by Brought to you by quitt.business. For startups and small companies, hiring and onboarding new employees can be a real hassle. In Switzerland especially, there is a significant amount of admin to deal with. The following is a guide to all the tasks involved in this process. © Sasa Mihajlovic | Dreamstime.comA summarised list of the administrative tasks associated with hiring a new employee are set out below: Create an employment contract Register for social security taxes with the compensation office Set up a compulsory employee pension known as a 2nd pillar pension Take out accident and supplementary insurance Meet obligations under Swiss immigration laws Set up salary withholding taxes (if required) Apply for family allowances Set up salary payments
Topics:
Investec considers the following as important: Business & Economy, Guides
This could be interesting, too:
Investec writes Swiss National Bank surprises with interest rate cut
Investec writes No rise in Switzerland’s rent rate this quarter
Investec writes Swiss supercomputer aims to make AI open to all
Investec writes Swiss unemployment rises more than expected
Brought to you by quitt.business.
For startups and small companies, hiring and onboarding new employees can be a real hassle. In Switzerland especially, there is a significant amount of admin to deal with. The following is a guide to all the tasks involved in this process.
A summarised list of the administrative tasks associated with hiring a new employee are set out below:
- Create an employment contract
- Register for social security taxes with the compensation office
- Set up a compulsory employee pension known as a 2nd pillar pension
- Take out accident and supplementary insurance
- Meet obligations under Swiss immigration laws
- Set up salary withholding taxes (if required)
- Apply for family allowances
- Set up salary payments
- File annual salary declarations
- Issue annual salary statements to employees
These processes can be done manually. Alternatively, they can be done online using a service such as the quitt.business‘s digital service, which takes care of all registration, correspondence and updates with government agencies, employees and insurance providers.
1. Create an employment contract
An employment contract may be concluded tacitly, orally or in writing. To avoid ambiguity, it is recommended to have a written contract to reduce the chance of disputes further down the line. An employment contract may be requested by the employee at any time, so having a written one makes life easier.
The employment contract should contain at least the following elements:
- Name and address of employer and employee.
- Duties and responsibilities of the position.
- Start date and contract duration.
- Gross salary, monthly deductions, allowances and whether or not there is a 13th month of salary
- Working hours, overtime terms, night work.
- Termination notice period. The law sets out minimum requirements. These are set out here in French and German.
- Vacation time, public holidays, rest days and educational leave.
If your company is subject to a collective employment contract (GAV/CGT) you must comply with its provisions in every relevant employment contract. More information on this can be found here in German and French.
When hiring anyone under the age of 18 you will need to obtain a written declaration of consent from a parent or legal guardian.
If you enter your email on this page quitt.business will email you a free employment contract starter pack, which includes an employment contract template, a standard team contract (this contains standard employment rules that apply to most staff), an expense reimbursement regulations template and an employment checklist.
2. Register for social security taxes
People who are employed in Switzerland must pay social security taxes to one of the many organisations established to administer these taxes. These payments are used to pay state pensions (1st pillar/AHV/AVS) and disability benefits. The total amount is 10.6% of gross pay. Half of this is deducted from the employee’s salary and the other half is paid by the employer on top of the gross salary.
In addition, a further 2.2%, of which 1.1% is deducted from salary and 1.1% if paid on top of salary by the employer, must be paid for unemployment insurance. This amount is not paid on any salary exceeding CHF 148,200 a year – this amount changes and was last updated on 1 January 2024. This sum reflects a cap on the amount received in the event of unemployment.
Finally, there is a tax that is used to pay family allowances. This varies from canton to canton.
These requirements apply to all employees from the beginning of the calendar year after they turn 18 until they finish working. Employers are responsible for making these deductions and paying them to the compensation fund.
quitt.business can take care of the registration and ongoing administration of these tasks.
3. Set up an occupational pension (also known as a 2nd pillar pension)
For most employees, employers are legally required to sign staff up to an occupational pension savings scheme, also known as the 2nd pillar. Any employee earning an annual salary of more than CHF 22,050 annually must be signed up. Registration requires monthly salary deductions, which are invested to provide pension savings and regular income in the event of sickness, accident or disability. The size of the deductions depends on the employee’s age, salary and choice of pension plan.
These requirements apply to all employees from the beginning of the calendar year after they turn 18 until they finish working.
4. Take out accident and supplementary insurance
All employers in Switzerland are required to take out accident insurance for their employees. Known as UVG/LAA, this insurance covers work and non-work accidents. It means that anyone who is employed in Switzerland for more than 8 hours per week with a single employer is insured against accidents at work and outside work.
In addition to compulsory insurance, employers can take out supplementary insurance. Although not mandatory, this supplementary insurance is worthwhile for the employer in many cases. In the event of accidents and illness, employers are legally obliged to continue paying wages for a certain period of time. Without supplementary insurance, the employer bears the risk of having to pay salary while an employee is off work.
5. Meet obligations under Swiss immigration laws
If you are employing only Swiss citizens you can skip this section. If you are employing foreign nationals then you must declare them, and in many cases seek authorisation.
Swiss law requires employers to register and in some cases seek work permits for the following employees:
● Employment of an EU/EFTA national for a period of less than 90 days per calendar year must be declared to the State Secretariat for Migration (SEM). However, no work permit is required.
● Employment of EU/EFTA nationals for a work period of more than 90 days per calendar year must be declared to the State Secretariat for Migration (SEM). In addition, a work permit is required and typically granted with a minimum of fuss.
● Employment of workers from third countries must be declared to SEM. A work permit is required, and obtaining one is typically a more difficult process than getting one for EU/EFTA nationals.
Further information on this subject can be viewed in German, French and English.
6. Set up salary withholding taxes
In Switzerland, most individuals make monthly advance tax payments based on salary estimates and then file a tax return every year to calculate any additional tax due. However, a special salary withholding tax is applied to most foreign nationals. Employers are required by law to deduct these taxes from employees falling under this regime. They must then periodically remit the tax collected to the tax authorities. Employers must notify the tax authorities within 8 days of employing a foreign national. This regime also applies to cross-border workers, people who live outside Switzerland but work there.
More information on this subject can be viewed here in German and French.
Alternatively, quitt.business can take care of all necessary registrations, deductions and payments to tax authorities.
7. Apply for family allowances
The same agencies that collect social security taxes pay parents monthly allowances for their children. Employers need to apply for these payments on behalf of their employees.
These can be applied for at the same organisation that processes social security taxes. Alternatively, quitt.business can take care of all necessary registrations.
8. Set up salary payments
The employer must make monthly payments to employees as agreed in the employment contract. Payments are paid net of social security taxes and any withholding taxes due. These payments must account for holiday pay, overtime and any sick pay.
Unless specified in the contract, monthly salary must be paid at the end of each month.
Along with payment, employees must be provided with a detailed monthly pay slip, which contains information on gross pay and all deductions.
These can be created by the employer. Alternatively, their production can be outsourced to quitt.business, which will take care of the calculation, accounting and payment of wages.
9. File an annual salary declaration
Every year, total wages and salaries paid during the year must be declared to the organisation that collects social security taxes. This must be done by 30 January of the following year. Any overpayment of taxes will be refunded and any underpayment will be requested.
quitt.business, can take care of this declaration too.
10. Issue annual salary statements to employees
After year end, employers must issue wage/salary statements to all employees. This document is used by employees to fill out their tax returns. These statements must follow a strict format. quitt.business, can create these statements and make the documents available online for employees to download.
For more stories like this on Switzerland follow us on Facebook and Twitter.