Every employment relationship comes to an end eventually. And, whether it’s because the employee resigned, is dismissed, or retires, there are certain rules that apply to the end of the employment relationship in Switzerland. These are set by employment law and collective bargaining agreements between employers’ associations and trade unions.
In general, Switzerland is known for its flexible approach to termination, meaning neither employers nor employees need a specific reason for ending an employment contract. This allows employers to take a flexible approach to talent, scaling their workforces up and down as needed.
That said, there are still certain conditions that need to be met to ensure dismissals are fair and not abusive, which employers need to know about. Employers should also understand the notice periods that apply for both parties and the restrictive covenants (post-termination restraints) that employers can impose on their employees in Switzerland. We’ll cover all of this and more in this section of our global hiring guide.
Both employers and employees in Switzerland need to respect the appropriate notice period when ending an employment contract. These are set by Swiss labour law and depend on how long the employee has been engaged.
Statutory notice periods in Switzerland are the same for employers and employees:
Notice is counted from the last day of the month in which it is given. For example, if an employee who has been employed for less than one year is given notice on 13 June, their last day of employment will be 31 July.
Collective bargaining agreements can also provide different notice periods, which employers and employees must abide by. It’s also possible for employers to agree on different terms within their individual employment contracts, as long as they are at least as favourable to the employee as the statutory requirements and those set out in the relevant collective agreement.
Both employers and employees in Switzerland should give notice in writing. Because termination of a contract is only valid from the time when the other party receives the notice, the most common way of giving notice is by registered letter.
For either party, the notice letter must contain:
In Switzerland, neither employers nor employees need to give a reason for terminating an employment contract. However, if the other party requests the reason, it must be provided. There are certain things that can never be justifications for terminating an employee’s contract, such as pregnancy.
During the probationary period, the statutory notice period for either party is one week (seven days).
Severance pay is only mandatory in Switzerland when an employee is over 50 years of age and has worked for a company for more than 20 years. The statutory requirement is two months’ salary. However, this obligation is eliminated if the employer has contributed to the employee social security scheme.
The rules for termination of employment in Switzerland are generally quite flexible compared to other European countries. Crucially, employers don’t need to give a specific reason to terminate an employee’s contract as long as they abide by the relevant statutory notice period and the termination isn’t abusive or unfair. However, they must provide a reason if the employee requests it.
Despite the relaxed attitude towards termination of employment in Switzerland, there are still certain circumstances when employers may not terminate an employee’s contract. For example, it’s illegal to dismiss an employee for the following reasons:
If an employer dismisses an employee for any of the above reasons, they could face an unfair dismissal case. Employees can also bring a case for unfair dismissal if the employer does not respect the proper notice period or if their contract is terminated for discriminatory reasons.
Termination without notice in Switzerland is only possible under certain limited conditions. Specifically, the continuation of the employment relationship must no longer be reasonable. Examples of situations when this might apply are if the employee has committed fraud, refused to work, or carried out activities that compete with the employer’s business. In most cases, employers must nonetheless give the employee a prior written warning before proceeding with termination.
Because employers don’t need to give a reason for termination of employment in Switzerland, it’s possible to dismiss an employee due to financial or organisational reasons. However, there are special rules in place for mass redundancies.
Under the Swiss Code of Obligations, employers considering mass layoffs must first inform and consult with employees and inform the cantonal labour office in writing. Employers can also sometimes avoid dismissals through unemployment insurance, which pays 80% of the loss of earnings of employees for a fixed period. Employees can refuse this compensation and continue to receive their full salary instead, but they run the risk of being dismissed.
In Switzerland, fixed-term contracts terminate automatically on their expiration date. It’s generally not possible for either the employer or the employee to terminate the contract early.
Post-termination restraints are restrictions that employers can impose on their employees after the end of the employment contract. They are designed to protect businesses from any harm that could be caused by their former employer using their insider knowledge of the company. Post-termination restraints are also called restrictive covenants.
Here are the types of post-termination restraints that are permissible in Switzerland:
Post-termination restraints are subject to certain limitations in Switzerland. For example, non-compete agreements are only permissible when the employee has knowledge of their employer’s clientele or manufacturing or commercial secrets, and where the use of this knowledge would cause significant harm to the employer.
Any restraints must also be limited in terms of time, geographical location, and scope. They may not unfairly limit the employee’s future economic activities by preventing them from making a living. Typically, this means that restraints can’t exceed one year if they’re based on the employee’s knowledge of the company’s clientele, or three years if based on their knowledge of its trade secrets. Unlike in some other countries, there’s no obligation to compensate employees during the restriction period.
In some cases, employees in Switzerland can waive certain rights in the context of a settlement agreement. This is usually in exchange for a lump sum payment from the employer. In Switzerland, waivers of mandatory entitlements are only valid if they are made against well-balanced concessions. That means that the payment the employee receives must be proportional to the rights they have waived.
A transfer of undertakings is when one company is wholly or partially acquired by another. As in many countries, there are strict rules on what happens to employees when the entity they work for is transferred to another business. The rules on transfers of undertakings in Switzerland are defined by the Swiss Code of Obligations and are similar to the requirements under EU law (even though Switzerland is not part of the EU).
The rules apply when either a single business unit or an entire company is transferred to another entity. However, the business must maintain its structure and organisation after the transfer for the rules to be applicable. There’s no requirement for any assets to be transferred to the acquirer in addition to employees.
When an entity is acquired, employment agreements are automatically transferred to the new employer. All rights and obligations of both parties also transfer. Employees can object to a transfer of undertakings; in which case their employment agreement will terminate on the expiration of the statutory notice period.
If a transfer of undertakings is expected to cause redundancies, terminations, or changes in working conditions, employers must consult with the works council or employees prior to making any decision. The works council or employees must be given the possibility to make suggestions on how to avoid these measures.
There are many different ways an employment contract can come to an end. But whatever the situation, you need to understand the rules that cover the end of employment in Switzerland — or you could end up facing legal issues.
Our solutions ensure your business is protected from risk when a relationship with a worker comes to an end — whatever the reason. We can also help you to avoid missed opportunities by re-deploying talent where possible.
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