Employment Contracts: A Guide for Swiss Employers

Employment contracts are fundamental for defining the employer-employee relationship in Switzerland. They outline the terms and conditions of employment for both parties, clarifying roles, responsibilities, and expectations. This guide will explore the various types of employment contracts available in Switzerland, their key elements, and the distinctions between employment and work contracts. Common questions on employment contracts are also dealt with, providing valuable insights for Swiss employers to navigate this essential aspect of their business.

What is an employment contract?

An employment contract is a formal agreement between an employer and an employee that specifies the terms and conditions of an employment relationship. This document serves as a vital tool in defining the roles, responsibilities, and expectations of both parties, helping to ensure a clearer understanding and more harmonious working relationship. A written contract also provides legal protection and helps in preventing misunderstandings and disputes by clearly stating the terms of employment, including salary, working hours, duties, and other relevant conditions.

Is a written employment contract always required?

In Switzerland, a written employment contract is not legally required. In fact, the Swiss Code of Obligations (CO) stipulates that an employment contract can be oral, written, or implied by conduct (Art. 320 Para. 1 & 2, CO).

That said, for clarity and legal protection of both parties, a written contract is always recommended. This is especially important for complex employment relationships or when specific terms need to be mentioned, such as salary, working hours, and notice periods. A written contract provides tangible evidence of the agreement, which is often essential in avoiding and resolving disputes.

What are the different types of employment contracts?

The three main types of employment contracts recognized in Switzerland include:

1.      Individual employment contract

An individual employment contract is a personal agreement, either written or oral, between an employer and an employee. It outlines the specific terms and conditions of employment tailored to the individual employee’s role and responsibilities, and therefore only applies to that specific employment relationship.

Individual employment contracts provide the flexibility to address unique aspects of each employment relationship, and typically include details such as job description, salary, working hours, benefits, and termination conditions. It is important to note that individual employment contracts can only include terms that do not contradict Swiss labor law. In other words, the ability to adapt and customize the contract is limited by legal regulations.

Furthermore, if an issue is not explicitly addressed in the contract, the law automatically provides the foundational terms for the employment agreement.

2.      Collective agreements

Collective agreements are contracts negotiated between employers or employer associations and employee unions. These agreements set out the terms and conditions of employment for a group of employees within a particular industry or organization. They aim to standardize the employment terms to ensure fairness and consistency and guarantee a minimum standard of working conditions.

Collective agreements usually cover aspects such as minimum wages, maximum working hours, overtime, holidays and days off, payment of wages in the event of absence arising due to illness, maternity, etc., and other employment conditions.

All companies that belong to the associations that signed the agreement must follow it. Sometimes, the agreement can apply to all companies in the industry, even if they are not part of any of the associations that signed it. The collective agreement would then be enforced by the competent authorities in the respective cantons in which it is applied or, in some cases, throughout Switzerland.

3.      Standard employment contracts

In industries where collective agreements are not in place, the federal or cantonal authorities can establish standard employment contracts. These are predefined employment contract templates which stipulate the basic employment conditions, such as minimum wages, number of working hours, sick leave, etc. Where a standard employment contract has been established by the authorities, the employer may only alter the terms in favor of the employees.
The purpose of standard employment contracts is to ensure that employees receive basic protections and benefits, even in the absence of individual or collective agreements. They are often enforced in industries or areas where employee groups have been mistreated or subjected to substandard wages and employment conditions.

What are the key elements of an employment contract?

While there is no legally defined form and structure for an employment contract, it is advised to make the contract comprehensive to ensure clarity.  Here are some key elements to include in the contract:

• Parties involved: Names and addresses of the employer and the employee.
• Job description: A detailed description of the employee’s role and responsibilities.
• Start date: The date on which the employment relationship begins.
• Salary: The agreed-upon salary, including any bonuses, commissions, or other supplements.
• Working hours: The expected working hours and any provisions for overtime.
• Probation period: Duration and conditions of the probationary period, if applicable (see FAQ section for additional details).
• Notice period / end date: Terms related to the notice period required for termination by either party, or, in the case of fixed-term contracts, the agreed end date of the employment relationship.
• Benefits: Details of benefits such as health insurance, pension schemes, and other perks.
• Paid vacation: The number of paid vacation days the employee is entitled to.
• Paid sick leave: Terms governing the continued payment of salary in the event of incapacity to perform work.
• Confidentiality: Clauses regarding confidentiality and non-disclosure of company information.
• Secondary employment: Terms pertaining to whether secondary employment is permitted and under what conditions.
• Non-competition clause: Restrictions on the employee’s ability to work for competitors after leaving the company if applicable.
• Termination conditions: Conditions under which the employment can be terminated.
• Place of work: Specification of the physical place of work, which is especially significant in telework arrangements. Allowances or obligations to perform work trips should also be outlined.

What is the difference between an employment contract and a work contract?

Employment contracts and work contracts, while similar in some respects, serve distinct purposes and have different legal implications. Understanding their differences is crucial for employers to ensure compliance with labor laws and avoid potential legal issues associated with false self-employment and other transgressions.

What are the characteristics of an employment contract?

An employment contract establishes a formal employer-employee relationship, with the employee working under the direction and control of the employer and integrating into their organization.

The employment relationship is characterized by several defining features:

• Control and direction: In an employment relationship, the employer has the authority to direct and control the employee’s work, including setting working hours, providing instructions, and overseeing the performance of tasks.
• Integration: Employees are typically integrated into the employer’s business, working as part of the organization rather than independently.
• Dependency: Employees usually depend on their employer for regular income and benefits, such as accident insurance and retirement plans.
• Obligations: The employer is responsible for withholding taxes, paying social security contributions, and providing other statutory benefits.

What are the characteristics of a work contract?

Conversely, a work contract, often referred to as a service contract, is typically used for independent contractors or freelancers who provide specific services to a client. It is referred to as a “Contract for Work and Services” in the Swiss Code of Obligations and is simply defined as “a contract whereby the contractor undertakes to carry out work and the customer undertakes to pay him for that work” (Art. 363 CO).

The key features of an independent contractor relationship which distinguish it from an employment relationship include:

• Autonomy: Contractors usually have control over how, when, and where they complete their work, without the same level of direction and oversight from the client as in an employment contract.
• Specific services: The contract usually outlines a specific scope of work or project to be completed, rather than ongoing duties and responsibilities.
• Lack of integration: Contractors operate independently and are not integrated into the client’s business operations.
• Payment structure: Contractors are often paid per project rather than receiving a regular salary. They are responsible for their own taxes and benefits.
• No statutory benefits: Unlike employees, contractors do not receive statutory benefits such as social security contributions or paid vacation from the client.

Avoiding false self-employment

False self-employment occurs when an individual is classified as an independent contractor by the company but operates under conditions that resemble those of an employee. This misclassification can lead to legal and financial consequences for the employer, including fines and back payments for taxes and social security contributions.

As an employer, it’s important to understand that what legally determines the existence of an employment relationship versus a simple work contract is the actual nature of the relationship itself, not the type of contract that has been entered into. In determining whether false self-employment exists, the authorities examine features such as the duration and frequency of the work relationship, the type of work performed, the level of autonomy or obligation to follow instructions, and the economic dependance.

Employers should carefully evaluate the nature of the relationship they have with contractors to avoid any incorrect classifications.