Introduction to Payroll in Switzerland
With an employer-first culture, attractive tax rates, a powerful economy, and high employment rates, Switzerland is a country worth considering if you are planning your company’s international expansion. But there’s even more.
Switzerland has historically always been a neutral state with solid ties to its neighboring nations, including Germany, Italy, and Liechtenstein. The country is also home to some of the world’s most reputable organizations – including the UN, the Red Cross, and WHO.
To attract, hire, and retain the best Swiss talent, however, you need to know exactly how to manage every step of the onboarding process — including the Switzerland payroll process.
Switzerland’s payroll system can be complicated, but working with a trusted and experienced partner like Skuad can provide you with the support you need to navigate payroll in Switzerland with ease.
Knowing how to manage the pre-payroll phase correctly is paramount to moving ahead with the rest of the payroll process in a rapid, accurate, and compliant way.
Your company is required to establish a business profile in Switzerland, in order to be able to submit all the relevant forms and documents to the many authorities you'll need to report to.
Due to the different laws and guidelines adopted in each of Switzerland's cantons, it's important to check whether you need to set up specific policies for the location where your business is operating.
Payroll and compensation also rely on policies around leave and holidays, and these should be clarified right at the beginning. Be sure your policy accounts for the mandated requirements in Switzerland.
Generally speaking, work attendance is one of the main factors that determine base salary. For this reason, it's crucial to identify and establish clear policies regarding attendance, permissions, and other special requests.
In Switzerland, labor laws are based on the Code of Obligations, the Labour Act, and any specific terms agreed within a contract of employment.
For the most part, employees in Switzerland are paid once a month.
To calculate individual salaries and benefits, it's important to collect a lot of information on every employee. You might also need to forward some of that information to specific agencies in order to comply with payroll regulations.
Payroll calculation phase
Once you have completed the pre-payroll phase, you can move ahead with payroll calculation. This involves calculating salaries for all your employees. This might sound like a simple enough task, but it is also one that gets very complicated, very quickly, due to the necessity to comply with laws and requirements, as well as calculating benefits and deductions.
Paying out your employees' salaries is what forms the core of the post-payroll phase. During this stage, you (or your payroll management company) liaise with your chosen bank to process all the payments. To make this quicker and more efficient, you might want to opt for automated direct deposits into your employees' bank accounts.
Internal accounting is essential in order to keep track of all the salaries that have been paid out.
Payroll reporting and compliance
Your company will also need to report salary payouts to the relevant government agencies and departments, including submitting tax forms and invoices.
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In addition to all the regular factors to consider in payroll processing, Swiss tax laws are fairly complex. Employers in Switzerland are expected to file withheld taxes either every month or once a quarter. On a regular basis, a range of tax collecting authorities within the country invoice companies for the taxes they owe. Business owners must withhold a series of taxes, including cantonal, federal, and municipal.
Payroll Processing Company in Switzerland
Tracking all these taxes and understanding which authority to pay can get complex quickly. Teaming up with a payroll company in Switzerland, like Skuad, simplifies this complicated process.
Payroll outsourcing in Switzerland is the easiest, most flexible, and most cost-efficient way to manage payroll in Switzerland. Other options are:
- Internal payroll: With this option, Swiss employees can get paid through a subsidiary. However, this means having to recruit more HR people and being able to sustain higher expenses.
- Remote payroll: A parent company can help you manage payroll if you choose this approach. While this can be a simple and cheap alternative, it also requires knowing all the different labor laws in Switzerland.
- A Switzerland payroll processing company: If you choose this method, you will need to research the market thoroughly and make sure that you select a trusted and experienced processing company familiar with Swiss laws and regulations.
To ensure compliance with Swiss labor regulations, you’ll first need to understand the many components of the local law and how they impact payroll. Generally, payroll comprises base pay with additions — like benefits or a bonus — and deductions — like taxes and social programs.
Switzerland’s national currency is the Swiss Franc (CHf, Fr., SFr.). Only a few areas within Switzerland have a minimum wage. These include Jura and Neuchatel, with minimum wages of CHF 20 per hour, and Geneva, with CHF 23 per hour.
Working hours in Switzerland
Both office and industrial staff work a standard week of no more than 45 hours. People in full-time employment within other sectors usually work Monday to Friday or a maximum of 50 hours a week.
Overtime work in Switzerland
Switzerland payroll statutory overtime pay is not mandatory, although this might still be included in an employee’s salary if the contract allows it. Generally speaking, an employee is allowed to work no more than 45-50 hours of overtime each week.
Every additional hour is paid at least 25% more than the standard hourly rate for people working across all sectors.
Dismissal and termination of employment
Termination of employment is another complicated matter for payroll in Switzerland, depending on the specific circumstances.
However, for a dismissal to be lawful, it needs to fit any of these criteria:
- Voluntary termination by the employee, or by mutual agreement
- Based on the failure to satisfy the probation period
- Based on disciplinary issues
- Based on the employee’s performance
- Dictated by the end of the contract
Switzerland doesn’t have any standard requirements around severance pay for staff members of 50 years of age or less, or those who have been with the company for over 20 years. Once the notice period has started, the employee will keep getting paid their standard salary.
Leave entitlements in Switzerland
The country’s sick leave allowance is of 730 days over a period of 900 days. During this time, employees are paid 80% of their salaries.
In Switzerland, people observe and celebrate a range of public holidays, which include national and regional ones — the latter based on the canton an employee lives in.
On a national level, public holidays include:
- New Year's Day
- Good Friday
- Easter Monday
- Labor Day
- Ascension Day
- Whit Monday
- Corpus Christi
Maternity and paternity leave
When a pregnant employee has worked for the same company for at least 270 uninterrupted days, she can claim a total of 14 weeks of maternity leave, or 16 if she lives in the Canton of Geneva. Of this allowance, eight weeks must be taken after the baby’s birth.
Throughout this period, the employee will receive 80% of their standard salary, to be paid for by Social Security. If she wants to, the employee can request an extra 14 days of leave, which will be unpaid.
Fathers and partners who have worked for the same company for at least 270 consecutive days can also receive 10 paid days of paternity leave, to be taken within the first six months following the baby’s birth.
In Switzerland, the minimum allowance for paid annual leave is four weeks for new employees and employees over the age of 20, and five weeks for those up to the age of 20.
Those in full-time work can receive 20 days of paid time off every year, which accrues 1.66 days each month. In the case of part-time work, annual leave is generally worked out on a pro-rata basis.
Payroll tax rate and deductions
In Switzerland, the tax year runs from January 1 through December 31. Employees who are also residents in the country are required to file their tax returns by the end of March, whereas Switzerland's employer payroll taxes must be submitted by January of the following year.
Taxes that need to be paid include:
- Income tax
- Cantonal tax
- Communal tax
- Municipal tax
Sick, elderly, disabled, and unemployed people also receive Social Security benefits, whereas employees with children are entitled to several tax breaks.
On a federal level, the corporate tax is established at a flat rate of 8.5%. However, cantonal and municipal rates can change significantly. In general, the sum of all taxes — federal, cantonal, and communal — sits between 11.9% and a maximum of 21.6%
Unlock the best Swiss talent with a global payroll partner by your side
Switzerland's payroll laws can get very complicated very quickly, as each of the country’s cantons often operates following its own specific rules. There is no need to spend a lot of time — and money — trying to get your head around all this: simply join forces with Skuad.
Skuad specializes in managing global payroll across a huge range of countries, including payroll in Switzerland. Are you ready to get started on your Swiss business expansion? Book a FREE demo today to find out how Skuad can support your payroll management in Switzerland.