Today, employers face tight requirements to maintain and improve business competitiveness and performance. In such a context, employers must sometimes reorganize their activities (e.g. by transferring part of them to a third party, terminating a group of employees or delocalizing abroad) with inevitable consequences for the employees. As employers, are you aware of the conditions stated under Swiss labor laws? Do you know your obligations? Which benefits can you offer to your employees to smoothen this transition? Are you aware of tax and social security relieves?
Here are the 8 most important questions that each employer / HR professional should bear in mind:
1. As an employer, are you aware of the procedure that applies if you plan to transfer part of the company to a third party?
YES / NO – If the transfer involves the continuation of the exploitation by a third party (e.g. mergers, scissions, assets recovery), Articles 333 and 333a of the Swiss Code of obligations apply. The employment relationships will automatically pass to the acquirer as of the day of the transfer with all rights and obligations. The former employer and the acquirer will then be jointly and severally liable for a limited period of time for the claims of the employees.
2. Do you know when you have to comply with the Swiss collective dismissal procedure and what are the related obligations?
YES / NO – The specific procedure of collective dismissal applies if notices of termination are given by the employer for reasons not pertaining personally to the employees, within 30 days, and which affect: at least 10 employees for a company employing more than 20 and fewer than 100 employees; or at least 10% of the employees for a company employing at least 100 and fewer than 300 employees. Several cantons have reduced these thresholds, with an obligation to announce the dismissals as soon as 6 employees are concerned (see question 3 below).
The employer intending to make mass dismissals shall previously consult/inform the employees and give them the opportunity to formulate proposals. The employer must also notify the mass dismissals to the cantonal employment office and inform it accordingly. Swiss laws/practice impose certain requirements with regard to the deadlines and the content of employees’ information/consultation.
3. Do you know how to proceed if the reorganization involves a modification of the employment conditions?
YES / NO – If the employer intents to modify the employment conditions of its employees, the so-called procedure of “congé-modification” must be respected. The employer notifies the termination of the employment contract(s), subject to the acceptance of new employment conditions. At the end of the notice period, the employment relationship will either continue with the new employment conditions, or will end without any other termination notice. Depending on the number of employees concerned by the “congé-modification”, the employer must in parallel comply with the Swiss collective dismissal procedure.
4. Do you have the obligation to offer a social plan to the employees who are dismissed?
YES / NO – The employer must negotiate and prepare a social plan if it employs at least 250 employees and intends to dismiss at least 30 employees within 30 days. If not, there is no obligation to offer a social plan (subject to any contrary employment agreement or collective employment contract). However, if some activities are maintained, the employer may wish to protect its public image by offering a social plan. This may include early release of the employees, assistance in the search for new employment (outplacement), specific compensation, early retirement (if applicable), etc.
5. Do you know how the benefits offered to your employees will impact their social security contributions and taxes?
YES/NO – Most benefits will be qualified as compensations and will, as such, be subject to usual contributions. Social security and tax laws however plan some relieves following the end of contractual relationship between employer and employee. Some services can be paid free of social security and taxes. Discounted tax rates may apply depending on the type of benefits and the age of the employee. Further rebates can also be agreed with the social security authotities (beneficial for both employee and employer) and tax authorities in case of collective dismissal. It is important to be aware of these advantages in order to offer the most beneficial package to your employees.
6. Are you able to address employees’ questions in terms of employment, retirement or early retirement?
YES/NO – Employees face a lot of administrative burdens when dealing with unemployment: Where should I register? When? What documents should I bring? Do I need to inform the tax authorities about my new situation? Same applies in case of retirement or early retirement: What is the AVS bridge? Should I perform a voluntary pension contribution (buy-back)? How can I obtain a favorable tax treatment on my severance allowance? All these concerns have to be analysed on an individual basis, in order to help each employee efficiently.
7. In case of departure from Switzerland, do you know your employees’ obligations?
YES/NO – Any arrival or departure need to be notified to the canton / commune. Depending on the canton of residence, the employee may need to finalize his tax return prior to departure. Depending on the country in which he plans to move, the employee could withdraw part or the total of their social security and pension benefits.
8. Can you explain employee’s net in hand package after delocalization abroad?
YES/NO – In case of delocalization, it is difficult for employees to get a clear understanding on their new net in hand package since they are most often not familiar with the tax and social security regime of the new country of employment. Some countries also offer special tax advantages for new hires from abroad which can make a substantial difference in their net financial situation. This could encourage the acceptance of new local package.
Are you able to answer “YES” with confidence to all the above questions? If not, your company should consider all the legal, social and tax requirements/issues before implementing the reorganization/transfer of its activities.
The consequences of non-compliance with Swiss laws are not limited to statutory and legal penalties; in fact, the company could face significant indirect costs (e.g.: the hiring of additional resources, lengthy negotiations, reputation damage, etc.).
Going through reorganization/transfers is not an easy exercise but we can help you address employees’ questions and make sure your packages are structured in the most efficient way.
An access to our Swiss labor law experts and Swiss tax and social security specialists (Global Mobility Services) may help you manage your project efficiently and comply with all the Swiss legal requirements.
For further information, please visit our Global Mobility Services webpage.