A professional employer organization (PEO) is a strategic partner that employers collaborate with to engage and manage their workforce. In this co-employment arrangement, both the PEO and the employer jointly assume responsibilities, but the PEO functions as a seamless extension of the business, assuming a comprehensive role in overseeing critical employment functions like benefits administration and payroll management.
Many companies are seeking to expand their pool of candidates, and hiring remote employees in Switzerland is an attractive option for organizations looking to reach European markets. If you’re thinking about hiring employees in Switzerland, PEO partnership may be an option you’re considering. Here’s what you should know first.
What are the benefits of using a PEO in Switzerland?
Working with a PEO in Switzerland can benefit a company in several ways. For one, PEOs have familiarity with local labor laws and can therefore help your business navigate compliance. PEOs also provide an array of HR, legal, and accounting services, such as payroll processing, benefit plan administration, and tax filing. PEOs may also assist with employees’ compensation insurance and other mandatory requirements that employers must fulfill.
Simply put, PEOs act as outsourced HR departments, allowing you to manage your Swiss employees and oversee their strategic initiatives. Partnering with a PEO may therefore help your company control its administrative burden and costs when hiring in Switzerland.
Unique things about Swiss labor laws
Switzerland has fairly liberal labor laws compared to other European nations, but there are still certain considerations to bear in mind. For one, Switzerland has specific overtime regulations. Office employees may only work 45 hours per week, and overtime pay is usually compensated with time off in lieu or by payment of the hourly rate plus a 25% premium. There is also a minimum notice period for employees, which is seven days during the probationary period, one month during the first year of employment, two months during the second to ninth year, and three months from the tenth year on.
Employees are entitled to a minimum of four weeks off per year. They are also entitled to unpaid time off for sick leave, though employers are required to pay a portion of their salary for a limited time. Women are not allowed to work for eight weeks after giving birth, and have a right to a total of 14 weeks of maternity leave. The state pays up to 80% of a mother’s average last salary during her maternity leave.
Non-compete agreements are allowed in Switzerland, but their terms must be limited with regard to place, time, and scope. The non-compete period cannot exceed three years past the termination of employment.
Switzerland also has a complex three-tiered taxation structure. Taxes are paid on the national, regional, and local level, which means there’s significant variation in tax rates throughout the country. The employer and employee split social contributions, while mandatory insurance can increase the employer’s contribution.
Finally, there are 26 separate cantons (similar to states in the U.S.) within Switzerland, each of which sets its public holidays independently. Most cantons observe eight public holidays and give employees the day off, including New Year’s Day, Good Friday, Easter Monday, Swiss National Day, and Christmas day, among others.
Find out more about the intricacies of hiring in Switzerland with our comprehensive guide.
Drawbacks of using a PEO
There are several reasons why you might consider an alternative to a PEO.
Switzerland may be a destination in which you hope to hire remotely, but in order to do so with a PEO, you’d have to have a registered business entity in the country. This is because a PEO is more of an HR services provider than a legal entity. Setting up a business entity can be a long and involved process. If you’re only looking to expand your team with a few Swiss employees, it may not be worthwhile to establish a legal entity.
Moreover, should you choose to hire in multiple countries, you’d need a PEO in each. Since every PEO has their own software, systems, and processes, it could become an administrative burden to manage partnerships with these various entities.
Additionally, since having a PEO means that you’ll remain the joint employer, you’ll maintain legal responsibility for hiring in Switzerland. Although the PEO can help you manage compliance, you’d still need to verify that all employment contracts and other labor details are compliant with country-specific regulations.
Finally, in some cases a PEO might require that you have a minimum employee count, such as five to ten employees. Small companies may therefore need to find another option, as this requirement could be prohibitive.
Alternatives to Swiss PEOs
When hiring in Switzerland, a PEO partnership isn’t your only option. There are two main alternatives to consider.
Opening your own business entity
Instead of partnering with a PEO, you might open up your own business entity and establish your own HR department. This would then allow you to penetrate the Swiss market and provide you with a team to oversee all HR-related tasks, including payroll, benefits administration, and compliance. Yet, this is a costly and time-consuming endeavor. For small to midsize businesses, establishing a registered business entity may not be the most economical or practical option.
Partnering with a global employment platform
A global employment platform is a solution that allows you to quickly and efficiently hire and onboard new team members virtually from anywhere in the world. It’s easy to set up, and allows you to hire from multiple countries within the same platform.
Plus, you’ll receive support with compliance, payroll, benefits, and workforce management, as well as a single source of truth for all the paperwork and documents. This solution works for both full-time and part-time employees, meeting the needs of employers of any scope and size. Learn more about how Oyster’s global employment platform can help.