Employee vs. Contractor: How to Classify Workers in Switzerland (Quiz included) [2024]
As you may already know, misclassifying your workers is, in many nations, an extremely serious crime that carries with it the risk of significant fines and penalties. In recent years, a number of countries have taken legal steps against companies like Instacart and Uber for misclassifying employees as independent contractors and fined the businesses eye-watering amounts.
While you’re still expected to classify employees correctly—and can incur penalties if you don’t—Switzerland is a bit different from the rest of Europe. Read on to find out what makes this charming country unique (and learn how to classify your workers correctly and stay compliant with Swiss labor laws to boot).
Classifying workers in Switzerland
Switzerland does indeed categorize employees and independent contractors (also interchangeably called “self-employed individuals”) differently.
While you should absolutely make sure you have a Swiss labor law attorney advising you on how to classify your employment relationships as you expand your business, here’s an interesting tidbit. If you’d ever like to look something up yourself, you can find contract and company laws in the federal Swiss Code of Obligations. The code is extremely organized and has been in place since its ratification in 1912. It’s been effective since then (and was most recently updated in April 2020).
There are several articles in the Swiss Code of Obligations—article 319, for instance—that provide guidance to employers who are trying to classify their workers. Below, we’ll discuss who would be considered an employee in Switzerland and who would be considered an independent contractor.
What is an employee in Switzerland?
Swiss employees are integrated members of the company they work for. How and where they perform their work is decided by their employer, as are their working hours. They’re also provided with equipment to perform their duties and with statutory benefits, including:
- Paid annual leave
- Paid maternity leave
- Paid paternity leave
- Pensions
- Unemployment insurance
- Disability insurance
- Minimum wage
- Overtime and extra hours
- Occupational accident insurance
- Paid sick leave
- Survivors’ insurance
- Paid public holidays
What is a contractor in Switzerland?
In Switzerland, an independent contractor provides services to a company without being an employee of that business. While they do receive remuneration for their work, they’re not entitled to benefits, and they don’t have to be paid the minimum wage. However, they have a lot more autonomy and freedom over how, when, where, and who they work with than employees. Independent contractors are also known as self-employed individuals, consultants, or freelancers.
Worker classification overview: Employees vs contractors in Switzerland
Contractors
Employees
High degree of autonomy.
Contractors have a great deal of control over how, when, and where they complete their work.
The employee is subordinate to the employer. Since “subordination” is such a key part of defining the employment relationship (as you’ll see in the next section), it’s crucial to note that employees receive supervision and direction on how, when, where, and what to work on.
They provide their own equipment and tools.
Equipment and tools are typically provided by the company.
They’re not an integrated part of the company. Along with the autonomy comes independence: Contractors are more likely to work remotely, complete tasks on their own and don’t receive a high level of visibility into what’s happening in the company as a whole.
They’re integrated members of the company. Employees are assimilated into the companies where they work. For instance, they’re likely to work on site, be a part of discussions and initiatives related to the organization’s mission values, and complete tasks as a team.
No benefits. Swiss self-employed individuals do not receive benefits from their employers.
Entitled to benefits. Swiss employees are federally required to receive benefits from their employer.
Contractors assume all risk and liability when they perform work.
The employer–not the employee–assumes the risk and liability.
What’s the main difference between an employee and an independent contractor in Switzerland?
While some countries, such as Canada, have provided tests to help employers classify their employment relationships correctly, Switzerland doesn’t have a comparable test. Rather, the main distinguishing factor is subordination. An employee is subordinate to their manager, director, or another person working for the same employer. An independent contractor isn’t.
Furthermore, there are differences between the tax laws and social security laws that apply to self-employed persons and employees.
Tax law differences: Independent contractors can deduct their professional expenses from their total income tax; employees cannot.
Social security law differences: The Swiss social security system is split into three “pillars.” Here, we’ll only discuss the first two, as their rules about contributions help to differentiate employees and independent contractors:
- First Pillar: The first, which includes Old Age and Survivors’ Insurance (OASI), private investment options, and unemployment insurance, is mandatory for all Swiss residents, regardless of their employment status.
- Second Pillar: This pillar involves occupational pension plans and accident insurance; as mentioned earlier, employees (provided they earn over 21,150 CHF annually) are insured by their employer automatically. It isn’t mandatory for independent contractors to contribute to either of these schemes (although both are intended to ensure people maintain a healthy living standard after they’ve retired).
Penalties for misclassifying workers in Switzerland
Interestingly, unlike Canada, the UK, and the US, Switzerland doesn’t seem to have had any high-profile misclassification cases in the last few years. But, that doesn’t mean they don’t take misclassification seriously.
Businesses found to have misclassified employees as contractors will be required to retroactively pay employment benefits and social security contributions. However, this is generally the extent of it. Courts usually only consider fines if the employer knowingly failed to deduct taxes altogether or if they willfully ignored Swiss labor laws on working time and health protections.
Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.
