pay is the same as for maternity leave, i.e. 80% of the average earned income before the birth of the child, up to a maximum of 196 CHF per day.

Funding

Paternity leave, like maternity leave, is financed by the loss of earnings compensation scheme, and as such mainly by contributions from employees and employers. The annual costs are estimated at around 230 million CHF. To cover this, the wage percentage will be increased from 0.45% today to 0.50%, split equally between the employee and the employer. This corresponds to an increase of 50 centimes for every 1000 CHF of salary. You will need to adjust your payroll system for deductions accordingly.

Added value for families, added expense for employers

The original popular initiative, in 2017, called for four weeks’ paid paternity leave. However, the Federal Council and Parliament rejected that proposal as too costly. Subsequently, the National Council and the Council of States developed the counter-proposal for two weeks’ leave. The Swiss electorate’s clear approval of this proposal confirms that paternity leave chimes with what modern families want.

As an employer, you have to think about how to implement paternity leave. You need to consider whether you wish to pass on paid paternity leave directly as is, supplement it to reach 100% of normal pay and/or extend it. In your HR applications, the main areas affected are time recording (new form of paid absence) and payroll accounting, especially when it comes to correctly recording the new wage percentage and payments during paternity leave.

We also address this topic in the section “Miscellaneous topical issues” section of our German-language Aktualitätenseminar (Seminar on current issues) event.

Contact us

Raymond Simmen

Raymond Simmen

Leader Payroll & Employment Solutions Switzerland, PwC Switzerland

Tel: +41 58 792 42 33