SWITZERLAND GUIDE

Switzerland – The Economy

Switzerland’s economy is one of the world’s most advanced and highly developed free-market economies. The economy of Switzerland ranked third in the 2020 Global Competitiveness Report, as was also ranked first in the world in the 2020 Global Innovation Index.

Switzerland also boasts one of the world’s highest GDPs per capita and a highly skilled labor force. The economy relies on financial services, precision manufacturing, metals, pharmaceuticals, chemicals, and electronics.

About two third of the area of Switzerland is covered with forests, lakes, and mountains. Since Switzerland has no mineral resources, it must import, process, and resell them as products.

Farming is also an important part of the economy. But the production of the Swiss farmers does not fulfill the needs of all people, so Switzerland must rely on imported goods from other countries. The country is a federal republic that is composed of 26 cantons, with federal authorities based in Bern. Switzerland is completely landlocked, and is bordered by Italy, France, Germany, Austria, and Liechtenstein. It is geographically divided into 3 regions – the Swiss Plateau, the Alps, and the Jura – spanning a total area of 41,285 km2 (15,940 sq mi) and land area of 39,997 km2 (15,443 sq mi).

The Swiss population of approximately 8.5 million is concentrated mostly on the plateau, where the largest cities and economic centres are, among them Zürich, Geneva, Basel, and Lausanne.

These cities are home to several offices of international organizations such as the WTO, the WHO, the ILO, the seat of the International Olympic Committee, the headquarters of FIFA, the UN’s second-largest office, as well as the main building of the Bank for International Settlements. The main international airports of Switzerland are also located in these cities.

Small and Medium-Sized Companies

Small and medium-sized enterprises play a fundamental role in the Swiss economy. SMEs form the huge majority of enterprises and account for two-thirds of the jobs in the country. They make a major contribution to national creativity, growth, and prosperity. SMEs are dominant, representing more than 99 % of the country’s economy, with approximately 330,000 companies in Switzerland employing fewer than 250 employees. 

Compliance Highlights

• The Federal Tax Administration (FTA) – is responsible for value added tax, direct federal tax, withholding tax and other federal levies. It implements double taxation agreements, provides international administrative assistance in tax matters, collects withholding taxes for other states in accordance with treaties and compiles tax statistics.
  
  
• Ch.Ch – The online government portal for the Swiss Federal Government, which has a whole section on employment and workers’ rights.

Payroll – Tax Contributions and Benefits

Tax liability is based on residency and with different classes depending on marital and family status. Liability is at federal, cantonal, and municipal levels with the addition of church taxes where applicable. Residents are taxed on their worldwide income in a tax year running from January 1 until December 31, while non-residents are taxed on certain categories of their Switzerland-sourced income, or income derived from Swiss investments.

Income Tax:

Social Insurance Taxes: Employers and employees equally share 10.6% of salary towards old age, survivors, and disability insurance; 2.2% towards unemployment insurance capped at CHF 148,200 (€143,061, US$161,676); 1% towards supplementary unemployment insurance above CHF 148,200.

Additionally, employers contribute between 1% and 3% towards family compensation fund, uncapped; 0.17% and 13.5% to occupational insurance, capped at CHF 148,200. Employees contribute between 1% and 4% to non-occupational insurance.

Sick Leave: Under the Code of Obligations, employees unable to work through illness are entitled to sick leave payments, generally dependent on length of service. The entitlement is three weeks during the first year once four months’ work has been completed, with proportionately longer periods for longer service. Employers can take out sick leave insurance with insurance providers to indemnify them against the payments to their employees, who are also able to take out individual sickness insurance. Employees generally are paid 80% of their salary. Parameters vary between the 26 cantons.

Paid Vacations: Full and part-time workers are entitled to a minimum of four weeks paid vacation each year. Employees up to the age of 20 are entitled to five weeks, while those over 50 can also receive more than the statutory minimum. CBAs or individual contracts can allow for more. Vacation days can be postponed if they fall during illness or having suffered injury. Outstanding entitlement can be taken during notice periods unless it is agreed to take payment in lieu.

Public Holidays: In Switzerland, public holidays are both national and regional as per the 26 cantons. Any public holiday that falls on a Saturday or Sunday will not be moved to a weekday. In principle, any public holidays officially recognized and equal to Sunday are not allowed to employ workers.

Employees who work on a public holiday are entitled to a 50 percent premium in addition to their regular rate of pay. Employers may only select employees who consent to work on holidays.

In cases where the work lasts for 5 hours, the employee must be compensated with an equivalent amount of free time within 4 weeks. In cases where the work lasts for more than 5 hours, the employee shall be granted a substitute rest period of 24 hours in the preceding or the following week.