Unfair: No unemployment benefits for failed founders

In his The well-known business angel Roland Zeller has the latest blog post a problem has been raised that is practically not discussed at all in Switzerland: If a startup fails, the founders are not entitled to unemployment benefit, even though they have always paid money into unemployment insurance. I think this practice is extremely unfair.

No entitlement to unemployment benefits

With a good lawyer, you can commit pretty much any form of white-collar crime in Switzerland - with one exception: If an employer fails to pay employees' social security contributions, they are personally liable. That can get really expensive. This is not the only reason why most founders pay meticulous attention to ensuring that all contributions are paid. Since the founders are also officially employed by the startup, the company also pays unemployment insurance contributions for them every month.

If it becomes apparent that a startup will fail, the founders often do not pay themselves salaries for a long period of time in order to conserve liquidity. If the startup ultimately fails, bankruptcy must be filed. If the company can no longer pay salaries due to illiquidity, normal employees will pay the salary Insolvency Fund a. It pays 100% of the salary for work already done (maximum CHF 12,350 per month), i.e. it covers the salary that the startup can no longer pay. After that, the unemployment insurance fund takes over. If cash can still be generated from the bankruptcy estate during liquidation, the unpaid salaries of the employees will be covered first and foremost (class 1, the amount then goes to the insolvency fund since it has already advanced the wages), and social security contributions that have not been paid will be covered secondarily (class 2).

So far, so good - unfortunately these safety nets do not work for the founders. From the state's perspective, every failed founder is a potential white-collar criminal and is suspected of intentionally running his startup into the ground. The reasoning is: It would be possible that the founders set extremely high wages for themselves in order to then deliberately file for bankruptcy so that the unemployment insurance company would have to pay high compensation and the founders would be left with a bad case. A slap in the face for every founder who works half to death for his startup and ends up in a shambles in his private life. In addition, all of the founders' claims (e.g. unpaid salaries) will be moved to class 3 for the same reason, i.e. they will only be paid out once all other creditors have been serviced.

Pragmatic solution: Set maximum wage for unemployment compensation

The legislator's perspective says a lot about the failure culture in Switzerland. Anyone who asks the Office of Economics and Labor in Zurich should not be surprised if they receive a disdainful answer:

You don't have to found a startup if you can do business!

Please don’t get me wrong: I am a firm believer that startup founders need to take risks. But it is simply unfair that the founders always pay unemployment contributions and receive no support in the event of failure (after all, depending on the source, up to 90% of startups fail). I know from my own experience how hard it is: You haven't received any wages for months, you have to prepare the complex process of filing for bankruptcy and ultimately have to deal with the failure personally. At the end of a startup, the founders often find themselves without a single franc in their bank account - especially in expensive Zurich, you can't survive like that for long.

The solution would actually be very simple: Instead of accusing failed entrepreneurs of having deliberately caused the failure in order to obtain high unemployment compensation, one could cap the wages on which the compensation is based. If you, as a founder, are faced with a heap of shambles and are practically bankrupt in your personal life, even a small amount of unemployment benefit would be a huge relief.

So my suggestion is: a maximum wage for founders is set, which is used as the basis for unemployment compensation. This maximum wage could, for example, be CHF 5,000 per month - so the unemployment insurance fund would pay out CHF 3,500 per month. That's only fair, because after all, the founder always paid in his amounts.

I wish that ecosystem players like Digital Switzerland or even that Institute for Young Entrepreneurs take up this issue and work for a pragmatic solution at the political level. It can't be the case that every politician and CEO likes to be photographed with cool startups, but as soon as the entrepreneurs fail, they are dropped.