The long-term employment indemnity is outlined in Articles 339b et seq. CO. However, it is important to note that these provisions have become less relevant in practice. Indeed, the introduction of the Federal Act on Occupational Retirement, Survivors' and Disability Pension (LPP) in 1985 significantly impacted the application of long-term employment indemnities provided under Articles 339b et seq. CO.
Eligibility Conditions
Firstly, it is necessary to verify if the cumulative conditions for granting the indemnity are met, as stipulated in Article 339b CO:
The employee must be at least fifty years old at the time of termination of the employment relationship.
The employment relationship must have lasted at least twenty years.
In the event of the employee’s death, Article 339b para. 2 CO applies.
Calculation of the Indemnity
The next step, once the individual is eligible for the indemnity, is to calculate the amount due (Article 339c CO). This provision covers several scenarios:
The amount of the indemnity can be determined by written agreement, standard employment contract, or collective bargaining agreement, but it must not be less than two months' salary (Article 339a para. 1 CO).
If the indemnity amount is not specified, the judge will determine it at their discretion, considering all circumstances; however, it must not exceed the amount of eight months' salary (Article 339b para. 2 CO). Factors such as the employee’s age and length of employment are major considerations, along with other factors like the employee's personal situation and economic capacity.
The indemnity amount can be reduced or even eliminated (Article 339c para. 3 CO).
Timing of Payment
According to Article 339c para. 4 CO, the indemnity is due when the employment relationship ends. However, the payment can be deferred by written agreement, standard employment contract, collective agreement, or by the judge.
Deduction of Social Security Benefits
Pursuant to Article 339d para. 1 CO, if the employee receives benefits from a pension institution, these can be deducted from the long-term employment indemnity to the extent that they were financed by the employer or by the pension institution through the employer's contributions.
Employer’s Obligation
The employer is also relieved from the obligation to pay a severance indemnity if they commit to providing future pension benefits to the employee or arranging for such benefits through a third party (Article 339d para. 2 CO).
Impact of the LPP
Following the introduction of the LPP, the long-term employment indemnity has lost much of its significance. Indeed, Article 339d CO often replaces the indemnity for long-term employment, making Article 339b CO rarely applied.
It is important to note that Article 339d CO establishes the principle of subsidiarity of the indemnity in relation to pension institution benefits.
In practice, the employer pays the indemnity in cases where the employee is not sufficiently affiliated with a pension institution. This mainly concerns part-time workers. To calculate the severance indemnity amount, the indemnity due is determined and then adjusted by the replacement benefit (Article 339d CO) to establish if the employee is entitled to severance indemnity.
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