Employment and employee benefits in Switzerland: overview
A Q&A guide to employment and employee benefits law in Switzerland.
The Q&A gives a high level overview of the key practical issues including: employment status; background checks; permissions to work; contractual and implied terms of employment; minimum wages; restrictions on working time; illness and injury; rights of parents and carers; data protection; discrimination and harassment; dismissals; redundancies; taxation; employer and parent company liability; employee representation and consultation; consequence of business transfers; intellectual property; restraint of trade agreements and proposals for reform.
To compare answers across multiple jurisdictions, visit the Employment and Employee Benefits: Country Q&A tool.
The Q&A is part of the global guide to employment and employee benefits law. For a full list of jurisdictional Q&As visit www.practicallaw.com/employment-guide.
Scope of employment regulation
Foreign nationals working in your jurisdiction?
Nationals of your jurisdiction working abroad?
Laws applicable to foreign nationals
The conflict of law rules of the Federal Statute on International Private Law (PILA) determine the applicable law. In principle, in the absence of a contractual choice of law, the law of the country in which the employee mainly works applies (irrespective of their nationality) (Article 121, PILA). If this cannot be established, the law of the state where the employer has a branch office or, if there is no such branch office, where the employer has its seat, applies.
Contractual choice of law clauses are valid, provided the law of the employee's usual residence or the law of the branch office or seat of the employer is selected.
If foreign law applies to an employee who is working for a Swiss employer, Article 18 of the PILA provides that important mandatory provisions of Swiss law (ordre public) will nonetheless apply. This mainly concerns public statutory provisions protecting employees' health and safety. Conversely, even if Swiss law otherwise applies to the contract, Article 19 of the PILA allows for the application of mandatory foreign law in exceptional circumstances, if this appears necessary to protect the employee. Special legal provisions exist relating to social security.
Laws applicable to nationals working abroad
See above, Laws applicable to foreign nationals.
Categories of worker
An employee or worker provides services to the employer based on an (oral or written) employment agreement which must fulfil, in principle, the following criteria:
The employee must provide services to the employer, but does not have an obligation to be successful.
The employee is remunerated for the time he has been working.
The employee stands in a subordination relationship with respect to the employer, and is integrated into the organisation of the employer, who can give them instructions.
The relationship is intended to last for a continuing period of time (however, this can be limited).
The qualification of a contract as an employment agreement is made on a case-by-case basis, taking into consideration all the factual circumstances of each case. The formal designation of the relationship by the parties is not directly relevant. Employment law does not apply to individuals providing services on an independent basis (that is, where there is no subordination relationship). However, this distinction is not always easy to make. In some specific cases, employment law may be partly applied by analogy. Specific provisions apply to certain types of employment relationships, such as apprenticeship contracts, travelling salesman's contracts, homework contracts, and personal lending. Finally, different rules may apply depending on the type of work performed (for example, office work, night work, and so on).
Entitlement to statutory employment rights
See above, Categories of worker.
There are no duration restrictions for employment contracts.
Grants or incentives
There are no grants or incentives available for employing people.
Filings must be made to affiliate the employee to the necessary social security schemes. In addition, certain applications/registrations may need to be filed when the employee is not a Swiss national (see Question 5, Permission to work).
In principle, background checks are permissible to the extent that the information requested or searched is objectively necessary to determine whether the candidate is suited for the job, or to properly execute the contract. Therefore, the information which may be requested by the future employer depends on the position the candidate is applying for. The same rules apply if the background check is conducted by a third party. Additional data protection provisions may apply, especially if the third party is domiciled outside of Switzerland.
Permission to work
Nationals of EU/EEA countries do not require a visa. The Federal Office for Migration maintains a list of third countries the nationals of which must obtain a visa to enter Switzerland (see www.bfm.admin.ch/content/bfm/en/home/themen/arbeit.html and www.bfm.admin.ch/content/bfm/de/home/dokumentation/rechtsgrundlagen/weisungen_und_kreisschreiben/visa.html). These persons must obtain a visa in addition to a work permit (see below, Permits).
Procedure for obtaining approval. The visa is issued by the Swiss diplomatic representation abroad upon approval of the cantonal migration authority. A work permit must first be obtained (see below, Permits).
Cost. A visa currently costs CHF90. Additional costs must be added for the issuance of documents on arrival.
Time frame. The length of the process depends on the citizenship of the foreign national and the canton where the application is filed. It usually takes from four to eight weeks.
Sanctions. Individuals who enter Switzerland in breach of Swiss law face criminal sanctions (imprisonment for up to a year or a monetary fine).
There is a dual system for granting foreign nationals access to the Swiss labour market. EU and European Free Trade Area (EFTA) nationals are admitted to the Swiss labour market under the agreement on the free movement of persons between the EU and Switzerland. All other nationals are only admitted in limited numbers, if they are well qualified and fulfil other requirements.
On 9 February 2014 new constitutional provisions regarding the Swiss migration policy have been adopted. They require that migration be limited and may impact the legal situation of EU/EFTA nationals taking up work in Switzerland in the future. The new provisions must be implemented by the authorities in the form of statutory law within three years. The current legal situation (see below, EU/EFTA nationals) remains the same until these new provisions are implemented.
EU/EFTA nationals. Full free movement of persons has applied since 1 June 2007 to citizens of Germany, France, Austria, Italy, Spain, Portugal, UK, Ireland, Denmark, Sweden, Finland, Belgium, The Netherlands, Luxembourg, Greece, Cyprus, Malta, Norway, Iceland and Liechtenstein (EU-17/EFTA).
Full freedom of movement has applied to citizens of Poland, the Czech Republic, Slovakia, Hungary, Estonia, Latvia, Lithuania and Slovenia (EU-8) since 1 May 2011.
Full freedom of movement will apply to citizens of Bulgaria and Romania (EU-2) as of 1 June 2016 at the latest. Currently, the domestic workforce can be given precedence over Romanian and Bulgarian citizens, and salary and work conditions can be checked by the authorities.
As a result of the full freedom of movement, employees who are employed by a Swiss employer do not require a work permit.
EU-17/EFTA and EU-8 nationals may be posted to Switzerland and can work or provide services in Switzerland without a work permit for up to 90 days in a calendar year. However, the employer must register them in advance with the authorities through an online notification procedure.
EU-17/EFTA and EU-8 nationals who will work for more than 90 days a year in Switzerland simply have to register with the communal authorities and apply for a work permit. Similar to the non EU/EFTA countries, in these instances, the work permit is subject to a quota system and is only granted to qualified and fulfil other requirements. In 2015, there are 2,000 quotas (500 per month) for short stay permits (up to one year) and 250 quotas for long stay permits (more than one year).
EU-2 nationals can provide services in Switzerland if they work in the general sectors and their service does not last longer than 90 days. However, they must be registered with the authorities through the online notification procedure.
EU-2 nationals who work for more than 90 days per year in Switzerland or who cannot benefit from the online procedure require a work permit. The employer files the application with the cantonal labour market authority at the place of work. The employer has to prove both that:
It has not found a Swiss employee or an integrated foreign employee.
The wage and working conditions are equal to the domestic ones.
If these requirements are fulfilled, a work permit will be granted if a quota is available.
Other foreign nationals. Persons from non-EU/EFTA countries are only admitted if:
They are well qualified (degree from a university or other higher education institution and several years of professional experience).
No person for the job can be recruited from the Swiss labour market or an EU/EFTA member state.
Exceptions can be granted, among others, for:
Temporary duties as part of large projects for companies with headquarters in Switzerland (international assignment).
Execution of special mandates and projects.
Intra-company transfers of managers and specialists.
The salary, social security contributions and employment terms must be in accordance with conditions customary to the region and the particular sector.
A quota must be available.
Procedure for obtaining approval. The procedure for obtaining approval depends on whether the applicant is an EU/EFTA national, or another foreign national:
EU/EFTA nationals. EU-17/EFTA and EU-8 nationals who want to work for more than 90 days per year in Switzerland must register with the communal authorities and apply for a work permit before taking up work.
For EU-2 nationals, the employer must file a work permit application with the cantonal labour market authority at the place of work.
Other foreign nationals. Other foreign nationals must obtain a work and a residence permit. The employer must submit the application for the work permit to the cantonal labour authority, which makes a preliminary decision. It then submits the file to the federal office for migration, which issues the federal decision.
If the federal office for migration approves the application, the cantonal migration authority authorises the Swiss diplomatic representation abroad to issue the visa (see above, Visa). The foreign national can then collect the visa at the Swiss representation abroad.
Cost. The cost depends on the type of work permit and the nationality of the employee. For example, in the Canton of Zurich, costs range between CHF100 and CHF400 (plus additional costs for the issue of visa authorisation by the migration authority). The Zurich authorities may also charge an additional fee of up to 50% of the original fee for additional work.
Time frame. The length of process depends on the citizenship of the foreign national and the canton where the application is filed. It can take from a few days to up to four months.
Sanctions. Employers who knowingly employ individuals who are not entitled to work in Switzerland are subject to criminal sanctions (imprisonment for up to a year or a monetary fine). Individuals who stay and/or work in Switzerland in breach of Swiss law also face criminal sanctions.
Restrictions on managers and directors
No specific age restrictions apply, except for the general maturity age of 18 years (Article 14, Civil Code). Therefore, managers of Swiss companies must be at least 18 years old.
There are no nationality restrictions on managers. However, foreign nationals need to obtain the necessary work permits (see Question 5, Permission to work). There are no nationality restrictions on members of the board of directors of Swiss companies. At least one person authorised to represent the company must reside in Switzerland.
Only physical persons (and no legal entity) can be members of the board of directors of a Swiss company. Moreover, due to conflicts of interest, specific public law statutes can prohibit a person's membership on a board of directors.
Regulation of the employment relationship
Written employment contract
No written employment agreement is required. If it is agreed orally or implicitly that a person will provide services to another for a limited or unlimited period of time, and the other party will pay a salary, an employment contract legally exists. However, certain covenants are only valid if agreed in writing and signed by both parties. In certain instances it may be unclear whether an employment contract or a mandate agreement exists (see Question 2).
An employment contract can include implied terms to the extent the parties act in a certain manner.
If the contract includes neither express nor implied terms, the relevant statutory provisions apply (mainly Articles 319 et seq of the Code of Obligations of 30 March 1911, as amended). The Code of Obligations addresses most issues that are relevant to an employment relationship. Many provisions are mandatory, that is, they cannot be contractually changed or can only be changed in the employee's favour.
Numerous public law provisions aim to protect certain categories of employees, such as females, youths, or people working at night.
Collective agreements (Gesamtarbeitsverträge) apply to certain sectors, for example, the machine industry or the chemical and pharmaceutical industry. They can be widely negotiated between trade unions and industry associations, or between trade unions and certain (usually large) companies. Upon a decision of the competent authorities, collective agreements can be declared binding for all employers in the sector concerned.
In addition, the Federal Government can enact mandatory standard employment terms for certain industries or certain types of workers (Normalarbeitsvertrag).
The employer and the employee can agree in the employment agreement on the employer's right to unilaterally change specific terms and conditions of employment, provided that clause is not abusive (which could be the case with respect to the main aspects of the contract, such as salary, holidays, and so on). If the parties have not agreed this point, the employer cannot unilaterally change the contractual terms and conditions of employment.
If the terms in question fall under the employer's authority to issue directives, the employer can unilaterally change these directives, again provided that change is not considered abusive.
The employer can issue a "modification-termination" (Änderungskündigung) by offering changes in the terms and conditions of employment, and terminating the employment at the same time in the event that the employee does not accept the changes. However, the applicable notice period must be observed (see Question 19, Notice periods). Additionally, if modification-terminations are given to numerous employees, the provisions on mass dismissals may apply (see Question 21).
Restrictions on working time
The Federal Statute on Employment (Arbeitsgesetz) of 13 March 1964, as amended, and its regulations contain rules about working hours and rest breaks. These provisions do not apply to members of top management.
Under the Federal Statute on Employment, the maximum working time is 45 to 50 hours per week, depending on the employment field. Hours worked over that threshold must mandatorily be compensated at the hourly rate plus a 25% premium (although there is a yearly buffer of 60 hours for office workers). Below this maximum, the parties can contractually agree working hours and can in principle exclude compensation of overtime in writing. Most employees work between 40 and 42 working hours per week.
Work must be discontinued with a rest break of:
15 minutes for a working time of more than five and a half hours.
30 minutes for a working time of more than seven hours.
One hour for a working time of more than nine hours.
A daily rest time of at least 11 consecutive hours must be granted. For adults, the daily rest time may be reduced to eight hours once a week, provided an average of 11 hours is maintained over two weeks.
One day off every week must be granted, in principle on a Sunday.
The Federal Statute on Employment and its regulations also contain provisions on shift workers, mainly providing for a periodical change of shift hours, a balance between day and night shifts, maximum working time and rest days. Specific rules also apply with respect to resting days for companies with continuous working (24/7). In particular, employees must be granted at least 61 weekly resting days of at least 35 consecutive hours (including the daily rest time). Out of these, 26 resting days must in principle fall on a Sunday.
Minimum holiday entitlement
The minimum holiday entitlement is four weeks per year (Article 329a, Code of Obligations). For employees under the age of 20, the minimum is five weeks. It is possible for the parties to contractually agree on a longer holiday entitlement.
Public holidays are in addition to the minimum holiday entitlement. They include, among others, the Swiss National Day (on 1 August), cantonal public holidays and local holidays. The only federal public holiday is 1 August: other public holidays vary, depending on the canton.
Illness and injury of employees
Entitlement to time off
An employee is excused from working if unfit to work due to illness or injury.
Employees who are ill/injured also enjoy statutory protection from dismissal. The extent of this period of protected sick leave depends on the length of service:
In the first year of employment: 30 days' statutory protection.
Between the second and the fifth year: 90 days' statutory protection.
From the sixth year: 180 days' statutory protection.
A notice of termination issued during the protected period is void. Further, if a notice of termination was previously issued, but the employee then becomes ill during the termination notice period, that notice period is extended for the duration of the illness (up to a maximum of the relevant statutory protection period that applies).
Entitlement to paid time off
The employer must continue to pay the employee's salary and other contractually agreed compensation for a limited time period, provided the employment has had a duration of more than three months or has been entered into for a period of more than three months (Article 324a, Code of Obligations).
Courts have interpreted this statutory provision somewhat differently in relation to the limited time period. Generally, the duty to continue salary payments depends on the duration of services the employee has actually rendered:
In the first year of employment, salary payments must be made for three weeks.
In the second year, between one and two months.
In the third year, between eight and nine weeks.
The duty to continue salary payments further increases with years of service, with a maximum limit of between six months to one year.
The employer and the employee may agree on an alternative solution (such as payment of salary by an insurance during a certain period of time), provided that such alternative solution is at least equally beneficial for the employee. The agreement must be in writing.
If the incapacity to work has been caused by injury, the mandatory accident insurance concluded by the employer pays 80% of the salary (capped to a yearly salary of CHF126,000) from the third day. The employer must pay 80% of the salary during the first two days and, if the yearly salary is over CHF126,000, must top up the insurance payments during the limited period of time mentioned above so that they reach 80% of the employee's effective salary.
Recovery of sick pay from the state
The employer cannot recover salary payments paid as sick pay from the state. However, most employers take out insurance to protect against the risk of prolonged salary payments to employees who are ill.
Statutory rights of parents and carers
Parents (including maternity, paternity, surrogacy, adoption and parental rights, where applicable)?
Carers (including those of disabled children and adult dependants)?
Under mandatory public laws, women are not allowed to work (and employers cannot employ women at this time) for a period of eight weeks after they have given birth. Moreover, they have a right to a total of 14 weeks of maternity leave after they have given birth. If a woman chooses to take her maternity leave, and provided she fulfils the statutory requirements, the state pays her a compensation amounting to 80% of her average last salary during a 98-day time period from the date of birth (cantonal legislation may provide further protection). The compensation is currently capped at CHF196 per day.
There are additional statutory rules protecting women during pregnancy and following birth. In particular, a pregnant woman is protected against dismissal during the whole pregnancy and for 16 weeks following birth.
There are no specific statutory paternity rights. However, many employers have issued internal regulations granting fathers some limited time off in the case of childbirth.
Surrogacy is prohibited in Switzerland.
Federal statute does not provide specific rights in the case of adoption. However, cantonal legislation may do so.
Employees with family duties have a statutory right to stay away from work for up to three days to take care of sick children. Statute does not provide other special rights for parents or carers. In practice, many employers have internal regulations that allow parents or carers to have some flexibility in unusual family situations.
See above, Parental rights.
Continuous periods of employment
Statutory rights created
Statute and court decisions create various benefits for continued employment. This applies to, for example:
Severance payments (Article 339b, Code of Obligations) (see Question 19, Severance payments).
Statutory termination notice periods (Articles 335c and 336c, Code of Obligations) (see Question 19, Notice periods).
Duration of salary payments and termination protection in the case of illness (Article 324a, Code of Obligations) (see Question 12, Illness and injury of employees).
Consequences of a transfer of employee
In a transfer of an employment contract in connection with the sale of a business (or part of it), all rights, including those acquired before the transfer, remain with the employee (Article 333 et seq, Code of Obligations).
Fixed term, part-time and agency workers
The general rules of employment law (Article 319 et seq, Code of Obligations) also apply to temporary workers. Certain specific issues arising in relation to these workers (for example, holiday entitlements and surcharges to the hourly salary to compensate for holidays) have been dealt with by the courts within the existing statutory framework.
There is no limit to the duration of a fixed term contract. However, if the same parties enter into successive employment contracts without an objective reason to do so, a court may consider that the parties have in fact entered into an employment agreement for an unlimited period. In this case, provisions governing employment agreements of unlimited period (such as notice periods in the case of dismissal) will apply.
A fixed term contract terminates on the last day of its validity. It is not necessary to issue a notice of termination. Since there is not any notice period, provisions extending the notice period in the case of illness do not apply. However, under Swiss law, a fixed term contract cannot be terminated prematurely by the employer by way of paying the employee a severance in lieu of notice, as is the case in other countries, unless the employee agrees to terminate the contract. Therefore, employment agreements for longer fixed terms are usually not recommended.
A special statute regulates agency work (Bundesgesetz über die Arbeitsvermittlung und den Personalverleih of 6 October 1989, as amended). The statute imposes a permit requirement on companies in the agency business. The agency worker enters into an employment contract with the agency company that provides, among other things, that the employee will perform their work for a variety of other companies. The statute sets certain minimum standards for employment contracts of this nature, for example, shorter notice periods.
Part-time workers have the same rights as full-time workers. However, workers who work less than eight hours a week for the same employer are not automatically insured against non-occupational accidents.
Employees' data protection rights
The employer can only deal with and preserve data that has a direct connection with the employment relationship, that is, with a person's ability to perform a certain job or with the performance by an employee of their contract.
Employers' data protection obligations
The Federal Data Protection Act of 19 June 1992, as amended, governs how an employer can use this data. Generally, the employer cannot:
Violate an employee's personal rights.
Make use of the data in bad faith.
Use the data disproportionally.
Transfers of personal data abroad without the employee's consent can cause substantial difficulties, primarily where the receiving country does not provide data protection equivalent to Switzerland. Usually it is advisable to obtain detailed legal advice on this issue.
Discrimination and harassment
Protection from discrimination
There is broad protection of the employee's personal rights (Article 328, Code of Obligations). Discrimination can be claimed based on, for example:
An employee affected by discriminatory behaviour has a variety of legal measures available, for example:
Temporary refusal to work.
Claims for damages and/or tort.
Immediate termination for cause.
Discrimination due to gender is subject to special provisions and sanctions in the Federal Law on Equal Treatment of 24 March 1995, as amended.
Protection from harassment
Sexual harassment is subject to the provisions and sanctions in the Federal Law on Equal Treatment. The employer must put in place reasonable measures (in particular, clear written guidelines) to prevent cases of sexual harassment.
Termination of employment
Usually notice periods for employment contracts with an unlimited duration are specifically agreed in the contract. Notice periods must always have the same duration for employers and employees.
Notice periods cannot be shorter than one month, except if otherwise agreed in a collective bargaining agreement, and even then only for the first year of employment (Article 335c, Code of Obligations).
If the employment contract does not address notice periods, the statutory notice periods are:
During the first year of employment, one month following the end of the calendar month.
Between the second and ninth year of employment, two months.
After then, three months.
The first month of employment is deemed a trial period, which can be excluded or extended by written contract to a maximum of three months. During the trial period, notice of seven days can be given at any time.
In certain situations, dismissal notices are void by law, for example dismissal during illness, pregnancy or absence from work due to childbirth.
Under the Code of Obligations (Articles 339b et seq), severance payments must only be paid if the employee affected is over the age of 50 and has worked for more than 20 years for the same employer.
In that case, the statutory minimum severance payment is equal to two months' salary. If the employee receives, or will receive, payments from a social security scheme that has totally or partly been funded by the employer, there is no obligation to make severance payments.
It is not uncommon in employment contracts for members of the top management to specifically agree severance payments in the case of early termination or dismissals following takeovers (golden parachutes). Following the entry into force of new legal provisions, such payments are in principle no longer permissible with respect to board and executive members of Swiss public companies listed on a stock exchange. In addition, golden parachute promises made to the top management to make takeover bids more difficult have been held unlawful by the relevant authorities.
Procedural requirements for dismissal
The Code of Obligations does not require notice to be in any specific form. However, for the purpose of proof it is advisable to serve notice in writing. In practice, most employment contracts provide that notice must be in writing.
Under Swiss law, a notice only becomes effective at the time of receipt by the affected person. It is advisable to hand over written notices in person and to receive written confirmation of receipt. If that is not feasible, notice can also be served by registered mail, but appropriate lead time should be allocated to protect against difficulties in serving notice on the employee.
Dismissals do not need to be reasoned or justified, that is, a reason does not have to be provided. Only on the specific request by the employee must the employer state the reasons in writing. It is usually highly advisable to seek legal advice in connection with dismissals, particularly where the dismissal could be regarded as unfair (see Question 20, Protection against dismissal).
Except in the case of a mass dismissal (see Question 21), there is no specific filing required. However, the relevant social security authorities must be informed.
In principle, employment agreements can be terminated freely by either party, provided the applicable notice period is observed. However, employees are protected in certain cases. The consequences of an unlawful termination depend on the circumstances.
Protection against unfair dismissal
In principle, a specific ground for terminating the employment contract is not required. The employer is however prohibited from dismissing an employee for specific reasons
Generally, a dismissal is deemed abusive if issued:
Due to a quality inherent to the personality of the employee (for example, dismissal due to race or gender).
Because the employee exercises a constitutional right.
To prevent an employee from asserting contractual claims (for example, a contractually agreed severance payment).
Additionally, in the context of a mass dismissal, no final decisions can be taken on dismissals before the completion of the consultation process (see Question 21).
Abusiveness in those cases does not render a dismissal invalid. The consequence of a violation of Article 336 of the Code of Obligations is the payment of compensation of up to six months' salary (or up to two months' salary for mass dismissals) at the discretion of the judge.
Protection of specific employees
Employees who are members of trade unions and/or fulfil certain functions in the company's employee representation bodies are specifically protected (Article 336, Code of Obligations). The consequence of a violation of this provision is the payment of compensation of up to six months' salary at the discretion of the judge.
After expiration of the probationary period (which can last up to three months), temporary protection against dismissal also exists under Article 336c of the Code of Obligations in the case of illness (see Question 12, Illness and injury of employees), pregnancy and mandatory military service. Dismissal notices issued during the protection period are void.
Definition of redundancy/layoff
Swiss employment law includes rules on mass dismissals (Articles 335d to 335g, Code of Obligations). There are certain threshold numbers of redundancies that trigger the mass dismissal regulations, depending on the overall number of employees.
If an employer intends to carry out a mass dismissal it must inform the employees (or any employee representation body) about the intended measures and the reason for those measures. There is also a consultation requirement. Employees must have an opportunity to provide their own counter proposals, showing how the dismissals can be fully or partially avoided or how their negative consequences can be reduced. While the employer does not need to provide evidence on the reasons for the mass dismissal, it must provide sufficient information for the employees to be able to make proposals.
After completion of the consultation process, the employer must notify the competent public authority, which can then intervene on its own and make certain proposals aimed at protecting the employees who become redundant.
If the employer does not duly consult the employees before taking the decision to dismiss, the dismissals are deemed abusive and the employees can claim compensation of up to two months' salary at the judge's discretion (see Question 20, Protection against unfair dismissal).
New statutory provisions require that companies of at least 250 employees in which at least 30 employees are dismissed within 30 days conduct negotiations with the employees with the aim of establishing a social plan. If the parties cannot agree on a social plan, an arbitral tribunal must be appointed.
For other businesses, there is currently no statutory obligation to establish a social plan under Swiss law. However, this obligation can arise under a collective bargaining agreement. Moreover, it has become customary for large companies to set up a social plan in cases of mass redundancies that provides for certain benefits, such as:
Additional severance payments.
Additional contributions to their pension schemes.
Assistance in finding new jobs.
Financing transition arrangements (for example, schooling).
Employee representation and consultation
Swiss statutory law does not provide for employee representation in the management.
The Federal Statute on Participation Rights of Employees (Mitwirkungsgesetz) of 17 December 1993, as amended, provides for certain information and consultation requirements with employee representation bodies or the employees. Consultation rights exist relating to:
Employment safety matters.
Transfers of business.
Accession to pension fund organisations.
There are consultation and information requirements if individual employment relationships are transferred to another legal entity in connection with a corporate transaction (Article 333a, Code of Obligations). Likewise, these requirements must be observed when all employment relationships are automatically transferred by operation of law in a merger (Universalsukzession). These requirements do not apply if the transaction only involves the sale of shares.
If companies violate the statutory information and consultation requirements for a transaction under the Federal Merger Act (Fusionsgesetz) of 3 October 2003, as amended, employees have a right to block the transaction by obtaining temporary restraining orders. However, Articles 333 et seq of the Code of Obligations do not provide for specific sanctions. Generally, an individual employee has a claim for specific performance or for damages, to the extent damage can be established.
See above, Remedies.
Consequences of a business transfer
Automatic transfer of employees
In a transfer of a business or part of the business, the employment agreements for all employees engaged in the business are automatically transferred by operation of law (Article 333 et seq, Code of Obligations). Issues can arise for people working for different business units, where case-by-case solutions must be negotiated.
Protection against dismissal
There is no general protection against dismissals, that is, employees can be dismissed before the transfer by the former employer, or after the transfer by the new employer, by observing the contractual notice periods. However, the dismissal must not have the aim of avoiding the automatic transfer of the employees to the new employer. Depending on the actual reason for the dismissals (as can be established in court), an attempt to circumvent the law could be assumed, for example, if the dismissed employees are shortly replaced by new employees.
Where applicable, the legal requirements on mass dismissals must be observed (see Question 21).
Employees have a right to decline the transfer, by filing an objection which will lead to the termination of the employment contract within the statutory notice period.
Harmonisation of employment terms
Harmonisation of employment terms after the transfer is only possible with the consent of each individual employee. If certain employees do not accept the proposed changes, the only option is dismissal.
Employer and parent company liability
An employer can be liable for the acts of its employees?
A parent company can be liable for the acts of a subsidiary company's employees?
The employer is liable in tort for damage to third parties due to the acts and/or omissions of employees in performing their professional activities, except if it is proved that the employer used all reasonable care to prevent damage of this type, or the damage would have occurred irrespective of this care (Article 55, Code of Obligations).
The employer can take recourse against the responsible employee.
A similar liability in contract exists if the employer uses auxiliary persons such as employees in performing contractual obligations, even if the employee is not personally guilty for having caused the damage. It is possible for the employer to completely exclude liability for damages caused by auxiliary persons in the third-party contract.
Parent company liability
Parent company liability only exists, if at all, in very narrow circumstances, mainly if a parent company, through its behaviour, creates a reasonable expectation that it would assume liability for its subsidiary.
Employee rights on insolvency
In the case of bankruptcy proceedings, claims of employees resulting from the employment relationship which arose during the six months prior to the opening of the proceedings are satisfied in priority out of the proceeds of the bankrupt estate.
State guarantee fund
There is no state guarantee fund.
Health and safety obligations
There are numerous public mandatory laws dealing with health and safety matters, for example, regulations on night and shift work, accident protection, maximum employment time, protection of juvenile workers under age 18 and so on. The most important statute is the Federal Statute on Employment (Arbeitsgesetz) of 13 March 1964, as amended, together with several related regulations (Verordnungen).
Taxation of employment income
Foreign nationals working in your jurisdiction?
Nationals of your jurisdiction working abroad?
Swiss tax law distinguishes between foreign nationals working in Switzerland who are subject to unlimited taxation (unbeschränkte Steuerpflicht) and to limited taxation (beschränkte Steuerpflicht).
Unlimited taxation. A foreign national is subject to unlimited taxation in Switzerland if they either:
Effectively establish their home in Switzerland.
Remain in Switzerland without any significant interruption for at least 30 days with employment activity (or for at least 90 days without employment activity).
In these instances, the foreign national is a Swiss tax resident subject to Swiss federal, cantonal and communal income tax on their worldwide income, regardless of source. This includes income from gainful activities performed in Switzerland. Certain exceptions apply to this rule: income from enterprises, permanent establishments or real estate situated outside Switzerland is, subject to the progression provision, exempt from Swiss income tax. Further, an exception applies to foreign nationals domiciled in a country with a double taxation treaty with Switzerland. Subject to the conditions in the applicable treaty, the foreign national who remains in Switzerland without any significant interruption for at least 30 days with employment activity (or for at least 90 days without employment activity) is subject to limited taxation only (see below).
Unless the foreign national has been granted a residency permit C or is married to a Swiss national or a holder of residency permit C, the foreign national is subject to tax on employment income at source. If the annual total income (from employment subject to taxation at source) exceeds CHF120,000 per year, the foreign national must file a tax return. Income tax at source is credited against tax on income declared in the tax return.
Limited taxation. Non-Swiss tax resident foreign nationals are only subject to tax on income from performing a gainful activity in Switzerland (and certain other types of Swiss source income, for example, directors' fees). Non-resident foreign national workers are subject to income tax at source. Income tax at source is a final tax. The employee is not required to file a tax return.
An exception applies to foreign nationals domiciled in a country with a double taxation treaty with Switzerland who is assigned to Switzerland for no more than 183 days by an employer. Subject to the conditions in the applicable treaty, the employee's state of residence can continue to levy income taxes on dependent personal services rendered by the employee in Switzerland. In this case, Switzerland cannot impose income tax on the employment income.
Nationals working abroad
Swiss nationals working abroad who are not Swiss tax residents are not subject to Swiss income tax on employment income.
Swiss nationals working abroad who are Swiss tax residents working in a country with a double taxation treaty with Switzerland are, subject to the progression provision, usually exempt from income tax in Switzerland by the treaty. An exception applies if the Swiss national is assigned by their employer to a treaty country for no more than 183 days. Subject to treaty conditions, Switzerland can continue to levy income tax on income earned abroad. Under the progression provision, Switzerland applies progressive income tax rates, which are calculated on income earned worldwide by individuals who are Swiss residents, regardless of whether this income is in fact taxed in Switzerland or not.
The taxation of Swiss and foreign frontier workers is governed by international tax treaties and other special agreements. There are international treaties with provisions on frontier workers between Switzerland and neighbouring countries Germany, Italy and France (but not with Austria and Liechtenstein). Frontier workers are employees who, as a rule, commute daily between their place of residence in one state and their place of employment in another state. The international treaties often contain a more specific definition of frontier workers.
Rate of taxation on employment income
Income tax is imposed by the Swiss federation and the Swiss cantons and communes. The income tax rates vary from canton to canton, and within the canton from commune to commune. They are generally at progressive tax rates. For example:
Employees earning a gross annual income of CHF150,000 are subject to combined federal, cantonal and communal income taxes of between about 9.6% and a maximum of about 23.5% (depending, among other things, on domicile).
For gross annual income of CHF500,000, the income tax rate varies between about 15% and 33% (depending, among other things, on domicile).
These tax rates apply to a single taxpayer for the tax year 2015. The tax rates are subject to change.
Switzerland does not impose any other tax on employment income.
Social security contributions
Subject to social security agreements, respectively the bilateral agreements between Switzerland and the EU on the freedom of movement, remuneration an employee receives for performing work in Switzerland is generally subject to Swiss social security contributions. Social security liabilities arise at the same time as income tax liabilities. The following social security rates apply in 2015:
AHV (first pillar coverage of old age and survivorship): 8.4%.
IV (first pillar coverage of disability): 1.4%.
EO (coverage of salary payment in the case of military service and motherhood): 0.5%.
The total rate of 10.3% is shared by the employer and the employee (5.15% each).
Contributions to the second pillar (mandatory and non-mandatory coverage of old age, survivorship and disability (BVG)) may be due depending on the relevant insurance contract and regulations.
Wages up to CHF126,000 are also subject to:
Contributions for ALV (coverage of unemployment): 2.2% wages above CHF126,000 are subject to contributions at a rate of 1.0% (no cap). These contributions are also shared equally between the employer and the employee.
Mandatory accident insurance. The insurance premium is dependent on the industry of the employer and the individual insurance contract concluded between the employer and the insurance company.
It is quite common for Swiss companies to pay variable compensations or bonuses, which can be contractually due or fully discretionary. Case law has set criteria under which a bonus intended as discretionary nonetheless qualifies as compensation contractually due. However, court decisions tend to look at the specific situation in each case and sometimes appear inconsistent. It is therefore not easy to define clear guidelines.
Payment of discretionary bonuses over a period of time (usually in excess of three years) without explicit reservation confers on the employee a legal right to claim payment of a bonus. In addition, if a discretionary bonus makes up a substantial part of an employee's overall compensation, courts tend to hold that at least a portion of the bonus is contractually due.
Currently there is a lot of political activity relating to excessive bonuses, paid mainly in the financial industry, aimed at imposing limits on bonus amounts or making them unattractive through increased taxation.
New statutory provisions regarding the compensation of board and executive members of public companies listed on a stock exchange entered into force in January 2014. Based on these provisions, listed Swiss companies may need to amend their compensation regulations and partly insert them into their articles of association. The compensation is subject to shareholder approval. Certain kinds of remuneration (severance pay, advance payments, transaction bonuses) are not permitted, or only under limited circumstances.
The Swiss Financial Market Supervisory Authority (FINMA) has issued a circular on the remuneration of employees of financial institutions. The circular contains a series of principles which must be observed for remuneration plans (deferred payment, vesting periods, clawback provision, and so on). The principles set out in the circular are mandatory for all employees of financial institutions with an equity capital over CHF2 billion.
Under Article 10a of the Statute on Banks (Bankengesetz), system-relevant banks must include provisions in employment agreements and/or benefit plans under which the legal right to variable remuneration and/or gratification could be curtailed in the case of state support being given to the bank.
Intellectual property (IP)
If the IP right has been created in the performance of the employee's duties, the IP right belongs to the employer by operation of law.
For IP rights created by an employee by coincidence, that is, not in performance of contractual duties, the employer has an option to acquire the IP right against payment of adequate compensation, where this is specifically agreed in the employment contract.
Restraint of trade
Restriction of activities
During employment, the employee is prohibited from engaging in any competitive activity by operation of law.
Post-employment restrictive covenants
Swiss employment law (Articles 340, et seq, Code of Obligations) allows the employer and employee to contractually agree on post-employment non-compete clauses. Such agreements are only valid if they are made in writing.
However, there are restrictions, for example in terms of duration (maximum of three years) and geographical scope. In addition, these clauses are only valid if the employee has acquired knowledge of the employer's clientele or other confidential business information. Finally, in principle, the prohibition lapses if the employer terminates the employment relationship (though a restrictive covenant can be included in a termination agreement). Compensation of the employee during a post-employment restrictive covenant is not mandatory.
Non-competition clauses always require careful drafting, to ensure adequate enforceability and monetary compensation in case of breach.
Proposals for reform
A Bill to improve protection afforded to whistleblowing is pending in the Federal Parliament.
In November 2013, the Swiss Federal Council has approved a preliminary draft for a change of the Swiss social security system. The preliminary draft contains, among other things, the following topics:
Harmonisation of the retirement age of men and women at 65 years.
Flexible and individual structuring of retirement.
Equal treatment of employees and self-employed persons.
Swiss Confederation – Collection of statutes
Description. Official website of the Swiss Confederation providing for all up-to-date statutes of Swiss law in German, French and Italian. A selection of statutes (including the Swiss Code of Obligations) is also provided in English, for guidance only (please click the "English" tab on the upper right hand corner).
Federal Tax Authority
Description. Official website of the Swiss Federal Tax Authority providing information on federal taxes in German, French and Italian.
Professional qualifications. Switzerland, 1994
Areas of practice. Employment law; litigation and arbitration.
- Representing clients in employment related litigation and arbitration, in particular regarding top executive pay, in particular in connection with the claim for past and running incentive pay for US$6 million.
- Advising clients in relation to deferred compensation/bonus schemes, in particular relating to bank bonus schemes providing for Tier 1 capital.
- Advising clients in relation to transfer of enterprises and mass dismissals, in particular in connection with the merger of two banks.
Professional qualifications. Switzerland, 1999
Areas of practice. National and international tax law; social security law.
- Cross-border immigration of a reinsurance group from abroad to Switzerland.
- Cross-border merger of a foreign industrial company with a Swiss industrial company.
- Setting up a Swiss principal company structure of a foreign pharmaceutical multinational.
- Acquisition of a Swiss industrial company and integration into the buyer group.
- Cross-border migration of Swiss entities from Switzerland to abroad.
Professional qualifications. Switzerland, 2007; New York, US, 2010
Areas of practice. Employment law; litigation and arbitration.
- Advising multinational clients on transfers of businesses and mass layoffs.
- Advising international clients on the drafting of employment agreements and on termination of employment in particular with respect to executives.
Representing international clients before labour courts in Switzerland.