In Switzerland, the State Secretariat for Economic Affairs (SECO) plays a key role in monitoring and enforcing labour laws. Notably, this also applies for contractors and temporary workers. SECO ensures that companies, contractors and the EOR (Employer of Record) providers comply with Swiss labour laws. These apply to wages, working conditions, and social insurance contributions. For both domestic and foreign contractors, compliance with SECO regulations is essential to avoid penalties.
The key aspects of SECO compliance for Contractors in Switzerland covers the following key areas:
Work Permits
Foreign contractors must obtain appropriate work permits before commencing work in Switzerland. SECO is concerned with the regulatio and monitoring of permit issuance to ensure fair labour market access for foreign workers without undercutting local wages and conditions.
Wage Requirements
Contractors must be paid in accordance with Swiss wage standards. SECO monitors compliance with minimum wage levels, which vary by canton and industry. Any attempt to pay contractors below the required minimum wage is subject to substantial penalty.
Working Hours and Conditions
SECO enforces the Swiss working hours regulations which include maximum working hours and minimum rest periods. Employees and contractors are required to adhere to these rules in order to ensure they are not exploited.
Social Security Contributions
Contractors in Switzerland are required to contribute to social security systems, including the AHV/AVS (Old-Age and Survivors’ Insurance), IV/AI (disability insurance). This includes other mandatory social contributions like unemployment insurance. SECO oversees the enforcement of these contributions for all workers, including contractors.
Posted Workers
If a contractor is posted to Switzerland by a foreign company, special rules apply under the Posted Workers Act. SECO ensures that these workers receive the same pay and conditions as Swiss workers, and that the posting is compliant with Swiss labour standards.
Health and Safety Regulations
SECO monitors compliance with Switzerland’s health and safety regulations. Therefore contractors must follow safety protocols in their workplaces to prevent accidents and maintain a safe working environment.
Collective Labor Agreements (CLA’s)
In some industries, sector-specific CLA’s apply, and contractors must comply with the conditions stipulated in these agreements. This includes wages, working hours, and benefits.
SWISS LAW and Employer of Record
In Switzerland labour laws are generally regulated at the federal level, but there are important cantonal variations that can impact how Employer of Record (EOR) services operate across different regions.
An Employer of Record is a SECO licensed entity that officially employs workers on behalf of another company. In this roll, the EOR handles payroll, taxes, compliance, and other HR functions. While the core responsibilities of an EOR are the same throughout the country, variations in labour laws and practices between cantons can affect the administration of these services.
Key Differences in EOR Services Across Cantons in Switzerland
Wages and Minimum Salary Requirements
- While Federal Law does not require a national minimum wage, specific sectors may have minimum wages through Collective Labour Agreements (CLA’s). These agreements are generally binding across all cantons.
- Some cantons have introduced minimum wage laws. For example:
- Geneva: The canton of Geneva has one of the highest minimum wages in the world, set at CHF 23 per hour.
- Neuchatel, Jura, and Ticino: These cantons have their own minimum wage laws, though these rates vary.
- Impact on EOR: When hiring through an EOR, companies must ensure that wages comply with the local minimum wage laws or the CLA’s that apply in the specific cantons. The EOR is responsible for handling these variations.
Collective Labour Agreements
- Federal Law: CLAs are common across Switzerland, particularly in sectors like construction, hospitality, and healthcare. Several hundreds of these agreements cover wages, working hours, benefits, and other employment conditions. For EOR providers there is an additional CLA specifically for personnel leasing which applies to all leased personnel in Switzerland with minimum wages set depending on skills, experience and location. This CLA can be supplemented by local cantonal and/or industry specific CLAs.
- Cantonal Differences: Some cantons enforce CLAs more rigorously or have regional variations in the agreements. The EOR must comply with the CLAs applicable in each canton and ensure that employees’ conditions meet these standards.
Taxation and Social Security Contributions
- Federal Law: Payroll premiums and social security contributions (AHV/AVS, etc.) are regulated at the Federal level. This means that the contributions an EOR makes are consistent across cantons.
- Cantonal Differences:
- Local cantonal payroll premium rates are always based on the location of the EOR, not the employee. Mandatory accident insurance and additional sick-pay insurance premiums are also partly based on the claim record of the EOR an its ability to negotiate based on volume.
- However Income tax rates are based on where the employee is registered. These vary significantly between cantons, as Switzerland has a decentralised tax system. Some cantons, such as Zug and Schwyz, have significantly lower personal income tax rates, while others, like Geneva and Vaud, have far higher rates. To see the extent of the difference try our sourcetax calculator.
- Impact on EOR: Payroll premiums are based on the EOR location, whereas income tax at source (withheld for foreign employees without a permanent “C” residence permit) differs across cantons. The EOR must adjust for these variations when processing payroll. This is where expert local knowledge is key.
Work Permits and Foreign Workers
- Federal Law: Work permits for non-Swiss citizens are regulated by federal authorities, but cantons play a role in issuing and managing permits.
- Cantonal Differences: Cantonal authorities have some discretion over the number and type of work permits issued, particularly for non-EU citizens. Therefore, cantons may have different administrative processes, waiting times, or quotas for issuing work permits.
- Impact on EOR: An EOR needs to navigate these cantonal variations to ensure timely and compliant issuance of work permits for foreign workers.
Working Hours and Overtime
- Federal Law: The Swiss Labour Law sets out standard working hours and overtime rules. This equates to typically 42 hours per week for office employees and 50 hours for industrial and service sectors.
- Cantonal Differences: Some cantons may have specific guidelines or interpretations of overtime, night work, or holiday pay, often influenced by local CLA’s.
- Impact on EOR: The EOR must be aware of and comply with local working hour regulations, including cantonal practices that may impose stricter rules or provide additional benefits to employees.
Paid Leave and Public Holidays
- Federal Law: Swiss labour law provides for a minimum of four weeks of paid leave per year.
- Cantonal Differences
- For example, Zurich and Bern have different public holidays compared to Ticino or Vaud. The total number of public holidays can range from 8 to 15 days, depending on the canton.
- Impact on EOR: The EOR must account for the differences in public holidays when calculating employee leave and pay specifically for each canton.
Health Insurance and Occupational Benefits
- Federal Law: Health insurance is mandatory for all residents, and employees must contribute to accident insurance through their employer. Occupational pension schemes (BVG/LPP) are also mandatory for employees at the basic level. However there is great flexibility in tax efficient voluntary contribution schemes.
- Cantonal Differences: While the requirement for health and accident insurance is federal, the availability and cost of healthcare services can vary between cantons. Additionally, some cantons may offer more generous occupational benefit schemes or pension contributions, depending on sector-specific CLAs.
- Impact on EOR: The EOR must ensure compliance with cantonal rules regarding pension contributions, accident insurance, and other employee benefits.
Summary:
In Switzerland, an Employer of Record or EOR must be able to navigate a complex mix of federal and cantonal labour laws, wage structures, tax systems, and employment practices. This requires in-depth knowledge and local expertise. While federal law ensures consistency in areas such as social security and working hours, variations in wage laws, taxation, public holidays, and work permit procedures can differ across cantons. Therefore, a successful EOR in Switzerland must be adaptable and ensure full compliance with both national and cantonal regulations. The requirements for success include knowledge of the cantons, cultures languages and laws. Furthermore it requires the EOR to be SECO licensed, and in addition to payroll and HR expertise, the EOR should have an in-depth knowledge of how Switzerland works in terms of local cultures, languages and nuances.
Accurity is a trusted and compliant, SECO-licensed employment services company with over 25 years’ experience in supporting companies of all sizes and across all segments and ensuring compliancy. We are Swiss owned with local know-how and expertise. We advise on remote work, EOR, ANobAG, Contractor payroll management, as well as outsourced payroll management for companies, consulting and more.
To find out more about the services we can offer your company, contractor or permanent staff, contact our team now.
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Michael is a celebrated strategic Marketing and Business development expert with decades of experience and achievements under his belt. He has extensive commercial knowledge in the relocation and travel industry and has specialised in highly individual customer facing services.
As a Swiss national Michael has a broad experience of Switzerland.
