Payroll - Terminating employment

Salary management

Terminating employment

Dismissal

Swiss labor law allows employers and employees to terminate their employment contracts relatively easily. Employers can dismiss employees for any reason but may be required to give them notice, depending on their contract. If they are on a fixed-term contract and the employer wants to dismiss them before the end of the contract, the employer must have a due cause. If not, they may have to compensate the employee for the time left on the contract.

Employees on open-ended contracts in their first year of employment must be given one month's notice. If they have been working there for two to nine years, their employer must give them two months' notice. Employees that have been working in the same company for ten years or more must be given three months' notice. Once they are no longer working, they are entitled to unemployment benefits through the Swiss social security system, which will pay them a percentage of their salary.

Voluntary departure

Employees have similar rights as an employer to terminate a contract. During a fixed-term contract, employees must wait until the end date of the contract, unless they have due cause to end it earlier. During an open-ended contract, an employee must give one month's notice in the first year. Between the second and ninth years, they must give two months' notice. If they have been in the same company for 10 years or more, they must give three months' notice.

Please keep in mind that the notice period starts when the letter of resignation, stating the date of resignation, is handed in to the employer. The Swiss government provides advice on writing a letter of resignation.

Retirement

The legal retirement age in Switzerland is currently 64 for women and 65 for men. In some cases, it is possible to take early retirement. However, this depends on the terms of your pension, so make sure you are familiar with yours. Anyone can continue to work after retirement age, but they must be prepared to continue to contribute to their AHV pension.

Severance payments

Severance payments must only be paid if the employee affected is over the age of 50 and has worked for more than 20 years for the same employer.

In that case, the statutory minimum severance payment is equal to two months' salary. If the employee receives or will receive, payments from a social security scheme that has totally or partly been funded by the employer, there is no obligation to make severance payments.

It is not uncommon in employment contracts for members of the top management to specifically agree on severance payments in the case of early termination or dismissals following takeovers (golden parachutes). Following the entry into force of new legal provisions, such payments are in principle no longer permissible concerning board and executive members of Swiss public companies listed on a stock exchange. In addition, golden parachute promises made to the top management to make takeover bids more difficult have been held unlawful by the relevant authorities.