8. Labor market and labor laws.

8. Labor market and labor laws. Switzerland has one of the most productive workforces of any national economy. Its labor market is characterized by liberal legislation, light-touch regulation and exceptional social stability. Labor conflicts are solved through the productive relationship between labor and management. Strikes are rare. The social insurance system for workers is based on the principles of solidarity and personal responsibility. The high wages attract qualified workers, and employers benefit from competitive unit labor costs thanks to low social security deductions. 8.1 Employment and unemployment. Switzerland has around 6 million employed people (as per first quarter 2011, excluding cross-border commuters and short-term residents), around two million of whom are women. The labor force participation rate (people in or seeking as a percentage of the population aged 15 and over) is 68.2 %, one of the highest in the whole of Europe. Foreigners account for 30 % of the employed population. 35 % of employed people work part-time. 58 % of women work part-time, compared to just 15 % of men. Switzerland has consistently had low unemployment, which has remained between 1 % and 4 % over the past ten years (2011: 3.1 %). Swiss workers are highly qualified around one-third have a higher education degree. Switzerland is famous for its multilingual employees, and Swiss managers have more international experi- ence than average. In terms of worker motivation, the Swiss rank second only to the Danish. Swiss employees are very loyal to their companies, partly because most companies are small or medium-sized. Fig. 33: International comparison of worker motivation, 2011 1 = low, 10 = high 1 Denmark 8.09 2 Switzerland 7.92 3 Austria 7.73 4 Taiwan 7.67 5 Norway 7.49 8 Germany 7.24 10 Hong Kong SAR 7.18 11 Netherlands 7.14 14 Ireland 6.94 15 Japan 6.88 18 Singapore 6.63 19 Brazil 6.59 21 USA 6.47 23 Belgium 6.42 24 Luxemburg 6.39 26 India 6.17 29 China 5.96 35 Great Britain 5.70 48 Italy 4.77 51 France 4.42 55 Russia 4.14 Source: IMD World Competitiveness Online 2011 68 Handbook for Investors 2012

Fig. 34: International experience (2011) 1 = low, 10 = high 1 Switzerland 7.82 2 Hong Kong SAR 7.80 3 Luxemburg 7.38 4 Sweden 7.18 5 Qatar 7.05 6 Singapore 7.01 7 Netherlands 6.98 10 Germany 6.63 11 Ireland 6.56 14 Belgium 6.32 19 Denmark 5.98 21 Great Britain 5.91 27 Brazil 5.72 28 India 5.71 34 USA 5.50 41 Norway 4.83 44 France 4.71 52 Italy 4.17 53 Russia 4.08 54 Japan 4.04 56 China 3.92 8.2 Labor costs. 8.2.1 Salaries Salaries are relatively high in Switzerland, reflecting the country s high levels of prosperity and output. Generous salaries are a symbol of success and make the country attractive to qualified workers. Compared to other cities (in 2010), gross wages in Zurich and Geneva are just ahead of Copenhagen and Oslo. Due to the lower deductions (taxes, social insurance) compared to other countries, Switzerland also holds first place when it comes to net income. Regular official surveys of wage levels and structures show considerable difference both within and between the individual sectors. Source: IMD World Competitiveness Online 2011 Fig. 35: Monthly gross salary (central value) per sector and region, 2008 Lake Geneva area Central Plateau Sector of the economy Switzerland Northwestern Switzerland Zurich Eastern Switzerland Central Switzerland TOTAL 5,786 5,952 5,610 6,084 6,236 5,414 5,651 4,929 SECTOR 2: PRODUCTION 5,935 6,106 5,742 6,557 6,309 5,659 5,829 5,041 Mining, quarrying of stone/soil 5,823 5,679 5,951 6,310 5,649 5,778 6,148 5,383 Manufacturing; industry 6,041 6,417 5,742 6,885 6,480 5,715 5,952 4,651 Energy and water supply 7,520 7,421 7,378 8,410 8,043 7,256 7,036 6,308 Construction 5,695 5,754 5,638 5,897 6,012 5,460 5,602 5,318 SECTOR 3 SERVICES 5,688 5,860 5,491 5,696 6,228 5,080 5,472 4,832 Trade, repair 5,344 5,574 4,979 5,344 5,792 4,954 5,333 4,504 Hospitality 4,000 3,902 3,931 4,098 4,236 3,895 4,036 3,660 Transport, communications 5,664 5,417 6,643 5,302 6,025 5,083 5,006 4,942 Banking and insurance 8,656 9,352 6,761 8,111 9,127 7,454 7,130 7,500 IT, R&D, corporate services 6,802 7,243 6,197 7,000 7,222 6,056 6,819 5,600 Education 7,137 6,666 7,259 7,901 7,579 7,653 7,150 5,857 Healthcare and social services 5,854 5,964 5,751 5,765 6,314 5,692 5,801 5,422 Other public and private services 5,742 5,953 5,532 5,465 7,034 4,667 5,033 4,754 Standardized monthly salary: full-time equivalents based on 4 1/3 weeks of 40 working hours per week Source: Swiss Federal Statistical Office, Swiss Earnings Structure Survey Ticino Handbook for Investors 2012 69

Fig. 36: Gross annual earned income (median) in each occupational group in CHF (first quarter 2011) Full time + part time Women + Men Self-Employed 62,500 Managers 80,000 Academic professions 84,000 Technicians and similar 66,300 Office staff, commercial occupations 36,000 Service and sales 41,400 Agricultural specialists 54,000 Skilled craftsmen and similar 65,000 Equipment and machine operators 59,700 Unskilled workers 26,000 Employees 66,200 Managers 108,600 Academic professions 84,500 Technicians and similar 74,700 Office staff, commercial occupations 58,500 Service and sales 43,200 Agricultural specialists 56,600 Skilled craftsmen and similar 65,900 Equipment and machine operators 65,000 Unskilled workers 26,000 Source: Swiss Federal Statistical Office, Swiss Labor Force Survey UBS Prices and Earnings Survey www.ubs.com/research Languages: German, English, French 8.2.2 Non-wage labor costs The deciding factor for employers is not the salary that they pay but rather the unit labor cost. Although salaries are high in Switzerland, the non-wage labor costs that employers must bear in addition to gross salary (employer social security contributions) add up to just 15 %. Coupled with high productivity, modest taxes and low capital costs, this means that at the end of the day many employers pay less than in other European countries. Fig. 37: Industry labor costs: direct remuneration and non-wage labor costs (2009)* Labor costs in EUR/hour Norway 43.64 Belgium 38.59 Switzerland 37.14 Denmark 35.08 Germany 34.28 France 33.31 Luxemburg 33.09 Sweden 32.88 Netherlands 32.75 Ireland 29.62 Italy 27.40 USA 22.95 Japan 22.86 Great Britain 22.21 Russia 3.61 China 2.25 * Not available: Brazil and India Source: Institute for the German Economy (Institut der deutschen Wirtschaft), Cologne, Industry labor cost, international comparison, IW-Trends 2009 Salary and wage level www.bfs.admin.ch > Topics > Employment and income Individual salary calculator www.lohnrechner.bfs.admin.ch Languages: German, French, Italian 70 Handbook for Investors 2012

Fig. 38: Salary statement example: employer and employee contributions Example: employee with two children Employee in % in CHF in CHF Gross salary 10,000.00 Social security (OASI/DI/IC) 5.15 515.00 State-mandated unemployment insurance 1.10 110.00 Non-occupational accident insurance 1 2.00 200.00 State-mandated occupational pension fund 2 6.50 650.00 Daily sickness benefits insurance 3 0.62 62.00 Social deductions 1 537.00 Child/family allowance 4 200.00 400 Net salary 8,863.00 Employer Gross salary 10,000.00 Social security (OASI/DI/IC) 5.15 515.00 Administrative costs 0.30 30.30 State-mandated unemployment insurance 1.10 110.00 Occupational accident insurance 1 0.50 50.00 State-mandated occupational pension fund 2 6.50 650.00 Daily sickness benefits insurance 3 0.62 62.00 Family allowance (two children) 4 2.00 200.00 Employer contributions 1,617.30 Total staff costs 11,617.30 1 Depends on sector and occupational risk Source: Own diagram Generis AG, Schaffhausen 2 Amount varies according to the age of the insured person (and insurance) 3 Voluntary insurance 4 Amount varies depending on the family compensation fund/canton 8.3 Labor contract and employee representation. The Swiss labor law comprises the rights and obligations of the employees and employers. It contains considerably less provisions than the legislations in the EU states and is set out in several laws the Swiss Code of Obligations (individual employment contracts, collective bargaining agreements, normal employment contracts), the Labor Act (general health and safety, working and rest times, young people, pregnant women and new mothers) as well as the Accident Prevention Law (safety at work). The mandatory law of the federal government and the cantons has precedence over the provisions of the collective bargaining agreement, although different provisions can be specified to the benefit of the employee, provided nothing else is stated in the compulsory law. If, on the other hand, the legal provisions are not mandatory, the agreements made between the parties have precedence. Some labor law regulations can be amended by the collective agreement, but they cannot be amended by an individual employment contract. Salaries are either negotiated directly between the employer and employee, or within the scope of collective bargaining agreements. Here the legislator also refrains from strict regulations in accordance with the liberal economic system. It allows a certain amount of room for direct agreements between the social partners. Handbook for Investors 2012 71

Fig. 39: Labor market deregulation, 2011 Entrepreneurship is 1 = severely impaired, 10 = not impaired at all 1 Denmark 8.35 2 Switzerland 7.96 3 Iceland 7.91 4 Hong Kong SAR 7.10 5 Singapore 7.05 8 USA 6.48 11 China 6.34 19 Ireland 5.56 22 Russia 5.46 26 Japan 5.14 31 Germany 4.95 33 India 4.90 42 Netherlands 4.38 44 Great Britain 4.28 46 Luxemburg 4.23 48 France 3.74 49 Italy 3.70 51 Belgium 3.44 56 Brazil 2.28 Source: IMD World Competitiveness Online 2011 8.3.1 Individual employment contracts Employers are required to provide employees with the key points of the employment contract in writing by no later than one month after the employee starts work. In larger companies, it is recommended to have an employee handbook containing the most important employment provisions, as the employment contract itself only contains provisions on wages, notice period and special terms (e.g. non-competition clause). Employment contracts and employee handbooks must conform to the mandatory provisions of the Swiss Code of Obligations and the provisions of any applicable collective bargaining agreements, where applicable. Employee handbooks should not be confused with agreements between the employer and the works council, as practiced in EU countries (and which do not exist in this form in Switzerland). However, industrial companies are required to establish «work rules» containing rules on occupational health protection and accident prevention. The employees or their representatives must be consulted before the rules are put into force. Companies may include in the employment contract a noncompetition clause for the duration of the employment with the company and beyond. Through a non-competition clause, the employer prevents employees who leave the company from using special knowledge that they gained while working there in a way that provides competition for their former employer. In practice, demanding requirements are imposed on the wording and enforcement of such clauses. There is no mandatory provision for compensating employees for agreeing to such non-competition clauses. Non-competition clauses must: be in written form clarify the definition (location, area, client group); a general restriction is not sufficient specify the duration; in general not longer than three years 8.3.2 Collective labor contracts Collective bargaining agreements are concluded between employer and employee associations. By doing so, these parties define the minimum conditions (e.g. minimum salaries, holiday entitlement, working hours, periods of notice or pension age) that individual employment contracts cannot go below. A collective bargaining agreement is normally agreed with a set term. During the term both sides have an obligation not to engage in industrial action. With the declarations of general applicability the scope of a collective bargaining agreement is extended to all employees and employers in a particular sector. Minimum wages which have been negotiated within the scope of a collective bargaining agreement of this kind, have to be observed by all employers. The approx. 1,500 collective bargaining agreements that are non-binding only have to be observed if the contractual parties are members of the respective associations. In Switzerland there are 36 collective bargaining agreements that are generally binding and have been issued by the federal government and 47 by the cantons (October 2011). If there are differences of opinion between an employer and the workforce, an amicable solution is sought internally. This fundamental approach dates back to the «peace agreement» between Swiss employers and employee organizations of 1937. In accordance with the mutual agreement to maintain peace, workers and management seek to resolve conflicts through discussions. Solution-oriented labor market partnerships are still the norm today. 72 Handbook for Investors 2012

Fig. 40: Employer-employee understanding, 2011 1 = total confrontation, 7 = total cooperation Average: 4.4 1 Switzerland 6.1 2 Singapore 6.1 3 Denmark 5.9 4 Norway 5.8 5 Netherlands 5.7 6 Japan 5.7 9 Austria 5.6 10 Luxemburg 5.5 12 Hong Kong SAR 5.4 22 Germany 5.1 25 Great Britain 5.0 29 Ireland 4.9 36 USA 4.8 46 India 4.6 51 China 4.5 57 Belgium 4.4 79 Brazil 4.2 118 Italy 3.8 125 Russia 3.6 133 France 3.4 Source: World Economic Forum, The Global Competitiveness Report 2011 2012 Declaration of general applicability of collective bargaining agreements www.seco.admin.ch > Topics > Labour > Labour Law Languages: German, French, Italian in all matters relating to work safety and worker protection on the transfer of operations in the event of mass redundancies when linking with a professional pension scheme In addition the employer must inform the employees at least once a year about the effects of the course of business on employment and the staff. Works councils in the EU have far greater powers than employee representation committees under Swiss law. The major difference is that, in contrast to works councils, Swiss employee representative committees are not able to push through their own views or to force a decision. Their rights are limited to being informed, having their views heard and providing decision-making input. 8.4 Working hours and leisure time. 8.4.1 Normal working hours, maximum working hours and working time models Employment contracts or collective bargaining agreements generally stipulate that normal working hours for employees in Switzerland are 40 to 44 hours per week. The legal maximum working time in Switzerland has remained stable over many decades. The maximum number of working hours per week is 45 hours for industrial companies (also applies to office staff and technical employees and sales personnel in large retail stores). For commercial operations, the maximum is 50 hours per week. This differentiation between normal and maximum working hours is important for the definition of overtime. 8.3.3 Employee participation and employee representation The Co-Determination Act governs the participation of employees in a company and applies to all private companies with employees in Switzerland, regardless of their size. Participation consists mainly of providing information to and listening to employees. In the areas listed below, the employer must inform employees of all significant circumstances, new developments and/or changes. Employees have the right to take their questions and/or comments to their employer and make suggestions. The act also governs the elections of employee representation committees. In areas with at least 50 employees, the right to set-up employee representation exists. Employers need only inform or consult the employee representative or the affected employees in the following instances: In practice, there are many ways of adapting working hours to the needs of a business, for example, flex-time, the range model, two/multiple-shift operation or continuous operation (7 x 24 hours x 365 days) are all possibilities. In particular, in the case of the need for continuous operation, the daily and weekly maximum hours can be extended and break times can be distributed differently. 8.4.2 Overtime and excess hours The difference between normal and maximum working hours is referred to as overtime. Employees are obliged to perform such overtime to the extent that they are able to do so and which they may be reasonably expected to perform. By law, overtime must be paid at a premium of 25 %. It is possible, however, for the premium to be waived in writing. Instead of overtime pay, the Handbook for Investors 2012 73

employee may be compensated through time in lieu of at least the same duration, provided the employer and employee mutually agree to this. For employees in managerial positions it is possible to compensate overtime generally through normal salary. If the weekly maximum working hours are exceeded, this is referred to as overtime. Under the Labor Act, excess hours may not exceed two hours per day for an individual employee. In total, the excess hours may not exceed 170 hours per year for employees with a weekly maximum working time of 45 hours, or 140 hours for employees with a weekly maximum working time of 50 hours. Unless compensated by time in lieu within a reasonable time, excess hours must be paid at a premium of 25 %. In contrast to many European countries, the consent of the employee representative committee is not necessary in Switzerland for overtime or excess hours. Neither is it necessary to obtain official approval, provided the above limits are not exceeded. 8.4.3 Day work and evening work Working hours from 6:00 a.m. to 8:00 p.m. are considered day work; the hours from 8:00 p.m. to 11:00 p.m. constitute evening work. Day and evening work do not require approval. However, evening work may be introduced only after consultation with the employee representative committee, or if there is none, after consultation with the affected employees. This rule allows the introduction of a two-shift operation without government approval. The working time of an individual employee, including breaks and excess hours, must be within a period of 14 hours. Fig. 41: Day, evening and night periods 6 a.m. 8 p.m. 11 p.m. N Day Evening N Max. 14 hours B 17 hours requires no approval B 8.4.4 Night work, working on Sundays and public holidays Approval from the authorities is generally required if night work is needed (apart from companies where special conditions apply). For temporary night work, a premium of 25 % must be paid. For permanent or regularly recurring night work, employees are entitled to paid leave of 10 % of the time worked during night hours. This leave must be granted within one year. There is no entitlement for compensation in the form of paid leave if the average shift time, including breaks, does not exceed seven hours, or if the person working at night is employed for only four nights per week. Sunday is defined as the time between 11 p.m. on Saturday and 11 p.m. on Sunday. Except where special regulations apply to certain sectors, approval from the relevant authority is also needed for work on such days. Only one holiday August 1 st, Swiss National Day is treated as equivalent to a Sunday throughout the whole country. The cantons may declare up to eight additional holidays as equivalent to a Sunday. They must be differentiated from the legally recognized public holidays: Although the same rules generally apply to these days as to holidays treated as Sundays, the legal basis for this is defined by the canton or municipality and so may differ in detail from the provisions regarding Sundays. 8.4.5 Holidays and public holidays All employees in Switzerland are entitled to at least four weeks paid leave per year (young people under the age of 20 are entitled to five weeks), two of which must be taken consecutively. Part-time employees are also entitled to paid leave in proportion to the percentage of standard hours they work. Leave must be taken; it may not be compensated through payment. There are no further statutory leave entitlements. However, longer entitlements are customary in collective bargaining agreements, and 25 days per year are usually granted to employees over the age of 50. During time off, salaries are paid in exactly the same manner as during regular working time. Additional vacation pay, as frequently encountered in tariff agreements in the EU, is unknown in Switzerland. N = night period B = requires approval Source: State Secretariat for Economic Affairs SECO 74 Handbook for Investors 2012

In addition employees normally have time-off on nine legally stipulated public holidays. As cantons may stipulate their own public holidays, some cantons may have more public holidays. Only August 1 st, New Year s Day, Ascension Day (celebrated 40 days after Easter and marking the ascension of Jesus Christ to heaven) and Christmas Day are holidays throughout the country; all other public holidays vary from canton to canton. Employees also receive time-off for marriage, funerals, moving, dental appointments, etc. The law does not stipulate how much time may be taken off. 8.5.1 Notice periods and protection against dismissal In general, the notice period is defined in the employment contract, in the standard employment contract, by the relevant profession or in the collective bargaining agreement. If there is no contract or regulation, then the provisions of the Swiss Code of Obligations apply: during the probationary period (max. three months): seven days during the first year of service: one month from the second to the ninth year of service: two months from the tenth year of service onwards: three months Holiday calendar www.feiertagskalender.ch 8.5 Notice of termination and short-time working. An employment contract can be terminated in writing or verbally at any time by either party and without valid reason. Under Swiss law, the employee representative committee does not have a say in this type of termination. Only in the case of mass redundancies does the employee representative committee have the right to be consulted by the employees. They must have the chance to submit proposals about how the redundancies can be avoided or the number of redundancies can be limited and how the effects can be alleviated. Essentially the recipient of the notice of termination has the right to demand that the reason for termination be stated in writing. There is no investigation of whether or not the termination is socially unjustified, i.e. whether the reasons are related to the performance or other characteristics of the employee or whether difficult business considerations made the redundancy necessary. An employment contract can be ended through: Termination Termination due to change of contract (employee new contract with altered conditions is signed) Agreement to terminate employment (mutual cancellation of employment contract) Termination on a specific date (for fixed-term contracts) Retirement Death of employee The notice period can be changed in writing but may not be shorter than one month (except under a collective bargaining agreement during the first year of service). For employees in managerial positions, notice periods of up to six months are often fixed from the very outset of employment. After the probationary period, notice of termination may only be given at the end of the month. In order for the termination notice to be legally valid, the person to be dismissed must receive it before the notice period begins. Even in the case of summary dismissal, the employee s salary will continue to be paid out until the end of the notice period. An employment contract can be terminated summarily only in serious exceptional circumstances, such as fraud, refusal to work or competition with the employer. In practice, summary dismissals are very difficult to carry out, as the reason for termination is often open to interpretation. It is improper to dismiss an employee, for example, on the grounds of age, color, religion, political affiliation or membership of a trade union. Improper dismissals can be appealed against and may give rise to claims for compensation. There are certain times when it is not possible to dismiss an employee, such as when the employee is sick, has suffered an accident, is pregnant or is serving in the military, civil defense, civilian service or aid campaigns abroad. Dismissals in these situations are not valid and are known as termination during barred periods. Handbook for Investors 2012 75

8.5.2 Short-time working and mass redundancies A company may be forced to take measures to lower staff costs in the event of a deterioration in the order situation or for other reasons. Overcapacity may be alleviated through a temporary reduction in or complete halt to production. In order to maintain jobs, the employer receives 80 % of the lost income of the employees for a specific period from unemployment insurance by applying for short-time working. This is done to prevent dismissal as a result of a temporary and unavoidable lack of work. However, employees have the right to reject the short-term work compensation and to continue to receive the full salary. By doing so, however, they take the risk of being dismissed. This is because dismissals are the last means that a company can resort to when utilization levels fluctuate. In the event of mass redundancies, Sections 335d 335g of the Swiss Code of Obligations stipulate that the employer must consult the employees, and must inform the cantonal labor office in writing. Compared with other countries, Switzerland has highly investor friendly labor market provisions. It is relatively easy for companies to appoint and dismiss employees. Fig. 42: Appointments and dismissals, 2011 1 = hampered by regulation, 7 = employers have flexibility in decision-making 1 Denmark 6.1 2 Singapore 5.8 3 Switzerland 5.8 4 Hong Kong SAR 5.7 5 Azerbaijan 5.3 8 USA 5.1 36 Great Britain 4.4 44 China 4.3 66 India 4.0 84 Ireland 3.7 85 Russia 3.7 108 Luxemburg 3.4 121 Netherlands 3.1 126 Italy 3.0 128 Brazil 2.9 131 Belgium 2.9 132 Germany 2.8 133 Japan 2.8 136 France 2.7 Source: World Economic Forum, The Global Competitiveness Report 2011 2012 Short term work: brochures, forms, addresses www.treffpunkt-arbeit.ch > For employers > Insurance services 8.6 Social insurance. The Swiss social insurance system is based on three coordinated pillars: state-sponsored, employer-sponsored and personal plans. Personal responsibility is a key factor in this system. As a result, the overall tax and contribution burden remains modest by international standards. The three pillars of Swiss social security: Pillar 1: This first level meets the basic needs of the insured or beneficiary through the government-sponsored old age and survivors pension (OASI), as well as long-term disability insur- 76 Handbook for Investors 2012

ance or incapacity benefit (DI). Both are compulsory and are funded jointly through contributions (percentage of salary) by the employer, the employee and taxes. Pillar 2: The occupational pension plan (BVG), which supplements the first pillar, makes it possible for retired persons to maintain their accustomed standard of living after retirement. All persons working in Switzerland must be insured. The plans are funded through contributions (percentage of salary) by the employer and the employee. Pillar 3: Personal voluntary retirement plans of employees or self-employed individuals cover additional personal needs, mainly through bank and insurance savings. Contributions to individual retirement plans enjoy preferential treatment under tax laws to some extent. These three basic pillars of social insurance are supplemented by unemployment insurance, the compensation system for loss of income due to military service or civil protection, maternity benefits and family allowances, which are governed by cantonal law. Federal Social Insurance Office FSIO www.bsv.admin.ch Fig. 43: Overview of compulsory contributions Insurance Employee Employer Self-employed Not gainfully employed Old age and survivors 4.2 % of earned income 4.2 % of earned income max. 7.8 % insurance (OASI) Disability insurance (DI) 0.7 % of earned income 0.7 % of earned income max. 1.4 % Compensation for loss of income and maternity benefits 0.25 % of earned income 0.25 % of earned income max. 0.5 % Occupational accidents none as a of insured earnings (varies from company to company) Non-occupational accidents as a of insured earnings (varies from company to company) none Incurred by obligatory health insurance Incurred by obligatory health insurance Minimum contribution: CHF 475 per annum Minimum contribution: CHF 10,300 per annum Incurred by obligatory health insurance Health insurance per capita none (voluntary, if at all) per capita per capita Unemployment insurance 1.1 % for income shares of up to CHF 126,000; 0.5 % for salary shares of over CHF 126,000, up to a limit of CHF 315,000; no contributions for salary components of over CHF 315,000 1.1 % for income shares of up to CHF 126,000; 0.5 % for salary shares of over CHF 126,000, up to a limit of CHF 315,000; no contributions for salary components of over CHF 315,000 (not insurable) Occupational pension fund Family allowances max. 50 % of premiums. Amount depends on insurance provisions Only in the canton of Valais (0.3 % of the salary) Source: Own diagram Generis AG, Schaffhausen At least 50 % of the bonus. The amount depends on the insurance regulations. 0.1 % 4.0 % of the salary (depending on the family compensation) Voluntary In the cantons of Berne, Lucerne, Schwyz, Nidwalden, Glarus, Basel- City, Basel-Country, Schaffhausen, Appenzell AR, St. Gallen, Vaud, Valais and Geneva Handbook for Investors 2012 77

Advice for SMEs on social insurance www.bag.admin.ch > Insurance practices > SMEs/companies Languages: German, French, Italian Social insurance for SMEs deducted from the employee s salary. The amount is based on the employee s insured salary. The maximum insured salary is CHF 126,000 per year. Information of the Federal Office of Public Health (FOPH) on accident insurance www.bag.admin.ch > Topics > Accident and military insurance www.kmu.admin.ch > SME topics > Personnel Languages: German, French, Italian 8.6.1 Old age and survivors insurance (OASI) OASI provides old-age benefits (retirement pension) or benefits to dependents (widows and orphans pensions). The benefits depend on the amount of previous income and the amount of time for which contributions were made. OASI insurance is mandatory for everyone who lives or works in Switzerland. All men and women who work in Switzerland are required to contribute, with the employer paying half of the contribution and the employee the other half. The non-active population such as students, disabled people, pensioners or housewives, who live in Switzerland, also pay a contribution. The insurance is based on the pay as you go process: the current economically-active generation finances today s pensioners. 8.6.2 Disability insurance (DI) The aim of disability insurance is to help integrate or return persons who are disabled due to birth defects, illness or accidents (in)to the workforce. A pension is paid out only when the person is unable to take up employment or return to his/her job. Contributions are mandatory and are levied together with OASI contributions. 8.6.3 Accident insurance (AI) Accident insurance covers all persons employed in Switzerland against accidents in the workplace, occupational illnesses and against non-occupational accidents. Healthcare and ancillary needs (treatment, required medical aid, travel and transport costs) and payments (daily benefits allowance, disability pensions, lumpsum compensation and perpetual care benefits and survivors benefits) are all covered. The employer funds the premiums for occupational accidents and illness, while the employee pays the premiums for non-occupational accidents. The employer must finance the entire premium amount, but part of this amount is 8.6.4 Health insurance and daily sickness benefits Mandatory health insurance offers cover for illness, pregnancy and accidents, where there is no accident insurance for this. Employees are free to choose their policy. Everyone has the right to basic insurance regardless of their health or age. In addition, voluntary supplementary policies can be taken out (generally requiring a health check). Premiums are charged per person, not based on income. The amount of the premium depends, amongst other things, on the amount of the division of costs (CHF 0 2,500) of the selected model and the municipality. Employers do not generally make health insurance contributions. In Switzerland there is no legal obligation for employers to conclude daily sickness insurance for their employees. The costs depend on the scope of cover (illness, maternity, accident). If group insurance is not arranged for employees, employers are obliged to pay employees their full salary for a certain period (depending on years of service) if they are unable to work through no fault of their own. That is why many employers take out daily sickness benefits for their employees. Maternity benefits as per the Compensation for Loss of Earnings Act have precedence over daily sickness benefits, provided there is no over-compensation. If a pregnant woman cannot attend work for health reasons, she is entitled to her full salary for a certain period of time. 78 Handbook for Investors 2012

Information of the Federal Office of Public Health on health insurance www.bag.admin.ch > Topics > Health insurance Federal Office of Public Health comparison of health insurance premiums www.priminfo.ch Languages: German, French, Italian 8.6.5 Compensation for loss of income and maternity benefits The Ordinance on Compensation for Loss of Income compensates people who have lost part of their income due to military service or civil defense. The ordinance also covers loss of income during pregnancy (maternity benefits). The insurance is mandatory, and everyone who makes OASI contributions must pay it (half is paid by the employer and half by the employee). is not possible for self-employed persons to insure themselves against unemployment, even voluntarily. In order to receive unemployment benefits, employees must be able to demonstrate payment of at least 12 monthly contributions within the last two years, to show that they have worked. For EU/EFTA citizens the contributions made in their home country are also allowed for if employment requiring contributions to be made was carried out in Switzerland after arrival. Another requirement is that the person must be in a position to take up work, which means that he/she is ready, able and permitted to take on appropriate work and to participate in integration measures. Regular contributions are mandatory. Compensation generally amounts to 70 % of the salary subject to OASI (average of the last six contribution months, or if more advantageous the last twelve, prior to unemployment), or 80 % for children requiring support, in case of disability or for those with an income of less than CHF 3,797. The maximum insured salary is CHF 10,500 a month. As a rule, a maximum of 520 days allowances may be drawn within a two-year period. Information for the unemployed Employed pregnant women receive 80 % of their average salary before delivery, up to a maximum of CHF 196 per day, for fourteen weeks. The requirement for this is that they had mandatory OASI -insurance for the nine months immediately before birth, worked at least five months during pregnancy and were still deemed able to work at the time of delivery. It is not possible to dismiss women while they are pregnant or for 16 weeks after delivery. Mothers may not work for up to eight weeks after delivery. Information from the FSIO about compensation for loss of earnings www.bsv.admin.ch > Topics > Compensation for Loss of Earnings Act/Maternity benefits 8.6.6 Unemployment insurance (UI) Unemployment insurance continues to pay partial salary upon unemployment for a limited amount of time and promotes the re-entry of the unemployed person into the job market. It is mandatory for employees. All workers who are not self-employed must make contributions. Unemployment insurance is financed equally by the employer and the employees (each pays 1.1 %). It www.treffpunkt-arbeit.ch > Unemployed what should you do? 8.6.7 Occupational pension scheme Occupational pension funds serve to ensure that the employee s accustomed standard of living can be maintained. They are based on the Federal Act on Occupational Pensions, which since 1985 has provided mandatory insurance for all employed persons from the age of 18 (against risks) and from the age of 25 (savings plan). A person must currently earn a minimum of CHF 20,880 to participate. The maximum mandatorily insured salary is CHF 83,520. The employer contributes at least as high a premium as the employee. Some employers choose to pay more. Premiums can vary between 7 % and 18 % of income, based on age and sex (the older the person, the higher the premium). The payment of the pension is based on a legally-determined conversion rate, which must not drop below (for men: 6.95 % and women: 6.90 %; conversion rate as per 2011). Pension funds are foundations, cooperatives or public law institutions that are monitored by cantonal and federal supervisory authorities. Smaller companies often join a collective pension foundation or association. Handbook for Investors 2012 79

Information of the Federal Social Insurance Office FSIO on occupational benefits www.bsv.admin.ch > Topics/Occupational Benefit Plan 8.6.8 Family allowances Family allowances go some way towards meeting the costs of bringing up children. The support, which to date has been limited to just employees, is to be expanded to cover self-employed people all over Switzerland (at the earliest at the start of 2013). There are already some cantons (Berne, Lucerne, Schwyz, Nidwalden, Glarus, Basel-City, Basel-Country, Schaffhausen, Appenzell AR, St. Gallen, Vaud, Valais and Geneva), which recognize claims of self-employed people and in some cases this is linked to a certain income limit. Normally, people who are not gainfully employed only have a claim if their annual income does not exceed CHF 41,760. Special regulations apply to agriculture. Family allowances include child and education allowances, as well as birth and adoption allowances mandated by the individual cantons. All cantons require as a minimum the following allowances per child per month: A child allowance of CHF 200 for children up to the age of 16 An education allowance of CHF 250 for children between the ages of 16 and 25 Family allowances are financed almost exclusively by the employer, except in Valais (where they are part-financed by the employee). 8.7 Recruitment. There are many options for recruiting external candidates: Ads in newspapers or specialist journals Online ads Contact with universities (internet platforms/trade fairs) External advisors Head-hunters Regional employment centers Third parties, etc. Each employer s choice depends on its needs and budget. 8.7.1 Public employment service The regional employment centers (RAV) are public service providers that specialize in advising and placing jobseekers. Around 130 RAV personally advise employers in their recruitment through a personnel consultant. There are many well qualified job seekers registered with RAV who are immediately available for permanent or temporary positions. On request, RAV can screen applicants according to the employer s criteria, thus making the selection process easier. RAV can also advertise open positions in the internal job market on its website and/or on teletext. Its website is the largest job market in Switzerland, and the key advantage is that all RAV services are free. Regional employment centre RAV www.treffpunkt-arbeit.ch > For employers Calculating family allowance by canton www.kinderzulagen-rechner.ch Languages: German, French 8.7.2 Employment agencies It may be worth using an employment agency to find a highly qualified specialist or manager. These agencies do most of the legwork: creating recruitment ads, choosing the media and selecting candidates. It also makes sense to work with an employment agency if the name of the company is to be kept confidential due to industry or internal reasons. However, this method is expensive, as it may cost one or more months salary for the position to be filled. 80 Handbook for Investors 2012

8.7.3 Head-hunters Head-hunters, or executive search consultants, act as a bridge between a company s need for highly qualified specialists and managers and the desire of such individuals to find challenging and attractive positions. They specialize in recruiting through direct contacts and work on a mandate basis. They range from companies specialized in certain industries to large international firms with household names and boutique companies especially suited to generalist tasks, complex jobs or unconventional solutions. Hiring a head-hunter is always beneficial if the usual paths of internal recruitment or ads on websites and in newspapers fail to produce results. 8.7.4 Staffing / Temporary employment agencies The hiring of staff for a limited amount of time through temporary employment agencies is useful if there is a temporary surge of orders or staff must be replaced at short notice. An hourly wage is agreed between the agency and the client, which is usually 1.4 to 2 times the normal hourly rate. However, only the hours worked must be paid, and all ancillary costs are included. The agency remunerates temporary staff as their employer and is responsible for all social deductions and insurance. The same labor law protections apply as with «traditional» forms of employment. Temporary employment agencies require a cantonal license in order to operate. They are also required to set aside a significant deposit to cover the claims of their employees. A federal license and a higher deposit are also required to operate abroad. HR Swiss Swiss Association for Human Resources Management www.sgp.ch Association of Personnel Service Providers www.swissstaffing.ch Languages: German, French Handbook for Investors 2012 81