6. Cost-Reduction Strategies

To what extent can employers implement the following cost-reduction strategies as a result of COVID-19, and what are the primary limitations on each? 

• Furloughs.

Short-term layoffs are an alternative to dismissal and entitle employees to retain almost 90% of their salary, even if their hours of work are reduced by 20%, 40%, 60% or 80%. Full furloughs are generally not utilised, since an employee who is released from work is still entitled to full salary and benefits.

• Salary reductions.

Salary reductions are offered as part of the short-term layoffs scheme. Other salary reductions can also be applied, but generally require the employee’s consent.

• Redundancy.

Employees can be made redundant due to the negative financial impacts of the Coronavirus. Employers who wish to make employees redundant in Sweden, need to follow the last-in-first-out principle. Once redundant, the employees are entitled to full salary and benefits during the notice period. There is no statutory severance in Sweden.

• Facility closure.

Employers are free to close down their facilities, but still need to pay employees’ salary, even if the employees are not working. Support for salary costs can be obtained under the short-term layoffs scheme.