Compared to other jurisdictions, the legal regime governing employment relationships in Switzerland is generally more liberal and favourable to employers. This is partly because trade unions are less influential in Switzerland in comparison to many EU countries, but also because traditionally unemployment has been, and remains, relatively low in Switzerland. Public law labour protection regulations cover, among other things: working hours and breaks; special protection for young employees, pregnant women and breastfeeding mothers; workrelated injury insurance; and industrial accident prevention. Some of these provisions can be modified in favour of employees, while others cannot be modified at all.

Issues arising on hiring individuals

Immigration

Currently, Switzerland has a dual system for the admission of foreign workers. Nationals from EU or EFTA countries benefit from the Agreement on Free Movement of Persons and, in general, do not need a work permit if residence is taken in Switzerland. This situation may change due to discussions in parliament following a public vote to reintroduce immigration quotas with the European Union.

For EU or EFTA nationals carrying out services for up to 90 days per year, an online notification procedure applies (both for the company posting workers and for the posted worker). If services will be rendered over this 90 day threshold, a work permit is required. The online notification procedure also applies to companies based in Switzerland employing foreign workers for up to three months.

With respect to non-EU and non-EFTA nationals, only a limited number of management-level employees, specialists and other qualified employees are admitted from all other countries (subject to a quota determined by the Federal Council). If non-EU or non-EFTA nationals, without residence in Switzerland, work in Switzerland temporarily for more than eight days for a Swiss company, such employees must be reported to the authorities in advance even if no work or residence permit is required.

Employment structuring and documentation

Under Swiss law, an employment contract is a contract whereby the employee is obliged to perform work in the employer's service for either a fixed or an indefinite period of time, and the employer is obliged to pay salary either based on the time period or the work performed. Although generally speaking an employment contract is not required to be in any specific form, and may also be agreed verbally or by implication, certain contractual provisions are only valid if agreed in writing (e.g. restrictive covenants, exclusion of compensation for overtime, notice periods which are different to statutory law etc.). Moreover, Switzerland has implemented the European Union Directive No. 533/91. Consequently, with employment contracts for an indefinite term, or for longer than one month, within one month of the commencement of employment, the employer must inform the employee in writing of: the names of the contracting parties; the commencement date; the employee's job; salary and any additional benefits; and the length of the working week.

Issues arising during the employment relationship

Wages, annual leave and working time

Salary is usually paid at the end of the calendar month, as established in the company's policies or by collective agreement, with the employer deducting all applicable social security contributions and withholding taxes.

The Swiss Labour Act determines the maximum weekly hours of work, distinguishing between two categories of employees: (1) workers employed in industrial enterprises and white-collar workers (office workers, technical staff and other salaried employees) as well as sales staff in large retail undertakings; and (2) other workers, mainly workers in the construction sector and craftsman, in commerce as well as sales staff in small retail undertakings.

The maximum working week is 45 hours for the first category and 50 hours for the second. If an organisation employs both categories of employees, the 50 hour maximum applies to both categories. Within these limits, the actual hours of work are fixed by collective agreements and individual contracts. The Labour Act does not apply to working hours and overtime for employees in senior management.

Under Swiss law, there are two categories of overtime work. The first category applies to employees working more than the working hours stipulated in the contract, up to the maximum working time allowed under the Labour Act. Under the Code of Obligations, any overtime not compensated for by time off must be paid at a rate at least 25 percent higher than the employee's wage, unless there is an agreement to the contrary in writing (i.e. a collective agreement or individual employment contract). Generally, management contracts state that any overtime is included in the standard wage.

The second form of overtime work relates to hours worked in excess of the Labour Act limits of 45 or 50 hours, when the mandatory overtime rate is 25% higher than the employee's hourly wage. The Labour Act specifies that for white-collar workers and sales staff in large retail undertakings, this supplement is only due if the overtime exceeds 60 hours per calendar year.

Trade unions

For many decades, Switzerland has enjoyed relative stability in labour relations, with most conflicts being resolved amicably. The basis of the "labour accord" goes back to 1937, when the trade unions and employers in the metalworking industry signed an agreement to regulate the conduct of disputes. On the one hand, the unions undertook not to use strikes as a weapon to settle grievances, while on the other, the employers agreed to accept arbitration to resolve wage claims. As a result, strikes are rare, although occasionally workers may stop work for a few hours as part of a campaign. Lengthy strikes are even more unusual, although not entirely unknown.

Every employee has the right to decide whether to join a trade union or not. The unions are financed through the contributions made by their members. The Swiss Federation of Trade Unions (Gewerkschaftsbund/Union syndicale suisse) is the umbrella body for 16 trade unions in industry and construction, and is Switzerland's largest employees' organisation. A second umbrella grouping is Travail Suisse, with 13 member organisations.

Social insurance

The Swiss social security system includes the following schemes:

  • Old-age and survivors' insurance (AltersundHinterbliebenenversicherung, AHV)
  • Disability insurance (Invalidenversicherung, IVG)
  • Military income loss insurance (Erwerbsersatzordnung)
  • Unemployment insurance (Arbeitslosenversicherung, ALV)
  • Occupational benefit plan (Berufliche Vorsorge, BVG)
  • Accident insurance (Unfallversicherung, UVG)
  • Sickness insurance (Krankenversicherung, KVG)
  • Family allowances (Familienzulagen)

Swiss employers are fully liable for social security contributions in respect of their employees. This system, however, only applies to resident employers and non-resident enterprises with a permanent establishment in Switzerland.

Contributions are borne fifty-fifty by employer and employees. The employer withholds the employee's share, deducting it from salary at source. The rates are, in general, based on gross salaries.

Issues arising on termination of the employment relationship

Business transfers

Where the employer transfers a business or a part of a business to a third party, the employment relationship and all attendant rights and obligations pass to the the acquiring company on the day of the transfer, unless the employee refuses to transfer.

If the employee refuses to transfer, the employment relationship ends on expiry of the statutory notice period, until then, the acquirer and the employee are obliged to perform the contract. The transferring employer and the acquiring company are jointly and severally liable for any employment claims which fell due before the transfer, or which fall due between then and the date on which the employment relationship could normally be terminated, or is, terminated following the employee's refusal to transfer.

When transferring a business to a third party, they must inform the organisation that represents the employees or, where there is none, the employees themselves, in good time before the transfer takes place, of: (1) the reason for the transfer; (2) the legal, economic and social consequences for the employees. Where "measures" are envisaged as a result of the transfer that would affect the employees, the employer should consult them in good time before the relevant decisions are taken.

Discrimination claims

The Federal Act on Gender Equality provides that employees must not be discriminated against, directly or indirectly, on the basis of their: sex, marital status; family situation; or pregnancy. This prohibition applies in particular to hiring; the allocation of duties the provision of working conditions; pay; basic and advanced training; promotion; and dismissal.

Recent court decisions apply these principles in an analogous way to other forms of discrimination (i.e. nationality, race etc.).

Terminating employment

A contract for an indefinite term terminates on the expiry of notice given by either party (ordinary termination). The minimum notice period is set out in the Code of Obligations. The parties may not, however, reduce the notice period to less than one month, subject to any longer periods provided for in collective bargaining agreements. There are certain periods during which a notice of termination is invalid (e.g. during pregnancy).

In principle, no cause for termination of the employment relationship is required. Nevertheless, under the laws to protect against abusive termination, employees have a statutory right to request written reasons for their dismissal.

Termination of employment must not be "abusive". An employer who terminates employment abusively must pay the employee compensation, up to a cap of six months' pay. If either party has "significant cause", it may terminate the contract at any time without prior notice, and may claim compensation from the other party for the damage caused. But if the employer terminates the contract with immediate effect without a significant cause, it must compensate the employee for the damage caused to them as a result, in addition to compensation for abusive termination (up to six months' pay).

With respect to termination agreements, case law provides that the mandatory provisions of the Code of Obligations must be taken into account and the agreement must include benefits for both the employer and employee. Otherwise a judge may declare the termination agreement null and void.

Published in collaboration with L&E Global: an alliance of employers’ counsel worldwide

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