Switzerland’s labour laws prove a major benefit to employers

Inour preceding columns, we already featured Switzerland’s excellent economic integration in the European Union’s markets, Switzerland’s healthy public finance and the resulting sustainably favourable tax environment. In this column, we feature Switzerland’s liberal labour laws as a further important feature benefiting employers in Switzerland.

One of Europe’s most liberal labour laws, a low degree of unionisation and moderate unions encourage hiring and essentially contribute to Switzerland’s unemployment rate of 3.3% (as of December 2012; source: Seco), which is exceptionally low compared to the EU’s average of 10.7%, 4.5% in Austria and 5.4% Germany (all November 2012; source: Eurostat). Let us have a closer look into these features.

No workers’ councils

There is no statutory duty for Swiss companies to have workers’ councils, but in companies employing more than 50, the employees may elect a workers’ representation. Employees and workers’ representation (if any) have a statutory general information right to be informed in a timely manner about matters they need to know for the performance of their jobs, and once a year they must be informed about how the company’s results may affect their jobs. Further, they have some specific statutory information and consultation rights in the following cases:

• The employer company is about to be sold by way of an asset deal or merger;
• The employer plans large-scale layoffs; and
• With the selection of pension fund carriers and certain matters of occupational health and safety.

  

Nevertheless, neither employees nor the workers’ representation (if any) have a statutory right to have a say in management matters (even if affecting their workplace environment), except that the employer company may not exchange a pension fund carrier without their consent.

No statutory minimal wages

There are, in contrast to most EU member states, no statutory minimal wages (minimal wages may apply, however, based on collective bargaining agreements) and nowhere in Europe is it as easy and inexpensive to terminate employment agreements as in Switzerland. Terminations respecting the applicable notice period may be given at any time, without giving reasons and without any severance pay.

Short notice periods

Statutory notice periods are seven days during the first month of service (extendable to the third month by mutual agreement), one month during the remainder of the first year of service, two months in the second through to the ninth year of service, and six months from (and including) the 10th year of service.

Such statutory notice periods may be set aside by mutual agreement, provided that the notice period is not less than one month. Usually, agreed notice periods are one or two months for employees without management functions, three months for lower management, six to 12 months for higher management, and 12 to 24 months for top-level management.

Moderate dismissal protection

The statutory protection from dismissal is limited to the following events:

• The employee’s pregnancy, and 16 weeks after childbirth;
• The employee’s military service or, if lasting more than 11 days, the four weeks preceding or following it;
• The first 30 days (in aggregate) of a sick and accident leave during the first year of service;
• The first 90 days (in aggregate) of a sick and accident leave during the second through the fifth year of service; or
• The first 180 days (in aggregate) of a sick and accident leave after (and including) the sixth year of service.

During these termination protection periods, the employer is obliged to pay the salary for a limited period of time, which has been determined by courts to range slightly below the length of the applicable termination protection period. But with respect to military service and pregnancy, social security has stepped in, covering the continued pay obligation in whole or in part, depending on the amount of the relevant salary. With respect to sick and accident leave insurance, covering 80% of the salary during a maximum of 720 days of sickness or accident leave within a period of 900 days is customary; premiums are usually borne in equal shares by the employer and the employee.

Low unionisation

Swiss unions negotiate collective employment agreements improving statutory working hours, holiday leave entitlements, notice periods and retirement matters, and introducing minimal wages. Nevertheless, the results are as a rule moderate, as the unions’ bargaining power is limited. In 2009, only about 16% of all gainfully employed persons were unionised (source: Swiss Federal Office for Statistics) and in 2011 only about 20.9% of employees who were full-time – or part-time and working at 50% or more of full-time hours – were employed under collective employment agreements (source: SGB).

High productivity

Switzerland not only has one of Europe’s most liberal labour laws, it also has one of Europe’s highest labour productivity rates, which is due to: (i) 41.6 average weekly working hours (2011, source: Federal Office for Statistics) in contrast to an EU average of 37.5 hours (2010, source: Eurofound); (ii) statutory holiday leave entitlements of, as a rule, four weeks only (five weeks for those less than 20 years old. Employees over 50 under collective employment agreements, as well as managers under individual employment agreements, are usually granted five or six weeks annual holiday leave); and (iii) a traditional absence of strike actions. In 2007 – the most recent year with relevant available data for both Switzerland and the EU – Switzerland’s number of annual strike days per 1,000 employees was two compared to an average 34 days in the EU member states (source: Austrian Chamber of Commerce based on ILO, OECD and Eurostat).