Switzerland is one of the few unique European countries that enjoy a strong reputation as a commercial powerhouse while being an interesting multicultural and multilingual society. If your company is thinking about global expansion, consider the following best practices for doing business in Switzerland.
The Federal State of Switzerland is made up of 26 cantons and as such, Swiss laws are divided up among the national level, the cantonal level, and the municipal levels of government. Thus, when looking at expansion into Switzerland, it is essential to determine where a company’s operations or resources will be based in the country. This is because cantonal regulations can vary and may have a significant impact on the overall cost of doing business in Switzerland.
Next, focusing on employment in Switzerland, our particular area of expertise. Switzerland’s labor market enjoys some of the highest average salaries in the world while also maintaining one of the lowest unemployment rates at approximately 3%. The labor regulations in the country ensure that Swiss and foreign employees alike receive some of the best working conditions and employment-related protections anywhere in the world. Additionally, the population of foreign nationals working in Switzerland has been increasing up to approximately 1.5 million foreign nationals employed in the country. And, due to the 2002 Swiss/EU bilateral agreement that guarantees the free movement, and employment, of EU citizens in Switzerland.
Further, any companies based in the EU or with a subsidiary based in the EU, should take note of a Swiss employment and tax regulation called ANOBAG (“Arbeitnehmer ohne beitragspflichtigen Arbeitgeber”). Essentially, ANOBAG allows non-resident foreign employers to be free from paying Swiss social security contributions for employees located in Switzerland under certain circumstances. As noted above, this regime does NOT apply to U.S.-based companies, as a U.S. COMPANY is not permitted to be a non-resident foreign employer in Switzerland under the ANOBAG scheme.
Beyond ANOBAG, there are several other employment-specific aspects that companies should be aware of when choosing to expand into Switzerland. First, Switzerland has a graduated notice period for terminating employees. Within the first year, the mandatory notice period is 30 days. However, between years 2 and 9 of employment, the notice period jumps up to 60 days and finally, to 90 days in year 10 and beyond.
Moreover, employers should also take note of the required 13th-month salary and the fact that health insurance is mandatory for all employees under Swiss law, but the insurance scheme is operated through private insurance companies instead of a single-payer system.
Finally, as discussed, Switzerland is a wonderfully attractive commercial market with great access to the rest of the EU. However, Switzerland can be a rather expensive employment environment, especially to companies that are unfamiliar with the terrain. For that reason, if your company is looking at entering Switzerland, give us a call. We can help you make the best decision for entering the Swiss market without overpaying to operate in the country.