Switzerland labour regulation

Switzerland Regulatory Environment

By comparison with the EU, Switzerland regulates comparatively few aspects of the employer/employee relationship, and labour law in general is more favourable towards the employer than is the case in the EU, although some influence is being felt from the EU acquis through the 'Bilateral Agreements' which have been signed between Switzerland and the EU.

A written contract of employment is not required except in certain special cases. For most workers, the maximum work-week is 45 hours, although overtime is permitted. The limit on hours does not apply to managers. Four weeks' vacation is the minimum, and cannot be 'bought out'.

Maternity leave is available, and return to work is only permitted after a minimum of 6 to 8 weeks. Compensation is payable if pregnancy results in termination of employment.

Non-competition agreements between employers and employees are permitted, up to three years, and with safeguards for the employee.

Sickness is not a reasonable cause of termination, on a sliding scale which permits up to 180 days of sickness after six years of employment.

An employer may terminate an employment 'with cause'. The legislation is not specific, and in the event of a dispute, a judge in court (not a tribunal) will decide. There are some rules about compensation for termination, but they are not onerous.

Switzerland Social Security Taxes

Social Security taxes are levied at a federal level and are payable by employees, employers and the self employed.

Resident individuals and individuals with gainful activity in Switzerland are required to contribute to the Federal Old Age and Disability Insurance plan and the mandatory federal unemployment insurance plan.

Currently, the total annual old age and disability contribution is 12.5% of total employee remuneration (no ceiling). Half is paid by the employer and half by the employee. Employers are required to deduct contributions from salary payments and to remit the total amount to the social security authorities.

Unemployment contributions are currently 2.2% of employee remuneration on annual salaries up to CHF 126,000. A 'solidarity surcharge' of 0.5% is payable by both employer and employee on annual salaries of CHF126,000 to CHF 315,000.

In most cantons, health and hospitalisation insurance is mandatory, and as a rule, virtually all employees are covered at their own expense. Their contributions depend largely on the type of benefits selected by them. Some companies voluntarily contribute to their employees' health insurance or organize group-insurance schemes for them.

Some cantons levy further payments in relation to child and family allowance schemes.

Social insurance therefore currently (2012) represents about 12.5% of an employee's salary, (not including the 0.5% 'solidarity surcharge') plus health insurance costs and some cantonal payments.

Switzerland is in the group of OECD countries with the highest unemployment benefits - more than 70% of average earnings; and in Switzerland low-paid people lose money by going back to work.

So says an OECD report in December 2007, Benefits and Wages, which provides a guide to how governments are tackling the twin challenges of supporting unemployed people while helping them back into work by tracking net benefit levels in individual countries.

A decade ago, says the OECD, countries were making it increasingly difficult to claim benefits: today many are actually cutting the level of benefits. Faced with labour shortages and pressures on pension funding due to ageing populations, one in three OECD countries has cut unemployment benefits in the last six years with a view to encouraging unemployed people to find jobs.

Switzerland Work Permits

Residence and work permits are dealt with together in Switzerland. The available types of permit are the '120-day' permit, the class A, B or C permits, the fiscal deal permit and the political refugee permit. The class A permit (for 'blue-collar' workers) and the political refugee permit are not described further here; the 'fiscal deal' permit is described in Personal Taxation. Permits other than the '120-day' variety are subject to a quota system. However, agreements with the EU are gradually putting EU freedom-of-movement rules into place which will eventually allow EU citizens to by-pass the quota permit system altogether.

EU citizens now have:

a free choice of residence and work cantons;
the right to change jobs and employers; and
a right to work for their family members.

Eventually, EU-citizens will have complete freedom of movement within Switzerland and Swiss citizens within EU-countries. However, there was a fixed quota for work permits until 31 May 2007 with a maximum of 15,000 new long-term residence permits a year and 115,500 new short-term residence permits a year.

On 31 May 2007, quotas for EU citizens wishing to work in Switzerland were suspended. As of June 2009 Switzerland made a decision to extend the agreement. Freedom of movement will be fully introduced between Switzerland and the EU as of June 2014.

The '120-Day' Permit: This permit allows a managerial or specialist worker to work in a specified position for up to 120 days in a particular year; rotation among a number of individuals is not allowed.

The Class B permit: The class B permit is the most commonly issued permit and gives the right to live and work in Switzerland. It is the permit of choice for professional and managerial people, and for self employed individuals who wish to start their own company in Switzerland. The Class B permit has the following characteristics:

It is usually granted for a period of up to one year at a time;
If the permit is for work purposes then the applicant must have a job to go to in Switzerland;
The granting of his permit must not have the effect of depriving a Swiss national of employment. Since many trades in Switzerland are protected by guilds which prohibit the recruitment of foreign workers an application for a class B permit is not always successful;
The class B permit allows the applicant to bring his wife and children into the country but not his extended family;
The application is not prejudiced by inability to speak the official languages of Switzerland;
It takes about 3 months to obtain a Class B permit.

The Class C permit: The class C permit is a longer-term residency permit which gives the applicant almost the same rights as Swiss citizens and allows the applicant to buy real estate in Switzerland. To obtain a class C permit one must have had a class B permit for between 5 and 10 years depending on country of origin. The class C permit is the last step before applying for Swiss citizenship. It is subject to the same conditions as the class B permit.

Lowtax Jurisdictions

Switzerland: Labour Regulation

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