Swiss Employment Law for Zug Employers: Contracts, Notice Periods, and What Foreign Founders Get Wrong

Swiss employment law is governed primarily by Articles 319–362 of the Swiss Code of Obligations (Obligationenrecht, OR), supplemented by federal statutes including the Labour Act (Arbeitsgesetz, ArG), the Act on Participation (Mitwirkungsgesetz), collective bargaining agreements (Gesamtarbeitsverträge, GAV) where applicable, and cantonal provisions in limited areas. For Zug employers — particularly founders building their first Swiss team — the OR’s employment provisions often operate differently from expectations shaped by US, UK, or Singapore employment frameworks.

This article covers the core elements that cause the most operational friction: contract structure, statutory notice periods, probationary periods, wrongful dismissal protections, non-compete enforceability, intellectual property assignment, the mandatory social insurance system, and the near-universal conventions around the 13th month salary and annual leave.

Employment Contracts: What Must Be in Writing

Swiss law technically permits oral employment contracts for most positions. In practice, no employer of any sophistication operates without written employment contracts (Arbeitsverträge), and for all employees receiving work permits in Switzerland, a written contract is required as part of the permit application documentation.

A standard written employment contract for a Zug blockchain or technology company should address:

• Parties — full legal name of employer entity and employee
• Job title and description — clear but not so narrowly defined that it prevents the employer from adjusting responsibilities as the business evolves
• Start date
• Probationary period — duration, as allowed by contract (see below)
• Employment type — fixed-term or indefinite; fixed-term contracts require a specific end date or objective completion event
• Place of work — particularly relevant for remote work arrangements, which have Swiss-specific complications around cross-border workers and tax residency
• Working hours — standard weekly hours; overtime provisions
• Salary and bonus — base salary, currency, payment frequency; bonus provisions, if any, should clearly state whether the bonus is discretionary or contractual, and the criteria for payment
• Notice period — minimum statutory periods apply; contract can extend but not shorten
• Confidentiality obligations
• Intellectual property assignment (see below — this is critical and often underdrafted)
• Non-compete clause (see below — must meet strict enforceability criteria to be effective)
• Governing law and jurisdiction — Swiss law and Zug courts; can be specified

The contract should be bilingual if employees are non-German speakers — English plus German, with the German version governing in case of discrepancy (as German is the language of the courts and legal proceedings). For executives and senior professionals, an English-language employment agreement with a certified German translation for legal proceedings is also workable.

Probationary Periods

Swiss employment law provides for a statutory one-month probationary period (Probezeit) by default. During the probationary period, either party may terminate the employment relationship with 7 days’ notice, without having to state grounds.

Extension by contract: the probationary period can be extended to a maximum of 3 months by specific contractual provision. Three months is near-universal practice in Swiss tech and blockchain companies; the one-month statutory default is rarely left unchanged in written contracts. Extension beyond 3 months is not permitted under Swiss law.

Suspension of probation: if the employment relationship is suspended during the probationary period — due to illness, accident, or Swiss military service — the probationary period is automatically extended by the duration of the suspension.

After the probationary period expires, the statutory notice period regime begins immediately. There is no requirement to confirm employment or issue a new confirmation letter; the transition is automatic.

Statutory Notice Periods

This is the area where founders from at-will employment jurisdictions most commonly miscalculate. Swiss law imposes minimum statutory notice periods that cannot be shortened by contract (though they can be extended). The statutory minimum under Art. 335c OR:

Critical point on calendar months: notice must be given such that the employment ends at the end of a calendar month, not at any arbitrary date. A notice given on 15 March, for an employee in year 3 of employment, is effective to end employment on 31 May — the end of the second following calendar month. Planning terminations requires accounting for this end-of-month rule.

Contractual extensions: contracts routinely extend notice periods beyond the statutory minimums, particularly for senior roles. Three-to-six month notice periods for C-suite and VP-level employees are standard in Swiss tech. Contractual notice periods must be mutual — if the contract provides 3 months’ notice for the employer, the employee is also entitled to give only 3 months’ notice.

Garden leave: Swiss law does not have a statutory concept of garden leave. An employer may instruct an employee serving notice not to come to work (freigestellt) while continuing to pay salary; this is contractual practice rather than statutory entitlement. The employer continues to pay the employee during the notice period regardless.

Wrongful Dismissal and Protected Categories

Switzerland does not have a statutory concept of “wrongful dismissal” in the common law sense — an employer does not need to demonstrate a fair reason for dismissal as a threshold matter. However, Swiss law distinguishes between ordinary termination (ordentliche Kündigung) and extraordinary termination (ausserordentliche Kündigung, for cause), and imposes specific protections against termination in certain circumstances.

Abusive Dismissal (Missbräuchliche Kündigung)

Art. 336 OR identifies specific circumstances in which ordinary dismissal is abusive (missbräuchlich):

• Dismissal on the basis of an inherent personal characteristic — gender, origin, race, ethnic background, sexual orientation (note: Swiss law has extended protection incrementally; explicit statutory protection for sexual orientation was added by 2020 amendment)
• Dismissal because the employee is exercising a constitutional right — including the right to strike under collective bargaining arrangements
• Dismissal intended to prevent the employee from asserting legal claims arising from the employment relationship
• Dismissal following employee participation in an official inquiry (whistleblower-related protections)
• Dismissal during which the employer acts in bad faith, including creating pressure to resign

An employee dismissed abusively is entitled to compensation of up to 6 months’ salary. The employment relationship itself is not automatically voided — the dismissal remains legally effective, and the company still terminates the employment, but it must pay the penalty compensation. Abusive dismissal claims are common in Swiss employment litigation and are taken seriously by Swiss courts.

Protected Periods (Sperrfristen)

Ordinary dismissal given during certain protected periods is null and void — the notice simply does not take effect — even if the content of the dismissal itself would be lawful. The protected periods under Art. 336c OR:

• Illness or accident: dismissal given during illness or accident incapacity is void if given within the first 30 days of the first year of employment; within 90 days in years 2–5; within 180 days from year 6 onwards
• Military service: dismissal given during Swiss military, civil protection, or civil service, and for a protected period afterwards
• Pregnancy and the 16 weeks following birth: dismissal of a pregnant employee or an employee who has recently given birth is void
• Adoption: similar protections apply during adoption-related leave (following the 2021 paternity leave reform)

The practical implication: if an employee calls in sick on the day a termination notice is delivered, or becomes pregnant after receiving notice, the notice period may be suspended or the notice may be void. Timing dismissals without awareness of these protections is a common cause of expensive employment disputes.

Collective Redundancies

For collective redundancies — where a company dismisses 10 or more employees within 30 days for economic reasons, in a company with 100+ employees — Swiss law requires a consultation process with employee representatives, including advance notice to the cantonal labour authority and a waiting period. This is relevant for growing Zug companies that may eventually need to restructure.

Non-Compete Clauses

Non-compete clauses in Swiss employment contracts are enforceable — but only within strict statutory limits under Art. 340–340b OR.

Enforceability requirements: A non-compete clause is only enforceable if:

1. The employee has access to client relations or trade secrets through the employment — general knowledge and skills acquired through work do not suffice
2. Their use in a competing capacity could cause significant harm to the employer
3. The clause is reasonable in terms of scope, duration, and geographic area

Maximum duration: Swiss courts will not enforce a non-compete clause beyond 3 years from the end of employment. In practice, 6–12 months is the standard term for Swiss tech and blockchain non-competes; longer terms attract judicial reduction.

Geographic scope: the geographic limitation must be proportionate to the employee’s actual role. A non-compete preventing a software developer from working in the entire global blockchain industry is likely unreasonable and subject to judicial reduction. A non-compete preventing a senior BD executive from approaching specific named clients for 12 months post-departure is more likely enforceable.

Compensation not required (but relevant): Swiss law does not strictly require compensation for non-compete restrictions, unlike German law. However, Swiss courts consider the proportionality between the restriction imposed and its economic consequences for the employee in assessing enforceability. Longer or broader restrictions that are uncompensated are more likely to be judicially narrowed.

Employer breach releases the employee: if the employer terminates the employment without good cause (i.e., not for genuine cause), the non-compete obligation falls away. Employers using non-competes must be aware that the manner of termination affects enforceability.

Intellectual Property Assignment: OR 332

Art. 332 OR governs the ownership of intellectual property created in the course of employment. The default rule:

IP created in the performance of employment duties and obligations belongs to the employer automatically, without any specific assignment clause. An employee who develops code, protocols, algorithms, or technical inventions as part of their job responsibilities does not need to sign a separate IP assignment — the OR gives the employer ownership by operation of law.

IP created outside the scope of employment duties — in the employee’s own time, using personal equipment, without using the employer’s resources — belongs to the employee. For this reason, employment contracts for blockchain and technology companies should define the scope of employment duties broadly enough to capture all relevant development work.

Contractual assignment of outside-scope IP: contracts may require employees to assign IP developed outside normal duties that is related to the employer’s business. Art. 332 Para. 4 OR requires that the employer pay separate adequate compensation for such assignments — the employment salary alone does not constitute consideration for the additional assignment. A contract provision that purports to assign all IP for no additional consideration, including IP created in the employee’s own time, is partially unenforceable under this provision.

Practical drafting: for a Zug blockchain company, the IP assignment clause should (a) confirm OR 332 assignment for in-scope work, (b) define employment duties broadly to maximise in-scope capture, and (c) include a contractual assignment for related-but-outside-scope work with a specific (if nominal) additional compensation provision to satisfy the OR 332 Para. 4 requirement.

Social Insurance: The Mandatory Cost Stack

Swiss social insurance is a multi-layer system with both mandatory employer and employee contributions. The total cost burden on the employer — gross salary plus all mandatory employer-side social contributions — typically runs at 115–125% of gross salary, depending on the employee’s age, salary level, and the specific pension fund.

AHV/IV/EO: First Pillar

AHV (Alters- und Hinterlassenenversicherung — old age and survivors’ insurance), IV (Invalidenversicherung — disability insurance), and EO (Erwerbsersatzordnung — income replacement for military and maternity) are jointly administered and deducted.

Combined AHV/IV/EO contribution: 10.6% of gross salary, split 5.3% employer / 5.3% employee. The employer deducts the employee’s 5.3% from salary and remits the full 10.6% to the cantonal Ausgleichskasse. In Zug, this is the Ausgleichskasse Zug.

ALV: Unemployment Insurance

ALV (Arbeitslosenversicherung — unemployment insurance) contribution: 2.2% of gross salary up to CHF 148,200 per year (the ALV salary ceiling, adjusted periodically), split 1.1% employer / 1.1% employee. An additional ALV solidarity contribution of 1% applies to salary between CHF 148,200 and CHF 370,800.

FAK: Family Allowances

FAK (Familienausgleichskasse — family allowance fund) contributions are paid exclusively by the employer and vary by canton. In Zug, the FAK contribution is approximately 2.0–2.5% of gross salary. Family allowances are paid to employees who have children.

UVG: Accident Insurance

UVG (Unfallversicherung — accident insurance) is mandatory for all employees working 8+ hours per week for a given employer. Two types of coverage are required:

• Occupational accident insurance (Berufsunfall): employer pays 100%
• Non-occupational accident insurance (Nichtberufsunfall): employee pays 100% (deducted from salary)

UVG can be obtained from SUVA (the national accident insurance fund, mandatory for certain industries) or from approved private insurers for employers not in a mandatory SUVA sector. Technology companies are typically not in mandatory SUVA sectors and can use private insurers, which may offer competitive rates for low-risk office workforces.

BVG: Occupational Pension (Second Pillar)

BVG (Berufliche Vorsorge — occupational pension) is the second pillar of Switzerland’s three-pillar pension system. All employees earning above the BVG threshold (CHF 22,680 per year as of 2024) who work at least 8 hours per week must be enrolled in a BVG pension plan.

BVG contributions are split between employer and employee, with the employer contributing at least as much as the employee (employer contributions are commonly higher than the employee’s share). The minimum BVG contribution percentages increase with age:

The BVG minimum is a floor. Many Zug employers maintain pension plans with contributions above the minimum to attract talent. The total BVG contribution burden on the employer (including risk premiums and administration costs) typically adds 8–15% of the relevant salary to the employer’s cost.

KTG: Daily Sickness Benefits Insurance

KTG (Krankentaggeldversicherung) is technically voluntary under federal law but is near-universal in Swiss employment practice and may be mandatory under applicable collective agreements. KTG provides salary continuation for an employee who is unable to work due to illness, supplementing the OR’s mandatory sick pay provisions (which require 100% salary for limited periods scaled to tenure) to provide longer-duration coverage.

Standard KTG policies provide 80% salary continuation for 720 days within a two-year period. Premiums are typically split 50/50 employer/employee.

The 13th Month Salary

The 13th month salary (13. Monatslohn) is not a statutory requirement under Swiss law for most private employers. However, it is effectively mandatory in practice:

• Many industry-wide collective bargaining agreements (GAVs) explicitly require a 13th month salary
• It is near-universal in Swiss employment market practice — the absence of a 13th month is a significant competitive disadvantage in hiring
• Candidates routinely ask about it and include it in salary comparisons

Standard practice: the 13th month payment is made at year-end (December) or split between mid-year and year-end. The 13th month salary is a full month’s base salary — bonuses are separate. For salary benchmarking purposes, Swiss annual compensation is typically quoted as “13 x CHF X,XXX” to reflect the 13-payment convention.

Annual Leave

Swiss law mandates a minimum of 4 weeks (20 working days) of paid annual leave per year for employees under 20 years of age. For employees aged 20 and over: the statutory minimum is 4 weeks. Five weeks (25 working days) is the common practice for Swiss tech and professional employers; some companies offer 6 weeks for senior or experienced hires.

Leave must be taken in the year to which it accrues — carry-forward is permitted but the employer should actively facilitate leave-taking. Untaken leave at termination is compensated in cash.

Swiss employment law is not hostile to employers, but it is protective of employees in ways that require deliberate planning. For Zug founders building their first Swiss team, the most important early steps are: use a properly drafted bilingual contract, extend the probationary period to 3 months by contract, ensure IP assignment provisions meet OR 332 requirements, and register with the Ausgleichskasse Zug before your first employee starts. Everything else follows from those foundations.