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Hiring in Switzerland

Switzerland is well known in the business world for its unique regulatory and economic advantages. Thanks to its affluence and business-friendly infrastructure, Switzerland has also established many strong trading relationships with other countries, such as the US, Germany, and China. According to the International Trade Association (ITA), in 2021, US companies alone employed approximately 100,000 Swiss residents.

The Swiss employment process, however, is multi-faceted and complex to say the least. Fortunately, there are several different employment models and hiring options for both employers with and without a legal entity in Switzerland. But hiring an employee is just the start. In this article, we’ll take a look at Switzerland’s employment law, how to hire in Switzerland, and everything from payroll processing to employment termination.

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Employment Law in Switzerland

Swiss employment law is designed to protect both the employer and the employee and ensure the government receives all required contributions, however, these legal regulations leave no room for error. Any mistake can be costly and result in penalties. Therefore, it’s best to ensure all registration, tax, insurance, and other important information is correct before submitting it. To hire an employee in Switzerland, there are several steps that must be taken and details that must be determined in advance. For example:

  • Which party will assume legal responsibility?
  • What is the employment type?
  • Where does the employee reside?

Before an employee can even be considered for hire in Switzerland, the legal status of the company must be determined. If a foreign business decides to establish their own legal entity, they can choose from four different legal structures depending on the nature of the business and minimum capital requirement.

However, this process is very complex, requiring a plethora of documents and fees, in addition to there being at least one Swiss resident to act as a representative. Alternatively, is ANobAG. This employment model places all responsibilities to register themselves with their local canton and pay all contributory obligations (i.e., taxes, pensions, and insurance) on the employee. Furthermore, when registering an employee, it’s essential to correctly identify their employment status as an independent contractor or a direct hire, as this directly influences the employee’s contribution obligations. Payroll also depends on this information, as well as whether the employee is working full-time or part-time. The place of residence is yet another important factor to consider due to Switzerland’s tiered taxation system. There are three tiers, and both businesses and individuals alike are obligated to pay taxes on all three tiers. These tiers are known as federal, cantonal, and municipal. To ensure all legal obligations and compliance requirements are met, seeking professional assistance from an payroll service provider is highly advised.
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Payroll in Switzerland

Upon hire, new employees must be enrolled in payroll. In Switzerland, payroll is processed once a month and all employees must be paid in the local currency, Swiss Francs (CHF). This process also includes paying out all required taxes, and insurance or pension obligations for both the employer and the employee.
Payroll can be processed manually, digitally, through a payroll agency. As it pertains to ANobAG employees, they are required to invoice for their hours worked and pay all social security contributions (including those required for the company) once they receive their gross salary.

Employment Benefits

Swiss employees are entitled to several benefits, including overtime compensation, paid time off, parental leave, paid vacation time, and public holidays.

  • Overtime Compensation: Full-time employees are expected to work 40–45 hours per week. The compensation rate for overtime hours is 125% of the employee’s base salary rate. Swiss employment law regulates overtime hours to a maximum of 60 hours per annum.
  • Parental Leave: Parental leave includes maternity and paternity leave, however, the two are not the same. Maternity leave regulates that mothers take a minimum of eight weeks off and have a maximum of 14 weeks paid leave following the childbirth. Paternity leave, on the other hand, allows fathers to take up to 2 weeks of paid leave within the first eight months following childbirth.
  • Vacation time: Full-time employees receive a minimum of four weeks of paid vacation per calendar year.
Sick Leave: Allotted time for sick leave per year depends on the duration of employment.

    • Three weeks during the first year
    • Four to eight weeks during the second year
    • Eight to nine weeks during the third year

In practice such law is hardly ever applied. On average employers insure their employees more than mandatory. This ensures that the employee gets paid for up to two years. At the end of those two years disability benefits from the pension fund take effect up until the employee is healthy again.

  • Public Holidays: All employees are entitled to time off on any recognized public holidays.
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Conclusion

Hiring employees in Switzerland offers advantages, but it also requires navigating a complex legal and regulatory framework. From determining the appropriate employment model to handling payroll and tax obligations, every step of the process must be carefully managed to ensure compliance with Swiss employment law. Whether you’re establishing a legal entity, or opting for the ANobAG scheme – understanding the nuances of Swiss labor regulations is essential for successful talent acquisition.
For businesses looking to expand into Switzerland, seeking professional guidance – such as from payroll service providers or legal experts – can help you avoid costly mistakes and ensure a smooth hiring process. By taking the time to understand local laws and benefits, you’ll be well-equipped to build a strong, compliant workforce in one of the world’s most business-friendly countries.

FAQ

How do I hire an employee in Switzerland?

To hire an employee in Switzerland, there are a few prerequisites that must be answered first.

  • What is the employment type?
    • This may be full-time or part-time, and contract or direct hire.
  • Which party will assume legal responsibility?
    • A foreign company can register their own legal entity in Switzerland
    • Opt for the ANobAG scheme
  • Where does the employee reside?
    • The employee’s place of residence determines the exact taxes that need to be paid.

Once all of these prerequisites have been met, the employee can be registered and onboarded, and payroll can be processed. To ensure all legal obligations and compliance requirements are met, or payroll service provider is highly advised.

Can I hire employees without a legal entity in Switzerland?

Yes, foreign companies can hire employees without establishing a legal entity in Switzerland. This can be done using the ANobAG scheme.
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