Self-employed people are also entitled to social assistance under certain circumstances. An important criterion here is economic viability. And: Social assistance is intended to cover personal living needs, not to finance business activities.

In the years before the Corona pandemic, the number of self-employed people on social assistance remained stable at just under 2'000. Compared to the total number of self-employed people in Switzerland, which, depending on the definition, comprises several hundred thousand people, this number is rather small. In 2020, the number of self-employed people on social assistance increased by around a third, but fell to around 2'100 people the following year, roughly returning to the pre-pandemic level, as Ingrid Hess, Head of Communications, Swiss Conference on Social Welfare (SKOS), writes in «Soziale Sicherheit CHSS».

But in which cases are self-employed people entitled to social assistance? The article by Ingrid Hess gives the answers of the SKOS recommendations in an abbreviated form. The definition of self-employment, which is also part of the recommendations, is not discussed in detail.

Main or secondary occupation?

First, it must be emphasized: Social assistance functions according to the principle of subsidiarity - both for employees and the self-employed. Before social assistance is examined and assessed, it must be ensured that preceding federal, cantonal, and private benefits have been exhausted. If necessary, social assistance must provide advance payments.

From the point of view of social assistance, the first thing to clarify is what purpose the self-employed gainful employment serves, explains Hess. Is it a main occupation that is intended to ensure the economic independence of the person concerned? Or is it a secondary occupation that is important because it serves social integration or provides a daily structure?

In the first case, the conditions for receiving social assistance are stricter than in the second. Persons who wish to engage in self-employment as their main occupation can only be supported by social assistance for a limited time and subject to conditions.

Business must be profitable

A central criterion for the entitlement to social assistance of self-employed persons is the economic viability of the business. A self-employed activity is economic in the sense of social assistance if it secures the livelihood of the person concerned and those dependent on him or her. While receiving social assistance, the goal is that an independent gainful activity can become profitable within the period of up to six months. The entitlement to social assistance may be extended beyond this period, despite self-employment, if it is considered realistic to achieve the goal within a grace period.

However, a favorable prognosis of economic viability is not an equal requirement in every case. The requirement is considered limited if the self-employment serves the purpose of social integration. In these cases, the aim is not to earn a living. However, it is to be assumed that the income in the set period basically covers at least the operating expenses (incl. legally provided contribution obligations for the social insurances of the first pillar).

Operating and social assistance budgets must be separated

As Hess further explains, an entitlement to financial support only arises for those who are not able, or not able in time, to cover the basic material security from their own resources and entitlements. However, this needs assessment is relatively complex for the social services in the case of self-employed persons, because a clear distinction must be made between the operating budget and the social assistance budget. This is because social assistance is intended exclusively to cover personal living needs, not to finance a business activity. For example, separate bank accounts are required - one for the operating budget and one for the social assistance budget. If this is not the case, the applicant is instructed to arrange this.

Income from self-employment that is not necessarily required for business operations or for obligatory social security contributions is to be counted as income in the social assistance budget. Non-liquid assets required for an accepted business operation, on the other hand, are not considered in the social assistance budget.

When allocating assets, the supported people must specifically state whether and why something should be part of the business assets. If this proof is not sufficiently provided, the value in question can be counted as realizable in the social assistance budget. In addition, it is permitted that the sale of a disproportionately high asset and the change to a favorable replacement is requested so that the surplus achieved can be counted as income (for example, in the case of a valuable business car).

Avoid contribution gaps

With regard to longer-term social security, social assistance agencies must, as far as possible, check whether self-employed persons requesting support are adequately covered under social insurance law. It must be pointed out that legally stipulated contribution obligations for social insurances (AHV/IV/EO) must be fulfilled and that there must be no gaps in the insurance coverage.

The SKOS also recommends that social assistance bodies ensure the reimbursement of social assistance when supporting self-employed people if assets remain after a possible cessation of activity and liquidation of the business. Reimbursement agreements, among other things, are suitable for securing the reimbursement of advance support.

Is there an interference with competition?

When answering the question of whether and how a self-employed person is supported with social assistance, possible distortions of competition must also be considered. In principle, situations in which an activity can only be carried out because of supplementary support with social assistance and the person is therefore given an advantage over other persons in the industry who must operate in a way that ensures their livelihood are distortions of competition. If economic viability is not given, or if it is not achieved within the set period despite a favorable prognosis, self-employed people must terminate their activity, among other things, also to prevent a longer-term distortion of competition due to social assistance support.

In the case of self-employment for social integration, on the other hand, longer-term support from social assistance is to be assumed. In these cases, however, possible distortions of competition must still be considered. Continued support seems possible regarding to other market participants if services are offered only on a very modest scale or in a niche.

Must the self-employment be abandoned?

Finally, Hess states that self-employment must be abandoned if the above requirements are not met. If self-employed people are no longer able to cover their living costs independently with their income and assets, they must contribute to reducing and eliminating the neediness to the best of their ability.

This obligation includes seeking and accepting reasonable employment. If they can reasonably be expected to be in good health, the persons concerned must commit themselves to a regional employment center (RAV) for job placement and to seeking and taking up a job that will secure their livelihood.