Switzerland doesn’t follow at-will employment. If you’re managing Swiss staff from abroad, you need to understand a legal framework that’s more structured than many foreign employers expect. Terminations are governed by the Swiss Code of Obligations (OR), primarily Articles 335 to 355, and getting the process wrong can be costly. This guide covers what you need to know before you serve notice.
The legal framework
Swiss employment law gives both employers and employees the right to terminate a contract, but it sets clear rules around how and when that can happen. There are three main routes: termination with notice, termination by mutual agreement, and immediate dismissal for cause.
There’s no obligation to state a reason for termination in the notice itself, but employees can request a written explanation. If a court later finds the dismissal was abusive (missbräuchliche Kündigung), the employer faces a financial penalty. That penalty can reach up to 2 months’ salary, and in aggravated cases, a court may award up to 6 months’ salary. Crucially, Swiss law doesn’t reinstate the employee, it only provides a monetary remedy.
Probation and notice periods
Probation period
The statutory probation period is 1 month. You can extend this up to 3 months by written agreement in the employment contract. During probation, either party can terminate with just 7 days’ notice, and that notice can be given on any day.
Post-probation notice periods
Once the probation period ends, the statutory minimum notice periods apply:
- Year 1 of service: 1 month’s notice
- Years 2 to 9: 2 months’ notice
- Year 10 and beyond: 3 months’ notice
Unless the contract specifies otherwise, notice periods run to the end of a calendar month. So if you serve notice mid-month, the termination date will fall at the end of the following month, not one calendar month from the date of notice.
Employment contracts can extend these notice periods, but they can’t reduce them below the statutory minimum. If a contract sets a longer notice period for the employer than for the employee, that extended period applies to both parties.
Protected periods and prohibited termination
Swiss law prohibits termination during certain protected periods, known as Kündigung zur Unzeit. You can’t terminate an employee while they are:
- Sick or injured (protection lasts 30 days in year 1, 90 days in years 2 to 5, and 180 days from year 6 onward)
- Pregnant or on maternity leave (protection extends to 16 weeks after birth)
- Performing Swiss military, civil protection, or civil service duty
- On adoption leave in certain cantons
If you serve notice during a protected period, the notice isn’t void, but it is suspended. The notice period pauses, resumes once the protected period ends, and the remaining notice days run from there. This can significantly extend the time before employment terminates, so it’s worth checking an employee’s status before serving notice.
Severance pay
Severance pay isn’t a general entitlement in Switzerland. It’s only required for employees who meet both of the following criteria:
- Aged 50 or older at the time of termination
- Have completed at least 20 years of service with the employer
For employees who meet both conditions, the severance amount is typically between 2 and 8 months’ salary, on a scale set out in the OR. This isn’t negotiable downward, but employers can offer more.
For all other terminations, there’s no statutory redundancy payment. Switzerland doesn’t have the kind of length-of-service redundancy entitlements common in other jurisdictions.
Collective redundancies
If you’re letting go of 20 or more employees within a 30-day period, the collective redundancy rules apply. You’re required to consult with employees (or their representatives) before finalising the decision, and you must notify the cantonal employment authority (the cantonal labor office). The notification triggers a mandatory waiting period before terminations can take effect. Failing to follow this process doesn’t invalidate individual terminations, but it exposes the employer to claims and regulatory scrutiny.
Garden leave and non-compete clauses
Garden leave
Switzerland allows garden leave. You can release an employee from their duty to work during their notice period while continuing to pay their salary. This is common for senior roles or situations where you want to limit access to clients or confidential information during the wind-down period.
Non-compete clauses
Non-competes are enforceable in Switzerland, but they come with strict conditions. To be valid, a non-compete clause must be:
- In writing
- Limited in time (the maximum is 3 years)
- Limited in geographic scope
- Restricted to roles where the employee had access to client data or trade secrets
If the clause doesn’t meet these conditions, it won’t be enforced. There’s also a compensation requirement: if an employee isn’t adequately compensated for the restriction, the clause is unenforceable. Courts have discretion to reduce overly broad non-competes rather than void them entirely.
Final pay and pension transfer
Final pay
On the termination date, the employee is owed all of the following:
- Outstanding salary through the last day of employment
- Compensation for any unused annual leave
- Any accrued 13th month salary, prorated to the termination date
This must be settled on the termination date itself, not in the next payroll cycle.
Bvg pension transfer
Switzerland’s occupational pension system (BVG) requires that an employee’s vested pension balance be transferred when employment ends. The balance must go either to the new employer’s pension fund or, if there’s no immediate new employer, to a vested benefits account (Freizügigkeitskonto). You’re responsible for initiating the transfer with the pension fund. Leaving this step incomplete is a compliance failure, not a minor oversight.
Work permit obligations
If your employee holds a Swiss work permit, termination triggers additional administrative steps. You must notify the cantonal migration authority of the termination. For quota-based permits, notification to SECO (the State Secretariat for Economic Affairs) may also be required. Failing to report can affect future permit allocations and leave the employer in breach of immigration rules.
How an EOR simplifies swiss terminations
Managing Swiss terminations from abroad means tracking protected periods, canton-specific requirements, pension transfer obligations, and immigration reporting, all at the same time. That’s where using an Employer of Record (EOR) makes a practical difference.
An EOR acts as the legal employer in Switzerland, handling notice calculations, final pay, BVG transfers, and permit notifications on your behalf. If you’re looking at EOR services to support your Swiss headcount, RemotePass covers the full offboarding process so nothing gets missed.
FAQ
Do I need a reason to terminate an employee in Switzerland?
You don’t need to state a reason in the termination notice itself, but an employee can request a written explanation. If a court later finds the dismissal abusive, you face a financial penalty of up to 2 months’ salary (or up to 6 months in aggravated cases). While there’s no at-will employment in Switzerland, the bar for a successful wrongful dismissal claim is reasonably high.
What happens if I terminate someone who is on sick leave?
Termination during sick leave is prohibited for a set period. If you serve notice during that time, the notice is suspended, not void. It resumes once the protected period ends. The length of protection depends on tenure: 30 days in year 1, 90 days in years 2 to 5, and 180 days from year 6 onward.
Is severance pay mandatory in Switzerland?
It’s only mandatory for employees aged 50 or older who have at least 20 years of service with the same employer. The statutory amount ranges from 2 to 8 months’ salary. For all other terminations, there’s no general severance entitlement under Swiss law.
What do I need to do with an employee’s pension when they leave?
You’re required to arrange the transfer of the employee’s vested BVG pension balance to their new employer’s pension fund or to a vested benefits account (Freizügigkeitskonto) if they don’t have a new employer yet. This is a legal obligation, not optional, and should be coordinated with your pension fund provider as part of the offboarding process.
