Cessantia: Legal Insights

Cessantia: Legal Insights

From Attorney at Law Suhendra Leon

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In earlier articles, I have briefly mentioned “cessantia”, but I’ve noticed when dealing with clients that not much is known regarding this subject. Therefore, I decided to write an article dedicated to “cessantia”. I must admit that researching the subject for this article also increased my knowledge regarding the Cessantia Ordinance. For this article, I have simplified the information presented. Thus for specific questions, I recommend seeking legal advice for your particular situation.

To put it simply, cessantia is a severance payment. According to article 2 of the Cessantia Ordinance, the employer and the employee determine the weekly wage at the start of the employment and each time the wage is changed. Any benefit in whatever form the employee receives as compensation for his work at the expense of his employer, as well as from third parties, which affect the terms of the employment contract, is considered wages. Not considered wages are social premiums, temporary overtime compensation, or an exceptional special compensation that is given for above-normal work performance.

Therefore, employer and employee should determine the average monetary value of the wage that consists wholly or partly of housing, benefits in kind, education or monetary benefits, commission, bonuses, and tips, to be able to calculate the weekly wage.

If the employment relationship ended, not due to the fault of the employee or because of circumstances that have to be attributed to the employee, the employee will receive a one-off payment by the employer, based on the last wages received. For the first 10 years of service, the employee will receive one week’s wage for every year, for the 11th till 20th year of service the employee will receive 1.25 weeks for each year, and subsequent years of service two weeks’ wage for each year.

The employee is also entitled to cessantia when he retires, unless he has a company pension that surpasses the old age pension.

SZV manages a cessantia fund and employers pay premiums for the maintenance of this fund to SZV. Therefore, if no cessantia is paid by an employer, who has been declared bankrupt or who has been granted a moratorium, the employee can claim the cessantia payment from SZV to a maximum of the daily wage determined per the Ordinance on Health Insurance.

SZV may decide to grant cessantia if an employer finds himself in the situation that he has ceased to pay, while he has not been declared bankrupt or a moratorium has not been pronounced.

I would not want to encourage claims on the cessantia fund, because I gather that the folks at SZV would not appreciate that. However, I still encounter employers that are greatly affected by the financial consequences of the pandemic and cannot pay their employees. Furthermore, some employees are not being paid due to the financial consequences of the pandemic for their employers.

In most of the situations I have encountered, neither the employer nor the employee filed for bankruptcy of the employer, while it is clear that continuation of the business is not feasible. Maybe filing for bankruptcy can be a solution for employers that appreciate their employees, but due to circumstances are not able to continue their business and pay their employees and for employees that are not being paid by their employers due to the pandemic.

I would recommend to employers, who are in the situation where they have ceased to pay (creditors and employees); to seek advice regarding bankruptcy or a moratorium, as in such cases, the employees could request cessantia payment from SZV. For employees, who are not being paid, I recommend that they consult their lawyer regarding the bankruptcy of their employer, and SZV regarding cessantia.