People, Payroll & Visas

Switzerland has a dual system for granting work permits, which depends on the applicant's nationality.

Thanks to the Agreement on the Free Movement of Persons, citizens from the European Union (EU) and EFTA (Iceland, Liechtenstein, Norway) enjoy significant advantages.

• Process: EU/EFTA citizens can enter Switzerland and look for work for up to three months. To stay longer, they simply need to register with their local cantonal authority with an employment contract (or proof of self-employment) and proof of residence to receive a work/residence permit.

• Permit Type: They are typically granted a B Permit (residence permit), which is valid for five years.

For citizens of all other countries (often referred to as "third-state nationals"), the process is significantly more restrictive and subject to annual quotas.

• Requirements: An employer must prove that they could not find a suitable candidate from Switzerland or the EU/EFTA. The candidate must be highly qualified (typically with a university degree and professional experience), and the proposed salary and working conditions must meet Swiss standards.

• Process: The employer must file a detailed application with the cantonal authorities. The process is lengthy and requires significant justification.

An entrepreneur wishing to move to Switzerland to run their own company must apply for a specific permit for self-employment. This requires submitting a comprehensive business plan demonstrating that the new company will have a "lasting positive impact on the Swiss labour market"—for example, by creating jobs for local staff or fostering innovation. This is a high threshold to meet and requires careful preparation.

Running payroll in Switzerland is a precise and systematic process. It involves deducting mandatory social security contributions and other items from an employee's gross salary.

• Gross Salary (Bruttolohn): This is the total salary agreed upon in the employment contract before any deductions.

• Net Salary (Nettolohn): This is the amount the employee actually receives in their bank account after all mandatory deductions have been made. Swiss payslips are required to show a clear breakdown of all these deductions.

The Swiss social security system is based on a "3 Pillar" concept designed to provide for retirement, disability, and death.

• Pillar 1: State Pension (AHV/IV/EO): This is the mandatory state pension and disability insurance. Contributions are shared equally between the employer and employee.

• AHV: Old-Age and Survivors' Insurance

• IV: Disability Insurance

• EO: Income Compensation Insurance (for military service or maternity leave)

• Pillar 2: Occupational Pension (BVG / Pensionskasse): This is a mandatory, employment-based pension fund. It is required for all employees earning above a certain annual threshold (CHF 22,050 as of 2024). Contributions are also shared between the employer and the employee.

• Pillar 3: Private Pension: This is a voluntary, private pension plan that individuals can contribute to for additional retirement savings, often with tax advantages. This is not part of the payroll deduction process.

• Unemployment Insurance (ALV): A mandatory contribution, shared equally between employer and employee, to provide benefits in case of job loss.

• Accident Insurance (UVG): Employers are required to insure their employees against occupational accidents (BU) and non-occupational accidents (NBU). The employer pays the premium for occupational accidents, while the premium for non-occupational accidents is typically deducted from the employee's salary.

Every month, the employer must provide each employee with a detailed payslip (Lohnausweis). It must transparently list the gross salary, all individual deductions (AHV, BVG, ALV, NBU, etc.), and the final net salary.

Payroll responsibilities extend beyond the monthly payments.

• Annual Declaration of Salaries to AHV & Insurances: At the beginning of each year, the employer must submit a report to the social security office (AHV) and other insurers (pension fund, accident insurance) detailing the total salaries paid to all employees in the previous year. This is used to reconcile the contributions that have been paid.

• Issuing the Annual Salary Certificate (Lohnausweis): The employer must provide each employee with an official annual salary certificate. This is a standardised form that summarises the employee's total earnings and deductions for the year. It is a crucial document that the employee must use to complete their personal income tax return.

Swiss employment law is recognised for being liberal and business-friendly, yet it also provides robust protection for employees.

While a verbal agreement is technically binding, a written employment contract is standard practice and highly recommended. It should clearly define:

• The names of the parties

• The start date of employment

• The employee's role or function

• The gross salary

• The weekly working hours

• The probationary period (typically 1-3 months)

• The notice period for termination

• Working Hours: The maximum legal working week in Switzerland is typically 45 hours for industrial and office staff, and 50 hours for other workers. A 40-42-hour week is common practice.

• Holidays: All employees are legally entitled to a minimum of four weeks of paid holiday per year (five weeks for employees under the age of 20).

• Public Holidays: There are national and cantonal public holidays. The number varies depending on the canton where the company is located.

• Sick Leave: Employers are obligated to continue paying an employee's salary during illness for a certain period, which depends on the length of service. Most companies take out daily sickness allowance insurance to cover this risk.

Switzerland follows the "freedom of termination" principle, meaning either party can terminate the employment contract for any reason, provided they respect the contractual notice periods.

• During Probationary Period: The notice period is typically 7 days.

• After Probation: The legal minimum notice periods are:

• 1 month during the first year of service.

• 2 months from the second to the ninth year of service.

• 3 months from the tenth year of service onwards.

The contract may specify longer notice periods. Termination is only valid when notice is given by the end of a month. There are specific protections against termination in certain situations (e.g., during illness, pregnancy, or military service).