How to hire and pay remote workers in Switzerland

Switzerland may be best known for its snow-capped mountains and warm fondue, but the country is also home to a talented workforce. Workers in Switzerland 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 remote workers in Switzerland is a solid option for companies that would like 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 effectively hire and pay remote 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 remote workers: 

Open a legal entity in Switzerland

If you plan to employ remote workers in Switzerland, you should consider opening a legal entity there. 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 own tax obligations, which simplifies the process for the employer and reduces 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 own 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 fluctuations in currency each month.

In Switzerland, the currency is the Swiss franc (CHF). However, be aware that many workers who work and commute across borders like 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 has the responsibility to pay.

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 14,800 - 0% 

• CHF 14,800 to 32,200 - 0.77%

• CHF 32,200 to 42,200 - 0.88% 

• CHF 42,200 to 56,200 - 2.64% 

• CHF 56,200 to 73,900 -2.97% 

• CHF 73,900 to 79,600 - 5.94% 

• CHF 79,200 to 105,500 - 6.6%

• CHF 105,500 to 137,200 - 8.8%

• CHF 137,200 to 179,400 - 11%

• CHF 179,400 to 769,600 - 13.2% 

• CHF 769,600 and above - 11.5% 

Federal taxes for married couples and individuals with children

• CHF 0 to 28,800 - 0% 

• CHF 28,800 to 51,800 - 1% 

• CHF 51,8,00 to 59,400 - 2%

• CHF 59,400 to 76,700 - 3%

• CHF 76,700 to 92,000 - 4%

• CHF 92,000 to 105,400 - 5%

• CHF 105,400 to 116,900 - 6% 

• CHF 116,900 to 126,500 - 7%

• CHF 126,500 to 134,200 - 8%

• CHF 134,200 to 139,900 - 9%

• CHF 139,900 to 143,800 - 10%

• CHF 143,800 to 145,800 - 11%

• CHF 145,800 to 147,700 - 12%

• CHF 147,700 to 912,600 - 13%

• CHF 912,600 and above - 11.5%

Which parts of salary in Switzerland are taxable?

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

Components of Switzerland 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 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. This can include accommodation, food, local travel, and other incidentals.

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

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

In general, an allowance refers to a lump sum paid by the employer 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 of the expense. In Switzerland, an employer is obliged to 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 seen as taxable income:

• Social security contributions 

• Pension scheme payments 

• Business expenses

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.

How much is overtime pay in Switzerland?

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

In general, the workweek has a limit of 40 or 50 hours, depending on the industry.

What are the local labor laws in Switzerland?

All Swiss employees who live and work in the country are protected by employment law, while self-employed workers 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

• Termination protections

• Hours of work

• Holiday pay

• Minimum age and protection of young workers

• Discrimination protections

• Maternity and family leave 

• Dispute settlement

How to pay contractors in Switzerland?

Choosing to pay workers as independent contractors means that you will not need to make tax contributions or offer worker benefits. A contractor in Switzerland may register as a self-employed freelancer or a limited company. You can also hire contractors through a recruitment company, but you may need a SECO license to do this. 

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 make payments to contractors yourself using international bank transfers or online money transfer companies like Wise or Remitly. 

While payments are secure and often instantaneous, they 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 have to take on the responsibility for compliance.

Contractor management service

Working with a contractor management service like Remote can save you a lot of money as well as 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 involved. Importantly, paying your contractors via Remote means that you can be confident of being fully compliant with Swiss laws. 

Worker misclassification risk in Switzerland

Switzerland recognizes a legal difference between an employee and a contractor. A self-employed contractor in Switzerland is defined as someone who has the freedom to decide how, when, and where they work. They are responsible for independently carrying out their business operations and bear all the financial risks of their work.

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

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

Classifying a worker as a contractor may seem more attractive as an employer. However, if your worker fits the employment requirements, misclassifying them could land you in serious trouble. It can result in legal action, the repaying of any missed benefits or contributions, and huge additional 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 the worker 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 useful 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 you have to manage payroll in line with various federal and cantonal laws. It can also expose you to permanent establishment risk, which means that you have to pay corporate tax abroad as well as in your home country — something businesses try to avoid. 

Managing all these risks when you're looking to hire remote employees in Switzerland can certainly be stressful. But it doesn't have to be if you use an employer of record (EOR).   

Payment with an employer of record (EOR)

Working with an EOR is hands down the simplest and most economical way to pay employees if you don't want to legally establish your company in Switzerland. 

An EOR, like Remote, can simplify the whole payroll process. It also takes on the burden of compliance, which frees you from any legal stress. An EOR can:

• Compliantly hire and onboard global employees

• Pay employees quickly and cost-effectively

• Minimize compliance and permanent establishment risks

• Help you scale easily by managing multiple workers

Turning to an EOR is usually the best solution for anyone who does not have the resources and time available to open a legal entity abroad or manage the complexities of global payroll. It’s also a great option if you want to avoid handling the responsibility of compliance on your own.

Read our expert guide on how to choose the best EOR for your business needs.

Pay remote workers in Switzerland with Remote

Companies who’re looking to hire top talent and grow their business internationally need to have an understanding of 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 

But many companies are missing out, being put off by the complexities of global payroll management. However, equipped with new tools, you can see how the process can actually be simple, quick, and inexpensive.

Working with a global payroll service like Remote is a safe, fast, and cost-effective solution to paying your 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 hiring and paying workers in Switzerland, download our guide to hiring remote employees. If you’re ready to start hiring remote workers, sign up for Remote and get started right away!