Switzerland PEO & Employer of Record

WeHG provides an International PEO and global Employer of Record service in Switzerland to companies willing to enter the Swiss market or hire local/expat employees in this country.

Traditional approach requires establishing a subsidiary in Switzerland.  However our solution allows you to start the operations in Switzerland within days hence save time and money.  WeHG would hire candidates on your behalf while you maintain full operational control of their work. So legally they would be our employees, on our local payroll, 100% compliant but will work on your behalf. 

Switzerland fast facts

Population, million: 8,5

Land area, sq. km: 41,285 km2

Capital: Bern

Local currency: Swiss franc (CHF)

Hiring, Negotiating and Doing Business in Switzerland

Necessity of 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.

Switzerland Employment Contract

Types of employment agreements

It is best practice to put a strong employment contract in place in Switzerland which spells out the terms of the employee’s compensation, benefits, and termination requirements. An employment contract in Switzerland should always state the salary and any compensation amounts in Swiss Francs rather than a foreign currency.

Switzerland working hours

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.

Vacation leave in Switzerland 

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.

Sick leave: 

Entitlement to unpaid 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 CHF148,200) from the third day. The employer must pay 80% of the salary during the first two days and, if the yearly salary is over CHF148,200, 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.

Entitlement to unpaid 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).

Switzerland Maternity Leave

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).

Switzerland Severance Laws

Notice periods

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.

Severance payments

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.

Switzerland Tax

Direct federal tax on income (for 2020)

I – Single taxpayers

* Swiss francs

For taxable income above CHF 755,200 the overall tax rate will be 11.5%.

II – Married taxpayers and single taxpayers with minor children

For taxable income above CHF 895,900 the overall tax rate will be 11.5%.

Social security contributions

If an individual is subject to the Swiss social security, the following social security contributions are payable (as of 1. Jan 2021): 

Additional Benefits in Switzerland

Some employers provide supplementary private insurance policies that provide for coverage of some treatments not covered by the basic insurance or to improve the standard of room and service in case of hospitalization.

Switzerland Holidays

There are 26 cantons (states) that make up Switzerland and each canton sets its public holidays independently. The exception is August 1st, National Day, which is the only federal holiday.

Most of the cantons celebrate the following public holidays, for which employees are given the day off, including:

• New Year’s Day
• Good Friday
• Easter Monday
• Ascension Day
• Whit Monday
• Swiss National Day
• Christmas Day
• St. Stephen’s Day

Why Choose WeHireGlobally

WeHG manages the onboarding process, payroll, compensation and benefits, tax filing, and termination of employment. Our Employer of Record solution enables you to manage your overseas teams efficiently while minimizing cost and risk.