When does an employment relationship exist legally?
An employment relationship exists when a person performs work in the service of the employer and receives a salary for it. This also applies to part-time work, when someone regularly works for the company by the hour, half-day, or day (Art. 319 Abs. 1 OR, Art. 319 Abs. 2 OR).
Important for SMEs: An employment contract does not generally have to be in writing. It can also be created orally or even tacitly if a company accepts work that, under the circumstances, can only be expected in return for salary (Art. 320 Abs. 1 OR, Art. 320 Abs. 2 OR). Precisely for this reason, a written contract is almost always sensible in practice. It prevents misunderstandings regarding function, workload, salary, holidays, probationary period, notice periods, and expenses.
Even if no detailed contract exists, the employer must provide written information on the most important points in the case of an open-ended employment relationship or an employment relationship of more than one month, at the latest one month after it begins. This includes the names of the parties, the start date, the function, the salary, and the weekly working hours (Art. 330b Abs. 1 OR).
What belongs in the employment contract?
A good employment contract makes collaboration predictable. Not every single point in the contract is legally mandatory, but practically it is. Anyone wishing to hire employees in Switzerland should at least regulate who is hired, from when the employment relationship begins, what function the person assumes, what the workload is, what salary is paid, when the salary is due, how much holiday is granted, and what notice period applies.
Regarding salary, the employer must pay the agreed, customary, or determined salary by standard employment contract or collective employment contract (Art. 322 Abs. 1 OR). Furthermore, the employer must hand over a written pay slip to the employee (Art. 323b Abs. 1 OR). Holidays may not, in principle, simply be replaced by money during the ongoing employment relationship (Art. 329d Abs. 2 OR). The legal minimum entitlement is four weeks of holiday per year of service, and five weeks for employees up to the completed 20th year of age (Art. 329a Abs. 1 OR).
It is also important to note that not everything is freely negotiable. Certain labor law rules are mandatory. There may be no deviation to the detriment of a party from the specifications mentioned in Art. 361 OR. There may be no deviation to the detriment of the employee from the specifications mentioned in Art. 362 OR. Thus, a contract is only truly helpful if it adheres to the legal minimum standards.
Which social insurances must an SME organize?
As soon as an SME pays a salary, it becomes relevant under social security law. An employer is anyone who pays remuneration to obligatorily insured persons (Art. 12 Abs. 1 AHVG). Employers with a place of business in Switzerland are generally subject to contribution requirements (Art. 12 Abs. 2 AHVG).
In practice, this means: The company must register with the competent compensation office, declare salaries correctly, deduct employee contributions from the salary, and settle them together with its own contributions. The AHVG explicitly states that employers must deduct the employee contribution from every relevant salary and periodically settle the deducted and self-owed contributions with the compensation office (Art. 51 Abs. 1 AHVG, Art. 51 Abs. 3 AHVG).
Unemployment insurance is also linked to the employment relationship. Employees who are insured under AHVG and subject to contributions for income from employment, as well as employers who are subject to contributions under Art. 12 AHVG, are subject to contributions (Art. 2 Abs. 1 AVIG). The employer deducts the employee's share with every salary payment and pays it together with their own share to the competent AHV compensation office (Art. 5 Abs. 1 AVIG).
When is the pension fund mandatory?
Occupational pension provision becomes relevant when certain conditions are met. Employees who have passed the age of 17 and receive an annual salary of more than CHF 22'680 from an employer are subject to the mandatory insurance (Art. 2 Abs. 1 BVG, Art. 7 Abs. 1 BVG). Anyone who is employed for less than a year is treated as if the salary were calculated for a full year (Art. 2 Abs. 2 BVG).
For SMEs, it is particularly important that the mandatory insurance begins when the employment relationship starts (Art. 10 Abs. 1 BVG). Anyone employing staff who must be obligatorily insured must join a registered pension institution or establish one (Art. 11 Abs. 1 BVG). The employer must report all employees subject to insurance to the pension institution and provide the necessary details for retirement accounts and contributions (Art. 10 BVV 2).
What accident insurance is needed?
Accident insurance is one of the duties that should be settled before the first working day. Occupational accidents are accidents suffered by employees when carrying out work on the employer's instructions or in the employer's interest. Accidents occurring during work breaks as well as before and after work are also covered, if the person is legitimately present at the workplace or in the hazard area of the professional activity (Art. 7 Abs. 1 UVG).
The premiums for mandatory insurance against occupational accidents and occupational diseases are borne by the employer (Art. 91 Abs. 1 UVG). The premiums for mandatory insurance against non-occupational accidents are generally at the expense of the employee, with the employer owing the entire premium amount and deducting the employee's share from the salary (Art. 91 Abs. 2 UVG, Art. 91 Abs. 3 UVG).
In addition to insurance, there are also prevention duties. To prevent occupational accidents and occupational diseases, the employer must take all measures that experience shows to be necessary, that are applicable according to the state of technology, and that are appropriate to the circumstances (Art. 82 Abs. 1 UVG). If the employer learns of an accident that results in medical treatment, incapacity for work, or death, they must inform the insurer without delay (Art. 45 Abs. 2 UVG).
What applies to working hours, health protection, and data protection?
Anyone planning to hire employees in Switzerland should not start only with the salary. Working hours, health protection, and personal data must also be organized from the very beginning.
The Labor Act generally applies to public and private businesses that employ staff (Art. 1 Abs. 1 ArG, Art. 1 Abs. 2 ArG). Employers must keep ready the documents necessary for implementation (Art. 46 ArG). The ordinance specifically requires details on personal data, entry and exit dates, daily and weekly working hours worked, compensation and overtime work, breaks, as well as rest days or replacement rest days (Art. 73 Abs. 1 ArGV 1). These documents must be kept for at least five years (Art. 73 Abs. 2 ArGV 1).
When it comes to health protection, employers have far-reaching obligations. They must respect the personality of the employees, protect their health, and take measures to protect life, health, and personal integrity (Art. 328 Abs. 1 OR, Art. 328 Abs. 2 OR). Additionally, the Labor Act obliges employers to take all cooperation, technically applicable, and operationally appropriate measures to protect health (Art. 6 Abs. 1 ArG).
Regarding data protection in the employment relationship, a special principle applies: Employers may only process data about employees to the extent that it concerns their suitability for the employment relationship or is necessary for the performance of the employment contract (Art. 328b OR).
What applies to foreign employees?
For foreign employees, the employer must verify before they start work whether the person is allowed to work in Switzerland. The AIG explicitly requires that, before the start of employment, the employer ensures that the authorization to engage in gainful activity exists by inspecting the ID or by inquiring with the competent authorities (Art. 91 Abs. 1 AIG).
In principle, foreign nationals who wish to be gainfully employed in Switzerland require a permit. In the case of employment, this permit must be applied for by the employer (Art. 11 Abs. 1 AIG, Art. 11 Abs. 3 AIG). Special rules apply to EU and EFTA nationals. For employment of up to three months within a calendar year, a notification procedure applies mutatis mutandis, whereby the notification must be made at the latest on the day before the start of the activity (Art. 9 Abs. 1bis VFP).
This is an area where SMEs should be particularly careful. Different procedures can apply depending on nationality, residence status, duration of the assignment, and place of work.
When is withholding tax added?
Withholding tax applies in particular to foreign employees without a permanent residence permit who have their tax residence or stay in Switzerland (Art. 83 Abs. 1 DBG). Employers must report the employment of persons subject to withholding tax to the competent tax authority within eight days from the start of employment (Art. 5 Abs. 1 QStV).
The employer is obliged to withhold the tax due when the cash benefit is payable, to issue a confirmation of the tax deduction to the employee, and to periodically deliver the tax to the competent tax authority (Art. 88 Abs. 1 DBG). The withholding tax deduction must also be made if the person concerned has their place of residence or stay in another canton (Art. 88 Abs. 2 DBG).
Which other obligations are often forgotten?
Family allowances are easily forgotten in the hectic pace of a new hire. Employers who are subject to contributions under Art. 12 AHVG are subject to the Family Allowance Act (Art. 11 Abs. 1 FamZG). The applicable family allowance scheme is generally based on the canton in which the company has its legal seat. Branch offices are subject to the scheme of the canton in which they are located (Art. 12 Abs. 2 FamZG). The family allowances are usually paid to the entitled employees by the employer (Art. 15 Abs. 2 FamZG).
Equally important is a clean payroll administration. This includes complete personal details, monthly payslips, correct deductions, expense regulations, holiday and working hours tracking, as well as timely notification of changes.
Conclusion
Anyone wishing to hire employees in Switzerland should not start the process only with the signing of the contract. Employment is only legally sound when the employment contract, payslip, social insurances, accident insurance, pension fund, working hours tracking, health protection, foreign national law check, and withholding tax work together cleanly.
A simple rule is worthwhile for SMEs: The most important legal foundations must be in place before the first working day. After that, ongoing, clean administration is required. In this way, the first hire does not become a liability risk, but a professional next step in the growth of the company.
Frequently asked questions about hiring employees
Does an employment contract in Switzerland have to be in writing?
No. An individual employment contract is generally free of form and can also come into existence orally or tacitly (Art. 320 Abs. 1 OR, Art. 320 Abs. 2 OR). Nevertheless, a written contract is urgently recommended because it records the most important points in a provable manner.
From when must an SME have a pension fund?
As soon as an SME employs staff who must be obligatorily insured, it must join a registered pension institution (Art. 11 Abs. 1 BVG). Employees with an annual salary of more than CHF 22'680 are obligatorily insured, provided that the age requirements are also met (Art. 2 Abs. 1 BVG, Art. 7 Abs. 1 BVG).
Who pays for the accident insurance?
The premiums for occupational accidents and occupational diseases are borne by the employer (Art. 91 Abs. 1 UVG). The premiums for non-occupational accidents are generally at the expense of the employee, unless a more favorable agreement exists (Art. 91 Abs. 2 UVG).
What must I check first with foreign employees?
Before the start of employment, the employer must check whether the person is allowed to work in Switzerland (Art. 91 Abs. 1 AIG). Depending on nationality, residence status, and duration of the activity, a permit or a notification is required.
