It would take a lot of work! You will need to undergo many documentation procedures, fulfill certain requirements, fulfill various formalities, etc. We are talking about starting a business. No matter how harrowing the process is, the end will make you pat your back.
Planning to locate your business in Switzerland, one of the most developed free-market economies of the world. You surely must know the tourism sector of the country how everyone wishes to visit this paradise once! The country was labeled the third-best country in the EU for businesses and startups. So, you may gauge the opportunities and possibilities it offers.
Furthermore, Switzerland hogs the second-highest percentage of folks educated at the tertiary level in the EU. Thus, you will find no talent shortage when recruiting people in your company. Although it is not cheap to conduct a business in Switzerland, you will get highly qualified labor and enjoy the perks of a highly advanced economy.
When establishing a business in the country, you need to know the legal obligations, qualification criteria, and other formalities. Knowing this will facilitate you in basing a business in the country. In the following sections, you will know the process of starting a business in Switzerland, regulations that govern the employee hiring process, and finally, the ease of doing business in the country. We have got it all covered for you! Read on!
Quick Overview
Establishing a business in Switzerland is fairly easy. This is indicated by its EODB rank, which was 36 in 2020. Furthermore, the country has a free market and highly advanced economy, allowing you to expand your business efficiently in the country. To start a business in this nation, one has to know the rules and regulations one needs to abide by while choosing a business name, registering a business name, filing taxes, etc. Naturally, establishing a business begins by conceiving a potential business idea, followed by preparing a masterful and convincing business plan. If you are a foreigner striving to base a business in the country, you would have to endure additional formalities such as sorting out different visa requirements.
You will know the process of establishing a venture in Switzerland in further detail in the following sections. That will equip you with the needed knowledge to glide through your journey of setting up a business a bit easier.
Process of setting up a business in Switzerland
Switzerland is a free market and a democratic country with the world’s 20th biggest economy by the country’s nominal GDP. The country’s business culture highly values politeness, punctuality, and efficiency. Before establishing a business in any country,, one must understand the legal obligations, procedures, and requirements it involves. Starting a business in Switzerland involves scribing a viable business plan, choosing a legal structure of the company, fulfilling business registration requirements, etc. However, if you are an ex-pat seeking to base a business in the country, you will need to endure extra formalities, which we shall walk you through here.
- Prepare a viable business plan: When establishing a business, preparing a convincing business plan is the first thing you need to consider. An elaborate business plan entails a business budget, product/ service demand, market size, etc. Investors solicit a business plan to see how sensible your business idea is as well as authorities will need to understand how serious you are with it. Furthermore, it will help clarify the vision and mission of the brand too.
- Get your Swiss visa requirements sorted: If you are a foreigner wanting to base a business in Switzerland, you will need to get a B residence permit which remains valid for up to 5 years. This permit can be grabbed from local cantonal authorities.
If you are not a citizen of EFTA/ EU and don’t have a Swiss spouse, you will have to send an application to the local cantonal authority of the place where you want to start a business. You would be granted a B residence permit if the authorities noticed your business idea and its benefits to the labor market and local economy. However, in some scenarios, you may receive a short-term L permit which typically is valid for two years at maximum.
- Decide a legal structure for the business: Deciding a legal structure for your business is critical. In Switzerland, the main legal business structures are sole proprietorship, limited partnership, general partnership, joint-stock company/ limited company, GmbH (limited liability company), and cooperative company.
Of these structures, you can choose the one that supports your business by facilitating through diverse administrative facilities. Before choosing a legal structure, make sure you research them in detail and consult an expert. This is because not all structures are appropriate for a business. You may consider social security, tax, risk, liability, capital, and independence offered by a legal business structure before choosing it for your company.
- Follow business registration requirements: Businesses established in Switzerland need to register their company name, which should be unique. If a business name is already taken by someone else or is unique could be checked in the Central Business Name Index. Sole trader companies must mention the name of the founder and partnership and a minimum of one partner. As this registration completes, you get enlisted in the Swiss Business and Enterprise register, and you are given a Unique Enterprise ID number (UID).
Except for sole traders, the businesses with a turnover lower than CHF 100,000 must get registered in the commercial register. The documents and requirements you need to fulfill shall depend on the legal structure of your business. Furthermore, you would be asked for a business address, formation year, board member names, company name, and legal structure to get registered. On top of this, businesses also need to get registered with tax and social security.
- Understanding the Swiss taxation system: Businesses in Switzerland have to reimburse corporate income tax to the government. The charges are levied on the profits accumulated as the business operates in Switzerland. Furthermore, taxes are deducted from these charges, which implies that the flat rate of income tax is 8.5 percent. Typically, businesses in Switzerland pay corporate tax between 11.9 to 21.6 percent.
Hiring Employees in Switzerland
After registering a business, you would want to hire people to get the business operations going efficiently. New businesses should keep to the minimum required employees in the beginning, to avoid increasing the expenses just at the start. Furthermore, before you start employing people, you will have to familiarize yourself with various legal obligations and requirements. Having an experienced HR agency like Zimyo is a step in the right direction.
Here are different employment and labor regulations you need to know so e
verything goes smoothly and fine. Read on!
- Trial Period/Probation Period: The trial period in Switzerland as per the law is set in the first month of employment, which can be extended to three months. The probation period can be extended correspondingly if any interference due to injury, illness, non-voluntary legal obligation, or accident. Legal rules that oversee termination due to inopportune events such as pregnancy, illness, accident, etc., are not applied during this period. Either party has the liberty to terminate the employment contract at any instant by giving a notice seven days prior.
- Leave and Holidays: Employees in a company are entitled to four weeks’ annual leave. Those who are 20 years old or below shall receive a holiday of five weeks annually. Vacations are to be used and not compensated by offering the payment. Vacation compensation in payment is allowed only if the employment is ending.
Furthermore, depending on the Caton in which an employee works, he/ she shall receive 5 to 15 public holidays in a year. If this holiday falls on a non-working day, the holiday won’t be substituted with another work-free day.
- Maternity Leave: Switzerland’s maternity leave is set for 14 weeks (98 days), which is the right of both part-time and full-time employees. Women who come back to work before this period shall not be given compensation. As a daily allowance, mothers are given 80 percent of the wages up to CHF 196/ day. It is not allowed for women to work for the first nine weeks post-childbirth.
- Termination of Services: An indefinite period of employment contract can be terminated by the employee and the employer. However, one has to send a notice 1 to 3 months prior, depending upon the duration of the service. For instance, in case of a trial period of 3 months, the employment contract would be terminated by giving notice at least seven days in advance. However, statutory notice periods may be altered by collective consent, given that they are the same for the employee and the employer.
Nonetheless, termination may occur instantly on fairgrounds, which shall be decided by the court. As per the law, only in the instances of severe law infringement and not merely underperformance shall be considered when understanding the legitimacy of the cause for termination.
- Pension: Swiss Pension System has three pillars, namely, the Federal Old-age, Survivors’ and Invalidity Insurance, the first pillar, Occupational Pension Scheme, the second pillar, and Private Pension Schemes, the third pillar. Under the first pillar, widowers, old-age folks, and orphans receive pensions.
The usual retirement age for women is 64, while it is 65 years for men. Depending upon the financial consequences, the age limit can be postponed or anticipated. The second pillar ensures that a person insured under the scheme can continue the lifestyle properly. The Occupational Pension Scheme is mandatory for employees and is financed by both employers and employees.
This pillar can be utilized to purchase a principal residence or kick off an independent activity. The last pillar, Private Pension Schemes, is offered by the private sectors and is optional. The person entirely finances this.
- Work Hour Norms: A typical working week in Switzerland is 40 to 44 hours. The maximum working hour limit per week for industrial, technical, office, salespersons, and other workers, as per the law, is 45 hours. The legal maximum work hour limit per week for commercial enterprises is 50 hours.
If a person does overtime, he/she must receive compensation with an extra premium of 25 percent. However, employers may mention it in the contract to not offer an additional premium in writing. An employee cannot work for over 170 hours (if the weekly work hour limit is 45 hours) or 140 hours (if the weekly work limit is 50 hours). Overtime should be compensated with an extra premium of 25 percent or a corresponding amount of time away from work if the employer asks so.
How easy is it to conduct business in Switzerland?
All your mojo would disappear by the end of the strenuous paperwork procedures you will need to go through for establishing a business. You would also have to spend a lot of time paying several charges to get the things done. Various factors make doing a business in a particular country easier than others.
The Doing Business project has taken it upon itself to understand these indicators to determine the overall Ease of Doing Business Index of 190 countries. In the EODB index, 2020, Switzerland was ranked 36 and scored 76.6 out of 100. Here are the accounts of individual ranks of different indicators considered in conferring this position.
- Starting a Business: When establishing a startup in a country, you will have to grab many legal documents and go through several formalities. The Doing Business evaluates the number of procedures, costs, and time it takes to start a business in a country. Switzerland got 81st position while scoring 88.4 out of 100 on this sub-index. In 2009, kicking off a venture in Switzerland was made difficult by increasing twofold the paid-in minimum capital requirement.
- Managing Permits: To construct warehouses, and office buildings and perform business activities legally, one must procure required licenses and permits. The Doing Business assesses the amount of paperwork, number of procedures, costs, and time to get permits and licenses. On top of this, the Doing Business also checks quality control mechanisms, quality of building regulations, etc. Switzerland received 71st rank among other 189 countries in this sub-index according to the Doing Business report 2020.
- Getting Electricity: Electricity is one of the primary requirements of launching and operating a business in a country. In some countries, you may find it easier to connect to the electricity grid than in others. The Doing Business looks into the time, procedure, and costs involved in procuring electricity connection for a business and evaluates the reliability of electricity supply along with the transparency of tariffs. Switzerland was ranked 13 in this sub-index while scoring 94.4 out of 100. The electricity connection process was made less expensive by revising the conditions involved.
- Getting Credit: Businesses require credit to expand their reach, manage operations, cover the expenses, recruit needed staff, etc. Therefore, the Doing Business considers Getting Credit as one of the indicators for the overall EODB index. The Doing Business investigates the time, cost, and procedures involved in acquiring credit for businesses. On top of this, it also checks the strength of credit information systems and the efficiency of movable collateral laws. Switzerland eked out 67th position among 189 countries in the Doing Business 2020 report.
- Managing Payroll: With the growth of business, your staff grows as well, and thus, you have bigger payroll to manage. In this case, instead of putting yourself to handling the absence, attendance, and payroll of the employees, one should con
sider hiring efficient and competent services. They help in the said job and do so while complying with the legal obligations. - Paying Taxes: Businesses need to pay taxes. Regulations that oversee tax reimbursement differ across legal business structures and activities. In some countries, you may have to undergo an immense drudge of filing and paying the taxes, while in others, it may be a tad easier. Since this factor impacts the ease of doing business, it is a potential indicator considered by the Doing Business. Switzerland got 20th position while scoring 87.7 out of 100 in the sub-index.
- Enforcing Contracts: This is another Doing Business indicator that looks into the number of procedures, time, and costs involved in legal settling commercial disputes. It also evaluates the power and efficiency of court laws and systems. Switzerland was ranked at 57th position while scoring 64.1 out of 100 in this sub-index. The country streamlined enforcing contracts by adopting an electronic filing system.
- Resolving Insolvency: It is necessary to know the insolvency laws as they may either facilitate a business in recovering and operating or may deteriorate it. Resolving insolvency is another Doing Business indicator where time, procedure, and cost of resolving insolvency are looked at. Furthermore, it also assesses the strength and efficiency of court systems and laws governing insolvency resolution. Switzerland got 49th rank while scoring 62.6 out of 100 among 189 other countries. In 2012, Switzerland introduced various amendments to its federal bankruptcy law and adopted a unified civil procedure code.
Although starting a business in Switzerland is not quite cheap, as professionals expect high salaries, people have high costs and living standards, and your business operations go steep, it pays off. The country was ranked at the 35th position in the Ease of Doing business among 189 other countries. Today, the businesses that enjoy the most scope in Switzerland are data analysis, monogram, recycling, blockchain services, accounting firm, import-export brokerage, and more.
Zimyo is a leading HR and Payroll management services provider in Switzerland with multiple years of experience. The company helps businesses hire the best talent and takes care of the financial requirements of employees, such as advances or credit for a hassle-free work experience.
