Employer Cost Guide: Things to Consider When Hiring in Switzerland

Are you a small business owner looking to take on one or more employees? Here, we list the primary responsibilities and costs attached to hiring employees in Switzerland.

Social security administration

All employers in Switzerland are expected to act as middle men between their employees and cantonal social security offices. This means that all contributions paid by your employees towards Old Age and Survivors Insurance (OASI), social disability insurance (DI), military and parental leave insurance (EO), and child benefits (FZ) must be processed by you as the employer. In the other direction, possible child benefits, maternity leave compensation, military leave compensation, disability insurance and other benefits paid out by the social security office to your employees will be channeled through your business and must also be administered by you.

OASI contributions

You are obligated to cover a minimum of 50% of your employees' social security Old Age and Survivors Insurance (OASI) contributions. OASI contributions are based on a percentage of each salary. The higher the salary, the higher the contribution you have to make. Make sure to factor your share of OASI contributions into the overall cost of taking on an employee.

Occupational pension fund contributions

Employees who work more than 8 hours weekly over an employment term of more than 3 months and earn a salary in excess of a fixed threshold (currently 22,050 francs) are entitled to join an occupational pension fund. As the employer, it is up to you to select the pension fund you want to work with. Depending on your employee’s age, contributions can equal between 7 and 18 percent of their salary, and you are required to pay half of those contributions. Make sure to account for the cost of your share of occupational pension fund contributions.

Accident insurance

In Switzerland, accident insurance is provided to employees via you as their employer. You pay the premium for occupational accident insurance. They pay the premium for insurance covering accidents outside of the workplace. You are responsible to select an insurance provider and to file claims and collect benefits on behalf of employees. See the guide to selecting an occupational accident insurance provider for advice.

Paid holidays

Employees in Switzerland are legally entitled to 4 weeks of paid holiday for every full 1 year of full-time employment. They can choose to forego paid holidays and claim an extra monthly salary instead. You must account for this by setting aside a sum equal to 8.33 percent of your employee's salary every month to cover holiday entitlements.

Paid overtime

When an employee works more hours in a week than the employment contract stipulates, the additional work hours count as overtime. Any overtime put in by an employee with your consent must be compensated at contractual salary rates plus a 25-percent markup. You can add this to their salary, compensate with paid leave, or provide alternative compensation as stated in your employment contract.

Paid Sick leave

Employees who have worked for you longer than 3 months are entitled to paid sick leave. Every additional year of employment entitles your employees to longer annual paid sick leave allowances. The exact paid sick leave entitlements vary depending on the canton in which your business is domiciled, unless you specify a different model in your employment contracts.

Getting paid sick leave insurance helps to protect your business from the financial impact of illnesses. You as the employer have to cover at least 50% of the premiums, while the remainder can be deducted from the employee's salary.

Maternity

Women in Switzerland are entitled to maternity leave. Men are entitled to paternity leave. The benefits are paid by the EO social insurance scheme, but you as the employer have to manage claims and benefits on behalf of your employee. It is also worth noting that an employee who is pregnant or has delivered a child cannot be laid off until the legal maternity protection period expires, regardless of their performance.

Employment termination notice periods

Swiss employment laws stipulate that, if not otherwise laid out in employment contracts, terminations are subject to a 1-month notice period during the first year of employment, a 2-month notice period from the second to the ninth year of employment, and a 3-month notice period from the tenth year of employment onwards. Special termination laws apply in the case of maternity (as stated above), accidents and illness (30 days during the first year, 90 days during the second, third and fourth years, and 180 days during the sixth and subsequent years). For workers who are employed on a probational basis, a 7-day notice period applies.

You are allowed to use shorter notice periods in employment contracts. In that case, the notice periods agreed to by you and your employee take precedence.

Thirteenth-month salary

Employers are not obliged to offer a thirteenth salary every year, but it is customary in Switzerland and some employees will expect it. This extra salary is normally paid to employees at the end of the calendar year. A thirteenth salary adds the equivalent of 8.33 percent of a monthly salary to the cost of hiring an employee.

Tax at source

If the employee does not have a C permit in Switzerland, is not married to a Swiss citizen or permanent resident, or lives outside of Switzerland (a cross-border worker), you are required to withhold a percentage of their income towards taxes. This withholding tax covers a foreign employee’s federal taxes, cantonal taxes and municipal taxes. You as the employer have to withhold the money from your employee’s salary and pass it on to the tax office, which adds administrative work for you.

What is the total cost of hiring an employee in Switzerland?

You can calculate the exact cost of hiring an employee in Switzerland using the salary cost calculator for employers.

More on this topic:
Business bank account comparison
Business loan comparison
Business credit card comparison
Executive pension plans explained
Pension fund comparison for employers
Guide to accident insurance for employers
Guide to paid sick leave insurance for employers