Hiring an employee in a foreign country usually means setting up a local legal entity, which can be both expensive and time-consuming. If you only want to onboard a handful of workers, it’s almost certainly not worth the effort. Another option is to engage workers as independent contractors. However, this always comes with a risk of misclassification, which could land you with fines, penalties, and other legal consequences. The solution? Hire employees in Switzerland through an employer of record, or EoR.
An employer of record is an organisation that hires workers on behalf of other organisations. Legally speaking, an EoR becomes the official employer of the workers they engage on your behalf. They also handle key HR processes like payroll, benefits administration, and onboarding. But in all other senses, you’re in charge: you’re still in control of your company’s day-to-day operations and the work your employees do, for example. Using an EoR in Switzerland can be a speedy and cost-effective way to hire Swiss workers.
In Switzerland, labour leasing is tightly regulated, both to protect workers and to control the labour market. That means that any business operating as an employer of record in Switzerland is legally obliged to obtain a licence from the local authorities. As an employer, you’ll need to ensure that any EoR you choose to work with is properly licensed to avoid trouble for your business.
Whether or not you work with an employer of record, you’ll need to understand certain key concepts before you can hire employees in Switzerland. For example, you should be aware of the major labour laws that apply, as well as the role of trade unions and collective bargaining agreements. If you do choose to use an employer of record in Switzerland, having this base knowledge will help you to ensure the provider you choose is competent and trustworthy. In this guide, we’ll explore everything you need to know about hiring employees in Switzerland — with or without an EoR.
Switzerland is known for its strong and stable economy and favourable tax conditions, making it an attractive destination for international expansion. Swiss workers are also some of the most highly educated people in the world: Switzerland boasts the highest number of tertiary-educated adults among all OECD countries. Plus, Switzerland’s workforce is highly proficient in English and other languages thanks to the country’s multilingual education system.
However, like all countries, Switzerland has its own set of labour laws, regulations, and norms, which employers need to know about. It’s also a country with a complex tax system, thanks to its 26 individual cantons (states), which all have their own unique rules and regulations. Read on to learn what you need to know before hiring in Switzerland.
The main pieces of legislation shaping the labour market in Switzerland are the Code of Obligations and the Labour Act. Case law also plays an important role. Generally, labour law in Switzerland is liberal and more favourable to employers than in other European countries. One of the key principles is freedom of contract, which allows employers and employees to agree on terms and conditions of employment to a significant extent as long as certain minimum standards are met. Some elements of labour law, including minimum wage, are set at the local level in each of the country’s 26 cantons.
Trade unions are active in Switzerland, with around 20% of employees belonging to a union. Collective agreements between unions and employers (or employers’ associations) set key rules on working conditions including wages and hours of work, which may apply to just one company or across an entire sector. However, collective agreements play a much smaller role in Switzerland than they do in other European countries. That means there’s more flexibility and freedom of negotiation between employers and employees.
Employers hiring in Switzerland are required to provide employees with certain key conditions of employment in writing, including their job function, salary, and working hours. They must provide this information within one month of hiring. However, it’s best practice to provide every employee with a comprehensive employment contract before their start date to ensure both parties understand their rights and obligations.
Both employers and employees in Switzerland pay various contributions to the country’s social security system based on the employee’s wages. This pays for things like pensions, unemployment insurance, and disability insurance.
Employer payroll contributions usually amount to between 8% and 23% on top of the employee’s salary. Employee contributions add up to between 8% and 11% of their pay. Employees also pay income tax on their earnings, but this is usually not deducted at the source in Switzerland.
Companies hiring in Switzerland should bear in mind that the country has some of the highest salaries in the world, which could significantly impact your hiring budget. Additional costs for each employee vary according to their age, salary, and the canton they live in. Generally, employers should account for at least an additional 10–20% of each employee’s salary.
Employers around the world frequently conduct background checks on potential employees to verify information and confirm their suitability for a job. Conducting background checks is permissible and common in Switzerland.
However, employers do need to be careful when conducting background checks in Switzerland because of the country’s strict privacy laws. Also, the culture in Switzerland is one that values privacy and respect for personal information. That means that excessive background checks may not be well-received by potential employees in Switzerland.
Employers hiring employees in Switzerland need to verify that they have the right to work in the country prior to hiring. For non-Swiss nationals, this means checking that they have the relevant work permit. However, since permits are generally easily granted to citizens of EU or EFTA countries, these people are usually allowed to start working as soon as they have filed a request for a work permit.
In some cases, other types of background checks may be required by law in Switzerland depending on the nature of the position. For example, criminal record checks might be required for legal roles, and credit reference checks are usually compulsory for bank executives and other roles that involve significant responsibility for a company’s finances.
Here are some other employment background checks you could conduct on potential employees in Switzerland:
Employers must always have a candidate’s consent before conducting a background check in Switzerland. Though this can technically be given orally, it’s best practice to get consent in writing.
The processing of a candidate’s personal data must also be justified by a legitimate purpose, such as assessing their suitability for a job. The scope of any background check conducted must be relevant to the job in question. For example, a credit check may be conducted on applicants for financial roles but would not usually be allowed for other positions.
Swiss employers must also be careful to ensure that the background checks they conduct don’t introduce the possibility of discrimination. That means it’s not permissible to screen candidates based on protected characteristics that are not relevant to the job. Employers also can’t conduct invasive checks into a candidate’s private life.
Before hiring employees in Switzerland, you’ll need to consider whether this is the best option for your company. For example, if you only need a worker for a limited period of time to work on a set project that’s not related to your business’s core activity, engaging them as an independent contractor might be more suitable. Below, we’ll talk about some of the different options for hiring workers in Switzerland.
Here are the options you’ll have to choose from when hiring workers in Switzerland:
Labour laws generally don’t apply to freelancers or independent contractors in Switzerland, and employers of independent contractors don’t have to pay most of the social security contributions that they would for an employee. For these reasons, some companies try to deliberately pass off people who are really employees as independent contractors — which the Swiss government takes very seriously.
Even if it’s not done on purpose, employee misclassification can land a company with fines, penalties and other legal repercussions — not to mention reputational damage. When assessing an employee classification case, labour courts look not just at the written agreement in place, but factors such as the level of control the employer has over the worker and the degree to which the worker is integrated into the company’s operations. The Swiss Federal Social Insurance Office provides resources and support to help employers correctly classify their workers.
There are no statutory requirements for the language of contracts and other employment documents in Switzerland. However, it’s recommended to draw up contracts in a language that is understood by both parties.
Switzerland has three main languages: German, French, and Italian. The language that people speak is based on the region they live in, with the majority of the population living in German-speaking Switzerland. English is also fairly widely spoken in Switzerland, with the country ranking 30th out of 113 countries in the EF English Proficiency Index 2023.
Although some companies may hire English speakers, it’s strongly recommended to have some proficiency in the relevant language for the region before working in Switzerland. Moreover, since 2019, workers entering Switzerland are required to have a certain level of proficiency in the local language to obtain a work permit. The specific requirements are different depending on the canton and the type of work permit applied for.
A foreign entity can legally engage employees in Switzerland, assuming the employees have the necessary work permits. However, they must pay taxes and social charges, and register with the local authorities, which can be time-consuming and complex.
Payroll setup in Switzerland carries several registration requirements, whether the company is local or foreign. Companies wanting to hire and pay employees in Switzerland must complete the following registrations:
There’s generally no need to register for payroll tax in Switzerland, since income is not usually deducted at source. The exception is for temporary residents in Switzerland. Employers can also choose to take out additional insurance to cover sickness benefits.
There’s no formal requirement to open a local bank account in order to set up payroll in Switzerland. Payments to both employees and local authorities can be made from foreign accounts.
Hiring employees in Switzerland usually means setting up a legal entity, which can be costly and time-consuming. Employers can avoid this hassle by working with an Employer of Record (EoR), like CXC.
Through our EoR solution, you can confidently hire employees in Switzerland, without worrying about compliance issues. We’ll handle everything from payroll to benefits to employment contracts on your behalf — so all you have to think about is finding the right person for the job.
With our EoR solution, you can engage workers anywhere in the world, without putting your business at risk. No more worrying about local labour laws, tax legislation or payroll customs — we’ve got you covered.
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