Switzerland Employment Contracts

Swiss Employment Contracts

Foreign companies hiring employees in Switzerland must operate within a framework of federal legislation, plus regulations applied by whichever of the 26 regional cantons they are based or where they employ staff. Additionally, Collective Bargaining Agreement (CBAs) and trade union arrangements also provide safeguards and entitlements for the workforce.

The Code of Obligations, part of Switzerland’s Civil Code, incorporates most aspects of employment legislation relating to employee contracts, including dismissals, redundancies, notice periods and collective agreements. The Federal Labor Law’s role in the private sector deals with the details of working hours and breaks, holidays, maternity, and paternity leave, for example.

These considerations come into play during the first stages of hiring and onboarding – drawing up a contract with your new employee. Once Bradford Jacobs’ Professional Employer Organization (PEO) recruitment networks have located the best talent for your company, we step in to steer you through this crucial element of recruitment.

General requirements apply to all contracts. These include:

• Within one month of being hired, employees should receive written notice of the details of the contracted parties, start date, role, work location and schedule, salary, and payment frequency
• The agreement must state whether the contract is indefinite / open-ended or fixed term
• Contracts can be verbal or implied but some provisions that differ from statutory regulations, such as overtime or notice periods, are valid only if confirmed in writing
• The contract must comply with all mandatory requirements and where they have been improved by collective agreements on relevant industries or sectors
• The first month of any indefinite contract is deemed a probationary period, which can be ended by either party with seven days’ notice. Probationary periods can be extended to three months if this is confirmed in writing
• There are no statutory requirements as to the language used in a contract, but the terms should be clearly understood by both parties

Other issues must be dealt with during the ‘contract phrase.’ These include:

• Obtaining Power of Attorney to act as payroll provider and registering employees with the relevant canton
• Filing forms with the Federal Tax Administration for remitting tax
• Registering with the Federal Social Insurance Office (FSIO) and the federal social insurance system (AHV) and the pension fund (BVG)
• The AHV 13-digit number (originally the OASI, Old Age and Survivors’ Insurance number) is now widely used as a Personal Identification Number (PIN) by all federal registers

Subsequently, employers will also have the following responsibilities towards their contracted staff:

• Dealing with differing tax rates as they are applied federally, by 26 cantons and over 2,500 municipalities and in some cases the church; assessing liability where all four classifications of taxation apply
• Withholding taxes due to the state, canton and municipalities at various percentages and transferring them to the authorities monthly or quarterly as required
• Filing annual tax returns, generally by March 31 for most cantons, with the tax year running from January 1 until December 31

Employment Contracts in Switzerland

Apart from the specific terms, employees should be given written notice of the key elements of their agreement within the first month of employment. Although there are no legal requirements for the language used in a contract, the terms must be fully understood by all the parties, whatever their nationality or native tongue. The agreement should give details of the contracted parties, start date, role, work location and schedule, salary, and payment frequency.

Although contracts can be verbal, any provisions that differ from statutory minimums will be invalid if not confirmed in writing, and they must comply with any enhancements stipulated by collective agreements.

Professional sectors not covered by a collective agreement can be subject to a standard contract drawn up by federal or cantonal authorities, stipulating minimum wages among other statutory entitlements.

Open-ended, Permanent, Indefinite Employment Contracts:  Under the Code of Obligations, this is the standard type of contact which runs until ended by resignation, mutual agreement, or termination under employment law.

Fixed-Term Employment Contracts: The Code of Obligations sets no time limit for the duration of a fixed-term contract. However, if the employer and employee renew the contract beyond the originally agreed period a labor court may decide the agreement became open-ended. In this case entitlements to notice periods will apply as if it is an open-ended contract. Otherwise, the contract terminates on the last day of the agreement without the employer needing to give notice. Under the Code, employers cannot terminate the contract early by offering pay in lieu of the remaining period. Fixed-term contracts can also apply to a specific project.

Probationary or Trial Periods: The first month of an open-ended contract is deemed to be a trial period. Either party can terminate without reason, giving seven days’ notice. Trial periods can be extended to three months if this is in writing.

Part-time or Temporary Employment Contracts: These can be fixed-term or permanent and are based on hours, days or part-days worked. Employees generally have the same entitlements as full-timers, adjusted pro rata if necessary.

Collective Bargaining Agreements (CBAs):  These agreements are between employers’ associations and workers’ associations or trade unions. In Switzerland they apply across many sectors, specific companies, or regions. It is estimated over two million Swiss workers, around 40% of the workforce, are covered by collective agreements.