When does an employment contract actually exist?
An employment contract exists when a person performs work in the service of an employer for a fixed or indefinite period and receives wages for it (Art. 319 Abs. 1 OR). Regular part-time work can also be an employment contract (Art. 319 Abs. 2 OR).
For startups, it is particularly important that the title of the document is not the only thing that counts. A contract can be called a "Freelance Agreement", "Mandate Agreement" or "Cooperating Agreement" and still qualify as an employment contract under labor law if the actual cooperation speaks in favor of it.
The Federal Supreme Court names work performance, remuneration, integration into an external work organization and a continuing obligation as typical characteristics of an employment contract (BGer 4A_64/2020 E. 6.1). Subordination, i.e. legal subordination in personal, operational, temporal and partly financial terms, is particularly important (BGer 4A_64/2020 E. 6.2). The overall picture of the individual case is always decisive (BGer 4A_64/2020 E. 6.5).
For SMEs, this means: If someone is integrated into your processes, receives instructions, works for you regularly and does not bear their own entrepreneurial risk, the collaboration should not be artificially labeled as a freelance model.
Does an employment contract have to be concluded in writing?
In principle, an employment contract in Switzerland does not require any special form (Art. 320 Abs. 1 OR). It can therefore also arise orally. It is even deemed to have been concluded when an employer accepts work which, under the circumstances, can only be expected in return for wages (Art. 320 Abs. 2 OR).
Nevertheless, SMEs and startups should always conclude employment contracts in writing. This is not only cleaner, but also helps with later questions about workload, place of work, salary, bonus, probation period, vacation and termination.
In the case of open-ended employment relationships or employment relationships lasting more than one month, the employer must provide written information on certain points no later than one month after the start. This includes the names of the parties, the start, the function, the salary including surcharges and the weekly working hours (Art. 330b Abs. 1 OR). Changes to these points must also be communicated in writing (Art. 330b Abs. 2 OR).
What belongs in a good employment contract?
A good employment contract is understandable, complete and not unnecessarily complicated. For SMEs and startups, it should at least regulate who is being hired, when the employment relationship begins, what role is being assumed, what workload applies and how high the salary is.
Also important are the place of work, home office rules, working hours, vacation, probation period, notice periods, expenses, confidentiality, handling of work equipment and, if applicable, regulations on intellectual property. Depending on the industry, it must also be checked whether a collective employment agreement or a standard employment contract applies. Although the salary can in principle be freely agreed upon, it is due if it has been agreed upon, is customary or is determined by a standard employment contract or collective employment agreement (Art. 322 Abs. 1 OR).
Not every creative clause is valid. Employment contract law contains mandatory and relatively mandatory rules. There can be no deviation from certain provisions at all, or not to the detriment of the employee (Art. 361 OR, Art. 362 OR). A contract is therefore not automatically valid just because both sides have signed.
How should the probation period be regulated?
Unless otherwise agreed, the first month is deemed to be a probation period. During the probation period, the employment relationship can be terminated at any time with a notice period of seven days (Art. 335b Abs. 1 OR).
SMEs can regulate the probation period differently in writing. However, it may last a maximum of three months (Art. 335b Abs. 2 OR). A clear probation period makes sense, especially for startups, because the first few weeks often show whether the role, pace, culture and expectations match.
If a person is absent during the probation period due to illness, accident or a legal duty that was not voluntarily assumed, the probation period is extended accordingly (Art. 335b Abs. 3 OR). This should also be known in the HR process so that deadlines are calculated correctly.
What applies to vacation, illness and health protection?
Employees are entitled to at least four weeks of vacation per year of service. Up to the completed 20th year of age, the minimum entitlement is five weeks (Art. 329a Abs. 1 OR). For an incomplete year of service, vacation is granted pro rata (Art. 329a Abs. 3 OR).
In the event of illness, accident or other personal obstacles through no fault of their own, wages must continue to be paid for a limited period of time if the employment relationship has lasted for more than three months or was entered into for more than three months (Art. 324a Abs. 1 OR). In the first year of service, the statutory minimum duration is three weeks, after which it is a reasonably longer period depending on the duration of the employment relationship and the circumstances (Art. 324a Abs. 2 OR). Alternative written solutions are possible if they are at least equivalent for employees (Art. 324a Abs. 4 OR).
In addition, the employer must respect the personality of the employees, take their health into account and take the necessary protective measures (Art. 328 Abs. 1 OR, Art. 328 Abs. 2 OR). A "startup culture" with high workloads, constant availability and unclear boundaries does not replace this duty.
How to regulate overtime correctly?
Overtime occurs when more work is performed than is contractually agreed, customary or provided for in a collective or standard employment agreement. Employees must perform necessary overtime to the extent that they are able to do so and this is reasonable in good faith (Art. 321c Abs. 1 OR).
With the consent of the employee, overtime can be compensated with free time of at least equal duration (Art. 321c Abs. 2 OR). If it is not compensated and nothing else has been agreed in writing, wages including a surcharge of at least 25 percent are due (Art. 321c Abs. 3 OR).
Particular caution is required in the case of executive employees. The Federal Supreme Court states that, in the absence of explicit regulations on working hours, executive employees in principle only have a limited claim to compensation for overtime. However, if weekly working hours are expressly agreed, the statutory overtime regulations may apply (BGE 129 III 171 E. 2.1).
It is also important to distinguish between overtime (Überstunden) and statutory overtime (Überzeit). Statutory overtime refers to exceeding the legal maximum working hours under the Labor Act. Depending on the category, the maximum weekly working time is 45 or 50 hours (Art. 9 Abs. 1 ArG). For statutory overtime work, a surcharge of at least 25 percent is generally owed, with the first 60 hours in the calendar year being excluded for certain employees (Art. 13 Abs. 1 ArG). The Federal Supreme Court explicitly distinguishes between these two systems (BGer 4A_207/2017 E. 2.1).
Which termination rules should SMEs know?
An open-ended employment relationship can be terminated by both sides (Art. 335 Abs. 1 OR). Anyone who terminates must justify the termination in writing if the other party requests this (Art. 335 Abs. 2 OR).
After the probation period, the statutory notice periods apply unless there is another valid regulation. In the first year of service, the notice period is one month, from the second to and including the ninth year of service two months and thereafter three months, in each case to the end of a month (Art. 335c Abs. 1 OR). These periods can be adjusted in writing, but in principle must not fall below one month, except by collective employment agreement and only for the first year of service (Art. 335c Abs. 2 OR).
Termination during blocking periods is particularly delicate. After the end of the probation period, the employer may not terminate, among other things, during certain times of sickness, accident, pregnancy, maternity and other legally protected situations (Art. 336c Abs. 1 OR). A dismissal during such a blocking period is null and void (Art. 336c Abs. 2 OR).
Termination without notice is only permitted for important reasons. An important reason is given if the continuation of the employment relationship is no longer acceptable in good faith (Art. 337 Abs. 1 OR, Art. 337 Abs. 2 OR). This is an exception and should never be pronounced prematurely.
When does a non-compete clause make sense?
A non-compete clause can make sense for SMEs if employees gain real insight into the customer base, business secrets or manufacturing secrets. It must be agreed in writing (Art. 340 Abs. 1 OR). It is only binding if the use of this knowledge could significantly damage the employer (Art. 340 Abs. 2 OR).
In addition, the non-compete clause must be appropriately restricted in terms of location, time and object. It must not unreasonably impede the employee's economic advancement (Art. 340a Abs. 1 OR). Overly broad standard clauses are therefore risky. For startups, a good confidentiality clause is often more important and robust than an overextended non-compete clause.
Conclusion: The employment contract is not a formality
An employment contract in Switzerland is more than a template with a name, salary and signature. For SMEs and startups, it is a management tool, risk protection and the basis for fair cooperation.
Anyone who regulates working hours, overtime, vacation, continuation of pay, termination and protective duties properly prevents subsequent conflicts. At the same time, the contract should realistically fit the actual cooperation. If someone works like an employee, the relationship should also be treated legally as an employment relationship.
Frequently asked questions about employment contracts in Switzerland
Can an employment contract be valid orally?
Yes. In principle, an employment contract can be validly concluded orally (Art. 320 Abs. 1 OR). For reasons of proof and due to the legal obligation to provide information, a written contract is almost always recommended for SMEs (Art. 330b Abs. 1 OR).
Does every startup have to pay a 13th month's salary?
A 13th month's salary is not provided for in the OR as a general obligation. It is due if it has been agreed upon or results from an applicable collective employment agreement, standard employment contract or a binding company regulation. The salary is based on the agreement, practice or applicable collective rules (Art. 322 Abs. 1 OR).
Can overtime simply be included in the salary?
This only makes sense with a clear written regulation. Without a written agreement, uncompensated overtime must in principle be paid with salary plus a 25 percent surcharge (Art. 321c Abs. 3 OR). Statutory overtime according to the Labor Act also follows its own rules (Art. 13 Abs. 1 ArG).
Can the notice period for employer and employee be different?
In principle, no different notice periods may be set for the employer and employee. If an agreement is contradictory, the longer period applies to both (Art. 335a Abs. 1 OR).
