International Business Expansion: Switzerland – HR compliancy

In a previous blog on the subject of International Business Expansion to Switzerland,  we highlighted some of the most important strategic reasons for a company to consider, when looking to establish a European business expansion hub.  In this post, we focus on some of the key HR parameters and compliancy requirements for an international company when engaging workers in Switzerland.

As a brief reminder (from our recent blog), the following are the main areas to consider with international business expansion to Switzerland.

• The economy (stable and thriving)
• Tax Regulations
• Network Infrastructure
• Business Entity Types & Engagement Models
• Standard of Living
• Currency Strength & Stability
• Business Friendly Eco-System
• A business expansion can also occur as part of a company merger or acquisition. According to recent publications, in 2022 alone, there were 647 mergers and acquisitions with Swiss involvement with deals worth a total of US$ 138.5 billion. 

Whatever the underlying reason for looking to expand to Switzerland, every company will need to invest quality time in understanding the parameters and compliancy rules for engaging workers in Switzerland.

• The first question to consider when engaging staff in Switzerland is, does the worker have a permit which allows them to live and work in Switzerland?
  
  
  • To engage in work in Switzerland, the worker should already have a permit or visa secured in their name or be able to apply for one.
  • For EU and EFTA nationals, the process is relatively straightforward as stipulated in Article 45 of the Treaty on the Functioning of the European Union.
  • For so called 3^rd country nationals (any nationals not EU/EFTA), obtaining a permit is more difficult. (This now includes the UK since Brexit – Article 45 of the Treaty on the Functioning of the European Union).

• What type of Engagement Model should the company use?
  • Once it is established that the worker is permitted to live and work in Switzerland, the engagement model should be considered. This can be either:
    • Full time
    • Part time
    • Contractor
  • For those companies engaging workers themselves directly, there are a myriad of worker engagement parameters for Switzerland that have to be understood and adhered to.  Accurity consulting services can advise prospective employers on this.
  • The majority of companies in Switzerland fall into the SME category and for which, outsourcing HR services is an accepted practise.  Working with a trusted professional employer / employment services partner such as Accurity, is a secure way for a company new to Switzerland, to ensure they are compliant in terms of HR practice and employment law.
  • Staff can be directly employed by the company with salary calculation, payment and other HR tasks outsourced, or the employees can be engaged as leased labour contractors through a SECO registered employment services partner such as Accurity, under the Employer of Record or (EOR) model

• Understanding Social charges in Switzerland
  • Employer and employee social payments are divided ca. 50/50 in Switzerland, so it is important for a company establishing a base in Switzerland to fully understand the social charges, pension payments and insurance obligations when engaging workers.
  • Here we highlight the pension payments, but this is just one type of social deduction and it is key for a company establishing a base in Switzerland to understand all social  payment deductions.
  • Pension payments in Switzerland are based on a 3-pillar system:
    • 1st Pillar is the first part of the Swiss Federal social security system (compulsory old age insurance, survivor’s insurance and disability insurance called the 1st pillar). It is a fixed amount of 5.3% each based on employee salary both for employer and employee.
    • The second part of the Swiss social security system is called the 2nd pillar and is a private pension scheme with payments made by the employer and the employee. The choice of private pension plan is for the the employer to decide and agree with the employee.
    • Membership of a company pension fund (LPP) is compulsory for all employees earning over CHF 21’ 510 a year and over 17 years of age. The contributions vary depending on age, salary, sex, and employer’s particular pension fund.
    • The 3rd pillar is a private savings scheme for the employee only and as such no payments are required by the employer.

• The Engagement ProcessIt is vital for a company recruiting workers in Switzerland to fully understand legal and compliancy requirements. Here we highlight the most important points to check when  engaging workers in Switzerland:

1. 1. Establish if the worker has a valid permit to live and work in Switzerland.
   2. If they are new to the area, do they have accommodation already located and a contract signed. (accommodation can be difficult to find and is expensive in Switzerland).
   3. What languages do they speak (four official languages in Switzerland and in the main cities English is widely understood). There are some language restrictions in place for the various types  of permits.
   4. Do they have family dependents? Do these also have a permit? This will also affect the social charges and payments.
   5. If the worker is engaged as a contractor, the role may need to be advertised at the local social security office first. This will depend on type of role, qualification requirements and seniority.
   6. Check salary guidelines with the relevant union organisations (GAV or collective engagement rules, which differ for each industry sector).
   7. Select and agree the engagement model for the worker (e.g. full time, part-time, contractor)
   8. Write the employment agreement according to Swiss law with all compliancy issues checked and covered. This document must be signed by both employer and employee. There is no set legal formula for work contracts, but they are normally written agreements. There are a few types of contracts that exist in Switzerland:
      • Individual employment contract. The employer may only modify these conditions to offer better terms for the employees.
      • Fixed term contract.
      • Collective labour agreements (GAV) with salary / terms and conditions determined by unions.
      • Standard employment contract where no unions are active. These are often put in place to end repeated violations of the usual wage conditions in a region, occupation or sector.
   9. Standard work hours in Switzerland are 40 or 42 hours. 45 hours is the maximum. Overtime is also controlled. Visit our blog on working hours for more information.
   10. Vacation – all workers in Switzerland are entitled to a minimum of 4 weeks vacation per year, two of which should be taken together. This increases with age. And there are considerations for giving a worker their notice period during vacation.

Accurity is SECO licensed with a 20+ year enviable reputation as a trustworthy, reliable and transparent partner for companies of all sizes including SMEs, contractors and recruitment agents. Our core services include Employer of Record or EOR for contractors and international and domestic clients wishing to engage contractors. We also support international clients with our PEO HR services.  Our pricing system is fair and transparent. We are based in Switzerland and have excellent local knowledge and connections. Contact our team to see how we can help you.