Switzerland is known for its beautiful scenery and strong trade relationships with countries across Europe, making it an ideal location for companies looking to expand. However, the nation’s laws and customs are complex and vary widely by region.
When setting up a Switzerland payroll, keep these rules in mind to stay compliant.
Taxation rules in Switzerland
Switzerland has a federal corporate income tax (CIT) rate of 8.5% on profit after tax. Additional expenses are applied at the cantonal and communal level, so your CIT can range between 11.9% and 21%, depending on your company’s location in Switzerland. The country also has a complex income tax rate for employees, which varies depending on how much money a worker earns.
Swiss law mandates that if an employee’s annual salary is less than CHF 148,200, then a 13th-month salary should be paid in December. However, employees can request that the 13th-month salary be disbursed monthly as part of the basic salary without additional compensation.
The item entitled “insurance premium” is calculated at 5.30% of the gross salary. AVS (old age and survivors’ insurance) is a mandatory contribution and is intended to cover the vital needs of a person in the event of retirement or death.
Switzerland payroll options for companies
Companies have a few Switzerland payroll options to choose from:
- Internal: Larger companies with in-country subsidiaries and a long-term commitment to Switzerland may run their own internal payroll. However, this option can be more expensive since the company will have to hire the necessary HR team members.
- Switzerland payroll processing company: Companies can also outsource payroll to a local Switzerland payroll processing company. However, you will still be held liable for any of the local company’s mistakes.
- G-P: The easiest way to run payroll in Switzerland and stay compliant is partnering with an Employer of Record like G-P. With us, you can rest assured that all employees will be paid on time, freeing you to focus on other important aspects of your business.
How to establish a payroll in Switzerland
To set up payroll in Switzerland, you will first need to establish a subsidiary by registering with the Commercial Register. Companies must submit notarized bylaws and founding documents as well as an application. Additionally, you’ll also need to open a Switzerland bank account. However, companies can bypass entity setup by partnering with an EOR like G-P.
Entitlement/termination terms
The first step to hire new employees is by writing an employment contract that outlines the terms of the relationship. You should include entitlement and termination clauses in this contract to avoid any issues in the future.
Probationary periods are common in Switzerland but must not exceed 3 months. Employers must provide a notice period of 7 days when terminating an employee during the probationary period. Notice periods to terminate the employment relationship after the probationary period depend on how long the employee has worked for the company, but both parties can potentially agree to immediately terminate the contract.
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