How to hire and pay remote workers in Switzerland

Switzerland may be best known for its snow-capped mountains and warm fondue, but it is also home to a talented workforce. Swiss workers are highly educated, multilingual, and enjoy a high quality of life. HR managers and company founders don't mind paying the premium for remote Swiss workers when they discover the value they can bring.

Hiring employees in Switzerland is a solid option for companies that want to scale in Europe. However, the country's tax laws and labor regulations can seem confusing, especially as they have both federal and regional taxes that vary by location. This can make hiring and paying remote workers in Switzerland tricky, especially when payroll and compliance issues are concerned.

But you’re in luck. This complete guide has everything you need to know to hire and pay remote employees in Switzerland effectively.

Why hire employees in Switzerland?

Switzerland offers top benefits to companies looking to expand globally.

It has established long-term economic and political stability. Plus, it’s one of the world’s top ten economies, and the EU is its leading trading partner.

Switzerland’s central European location, expansive transportation system, and solid networks make it easy to conduct business there.

The workforce is highly skilled due to the significant value placed on education in Switzerland. About two-thirds of students transition into the country’s vocational and professional education system (VET) following their compulsory school years.

Switzerland also boasts rich diversity and four national languages: German, French, Italian, and Romansh. And although English is not a national language, 45% of the Swiss population speaks it.

Employers benefit from the fairly liberal employment laws in Switzerland compared to other European countries. For example, there is no national minimum wage.

With all this in mind, let’s look at how to pay employees in Switzerland.

How do foreign businesses pay remote workers in Switzerland?

Any foreign business looking to hire remote workers in Switzerland should consider how they can efficiently pay workers. Here are a few ways to pay those who work remotely from abroad:

Open a legal entity in Switzerland

If you plan to employ remote workers in Switzerland, consider opening a legal entity.

Owning an office within the country allows you to hire local staff to manage payroll and other aspects of employee management. While this can solve your payroll problem, it might also set you back. Establishing a legal entity abroad can cost thousands and take months.

Pay Switzerland-based workers as contractors

Hiring Swiss residents as contractors instead of employees can be cheaper and less complex. Contractors handle their tax obligations, simplifying the employer’s process and reducing employer liability.

Crucially, you have to make sure you correctly classify your worker. Switzerland legally distinguishes between contractors and employees. Misclassifying an employee as a contractor to avoid paying taxes or offering benefits could land you in serious legal and financial trouble.

Work with a global employment partner

If you don't have an established legal entity in Switzerland, partnering with a global employment service is a quicker, easier, and cheaper solution to compliantly managing payroll.

A global employment partner like Remote owns its local entity in Switzerland, so you can start hiring and paying your team in the country right away. Our experts can help you handle corporate compliance issues around global employment and payroll so that you don't have to worry about the legal responsibilities of hiring international workers.

In what currency do companies pay remote workers in Switzerland?

It’s preferable to pay remote workers abroad in their local currency, as their salary won't be affected by monthly currency fluctuations.

In Switzerland, the currency is the Swiss franc (CHF). However, many workers who work and commute across borders, such as those in France and Germany, may also be happy to receive payments in Euros.

A global payroll solution, like Remote, can manage and make payments to workers in local currency for you with ease.

What are the tax rates for tax brackets in Switzerland?

Where a worker pays tax depends on whether they are classified as an employee or a contractor. Local labor laws also define whether the employer or employee is responsible for paying.

Taxation in Switzerland can be particularly confusing. The federal government sets some taxes, such as VAT, stamp duty, withholding tax, customs duties, and special consumption tax. Individual cantons (regions) administer others. They can define their own income, corporate, and wealth taxes. Municipalities and the church even govern some local taxes.

Both the federal government and the 26 cantons levy income tax. Here are the federal tax rates per income bracket. Note that these may vary depending on the canton:

Federal taxes for individuals

• CHF 0 to 18,300 - 0%

• CHF 18,300 to 32,800 - 0.77%

• CHF 32,800 to 42,900 - 0.88%

• CHF 42,900 to 57,200 - 2.64%

• CHF 57,200 to 75,200 -2.97%

• CHF 75,200 to 81,000 - 5.94%

• CHF 81,000 to 107,400 - 6.6%

• CHF 107,400 to 139,600 - 8.8%

• CHF 139,600 to 182,600 - 11%

• CHF 182,600 to 783,200 - 13.2%

• CHF 783,200 and above - 11.5%

Federal taxes for married couples and individuals with children

• CHF 0 to 31,800 - 0%

• CHF 31,800 to 52,700 - 1%

• CHF 52,700 to 60,500 - 2%

• CHF 60,500 to 78,100 - 3%

• CHF 78,100 to 93,600 - 4%

• CHF 93,600 to 107,200 - 5%

• CHF 107,200 to 119,000 - 6%

• CHF 119,000 to 128,800 - 7%

• CHF 128,800 to 136,600 - 8%

• CHF 136,600 to 142,300 - 9%

• CHF 142,300 to 146,300 - 10%

• CHF 146,300 to 148,300 - 11%

• CHF 148,300 to 150,300 - 12%

• CHF 150,300 to 928,600 - 13%

• CHF 928,600 and above - 11.5%

Which parts of salary in Switzerland are taxable?

Swiss law has specific taxation requirements that employers must meet. Understanding what these requirements are will ensure compliance.

Components of Switzerland’s salary that incur full taxes

After deductions, Swiss tax residents must pay taxes on all income and wealth worldwide. Non-tax residents are taxed only on Swiss-based income and wealth.

Taxable income includes:

• Employment income

• Business income (net profit)

• Income from dividends, interest, and royalty

• Income from real estate

• Income from pension schemes

• Other income

Components of Switzerland’s salary that incur partial taxes

Dividend income may be taxed at a lower rate. This partial taxation only relates to qualifying participations. Generally, employment expenses and social security contributions are tax-free.

Is per diem taxable in Switzerland?

Per diem payments refer to an allowance paid by the employer to cover an employee's travel expenses on a business trip. These expenses include accommodation, food, local travel, and other incidentals.

In Switzerland, companies may negotiate expense amounts for employees. Legislation usually considers this part of the income and is, therefore, taxable.

Is there a difference between an allowance and a reimbursement in Switzerland?

Generally, an allowance refers to a lump sum the employer pays to cover certain employee expenses. It does not take into account the actual cost incurred. Allowances paid into privately managed funds, such as the family allowance, are not taxable.

A reimbursement is also an employer contribution to cover employee expenses, but it reflects the exact final cost. In Switzerland, an employer must reimburse all costs incurred to carry out work. Reimbursements are taxable in Switzerland.

What payroll deductions are employers required to make in Switzerland?

In Switzerland, employers must make the following deductions, which are generally not taxable income.

• Social Security contributions: 10.25% of the total employee salary goes to Social Security, with the employer and the employee each responsible for 5.125%.

There are five branches of Social Security in Switzerland: old-age, survivors’ and invalidity insurance, health and accident insurance, compensation, and unemployment.

• Pension scheme payments: The minimum old-age pension contribution for a single person is CHF 1,225 per month, with the maximum set at CHF 2,450 per month.

• Business expenses: Individuals can claim deductions for commuting costs, meal expenses, and other work-related expenses (e.g., clothing/uniforms, books, or courses).

What is the minimum wage in Switzerland?

There is no national minimum wage in Switzerland.

Some cantons have legislation on minimum compensation for workers, while other areas set wages through collective bargaining agreements.

These cantons have currently set a minimum wage:

• Jura: CHF 20.00

• Neuchatel: CHF 20.08

• Ticino: CHF 19.00

• Geneva: CHF 24.32

Outside of Geneva, the minimum wage is further divided by worker skill levels. For example, a domestic, unskilled worker can expect CHF 19.20 per hour.

Switzerland is generally known for its higher-than-average salaries and hourly wages, which average CHF 78,268 per year and CHF 37.63 per hour, respectively.

How much is overtime pay in Switzerland?

Swiss employment law states employers must compensate workers with a 25% premium on the standard pay rate. Employers can also compensate for overtime with time off instead of remuneration if preferred.

The workweek generally has a limit of 40 or 50 hours, depending on the industry.

What are the local labor laws in Switzerland?

Employment law protects all Swiss employees who live and work in the country, while self-employed workers (or independent contractors) are not.

In Switzerland, most employment law is dictated by the Code of Obligations, the Labor Act, and the agreed terms set out in employment contracts.

Some worker protections defined by Swiss labor law include:

Employment contracts

While employment contracts are not bound to specific formats under Swiss law, some aspects of employment are covered in writing, including the names of both parties, their relationship, the job function, the employment start date, the working hours, and the salary.

Employment contracts typically fall under three types:

1. An individual employment contract is between the employer and the employee.

2. A collective employment agreement includes the trade union and the employer’s association outlining job terms within a particular sector, such as minimum wage. These cover a wide range of fields across the country, including construction and hospitality.

3. Federal or canonical authorities may issue a standard employment contract to cover sectors not addressed by collective employment agreements. Employers can only adjust these to provide better terms than those outlined initially.

Termination protections

Labor laws in Switzerland follow the freedom of termination principle, where employers can terminate without cause.

However, employment laws prevent the dismissal of workers concerning discrimination, retaliation, or bad faith. For example, employers cannot terminate employees who are on paid leave.

Employers must adhere to the Swiss Code of Obligations if the contract doesn’t include a notice period. For example, employees are entitled to one month’s notice within the first year of their employment.

Hours of work

A 45-hour workweek applies to most industry employees, office staff, technicians, and sales personnel. It’s variable for other fields, and up to 50 hours are allowed.

Here are the specifics:

• Day shift: 6 a.m. to 8 p.m.

• Evening shift: 8 p.m. to 11 p.m.

• Night shift: 8 p.m. to 6 a.m. (max. 9 hours)

Holiday pay

Switzerland has one national public holiday. Swiss National Day, held yearly on August 1, celebrates the founding of the Swiss Confederation.

However, each canton sets public holidays, so the days may vary based on where you hire employees.

Employees are entitled to a 50% increase in pay or a paid day off when working a holiday.

Minimum age and protection of young workers

In Switzerland, specific provisions allow employers to hire employees as young as 15. For example, minor employees cannot perform dangerous tasks, work on Sundays, or work night shifts.

Discrimination protections

Employers who hire in Switzerland cannot discriminate based on age, race, gender, nationality, religion, political preference, disability, sexual orientation, language, or social origin. They’re also mandated to address complaints or reports of harassment in any form.

Annual leave

Employees are provided with four weeks of annual paid leave, with two weeks of this consecutive.

When taking sick leave, employees receive 80% of their salary for 720-730 over 800 days when their employment contract provides daily insurance. If it doesn’t, they receive three weeks’ salary instead.

Maternity and family leave

New mothers are allotted 14 weeks of paid maternity leave, while two weeks of paid paternity leave are offered during the first six months.

In case of illness or accident, compassionate leave is provided for up to 3 days, and childcare leave for up to 14 weeks.

Dispute settlement

Collective labor disputes are handled differently in each canton, so it’s important to know your area’s regulations.

Employers are not required to pay striking employees.

How to pay contractors in Switzerland

Paying workers as independent contractors means you won’t make tax contributions or offer worker benefits. A contractor in Switzerland may register as a self-employed freelancer or a limited company. You can hire contractors through a recruitment company but may need an SECO license.

Payment options for contractors in Switzerland

There are a few ways you can pay your contractors based in Switzerland:

Bank and online transfers

You can manage and pay contractors using international bank transfers or online money transfer companies like Wise or Remitly.

While secure and often instantaneous, payments may incur costly fees or offer poor exchange rates. You are also left to track and manage all individual payments, which can get complicated. Moreover, if you’re paying contractors using these methods, you must be responsible for compliance.

Contractor management service

Working with a contractor management service like Remote can save you money and the hassle of making multiple contractor payments.

Remote can manage and automate payments to global workers in their local currency from a single platform. We also offer favorable exchange rates, and there are no hidden fees. Importantly, paying your contractors via Remote means you can be confident of full compliance with Swiss laws.

Worker misclassification risk in Switzerland

Switzerland recognizes a legal difference between an employee and a contractor.

In Switzerland, self-employed contractors can decide how, when, and where they work. They are responsible for independently carrying out business operations and bearing the financial risks.

On the other hand, an employee works under the direct supervision of the employer. The employer fixes employees’ wages, working hours, and location and directs their performance and daily operations.

One of the main risks of hiring and paying Swiss contractors is misclassifying your workers.

Classifying a worker as a contractor may seem more attractive to an employer. However, if your workers fit the employment requirements, misclassifying them could land you in serious trouble. It can result in legal action, repaying missed benefits or contributions, and substantial penalties. Ownership over intellectual property can also be left unclear.

Converting a contractor to an employee

If you do hire a worker as a contractor, be aware that working relationships can change over time. If a worker begins to take on more responsibilities or you decide to offer benefits, it may be time to convert them into an employee.

Here are some questions to consider before you decide to convert your contractor to an employee:

• Has your worker’s role changed?

• Do you want to offer benefits to your worker?

• Do you want more protection for your intellectual property?

• Do you want to provide a better employee experience?

• Are you confused or worried about compliance?

For more information, read our helpful guide on how to convert a contractor to an employee.

How to pay remote employees in Switzerland

Paying remote employees in Switzerland can be difficult because payroll must be managed under various federal and cantonal laws.

It can also expose you to permanent establishment risk, which means you must pay corporate tax abroad and in your home country — something businesses try to avoid.

Managing all these risks, not to mention addressing other issues in human resources when you're looking to hire remote employees in Switzerland, can be stressful. But it doesn't have to be if you use an employer of record (EOR). To avoid legally opening a local entity in Switzerland, rely on an EOR to simplify the payroll process. Plus, it takes on the burden of compliance, which frees you from legal stress.

Paying your employees via an EOR or global employment service provider like Remote is the simplest and most economical way to pay remote employees. Remote's global payroll service can help you manage invoices, automate payments, make payroll deductions, and pay your international team members on time and in their local currency — with minimal risks.

For more information, check out our expert guide on choosing the best EOR for your business needs.

Pay remote workers in Switzerland with Remote

Companies looking to hire top talent and grow their business internationally must understand all aspects of employing remote workers abroad. To hire remote workers in Switzerland, you must:

1. Classify your worker as a contractor or employee.

2. Understand labor laws, worker benefits, and employer risks.

3. Remain compliant with labor laws and tax practices.

The complexities of global payroll management put many companies off. However, equipped with the right tools and resources, the process can be simple, quick, and inexpensive.

Working with a global payroll service like Remote is a safe, fast, and cost-effective solution to paying remote workers without owning an entity in Switzerland. Our global employment services allow you to hire and pay employees in Switzerland quickly and compliantly, giving you time to focus on your business growth. Remote can:

• Handle the onboarding process

• Manage, automate, and approve payments to workers

• Pay relevant taxes and employer contributions

• Help you stay in compliance with Swiss laws and regulations

For more information about how to hire in Switzerland, download our guide to hiring remote employees.

If you’re ready to hire remote workers, whether you want to expand in Switzerland, Japan, or Greece, head to Remote and sign up today.