What Severance Pay Rules Must Employers Follow in Switzerland?

Which Employees Qualify for Severance Pay?

Employees who qualify for severance in Switzerland include:

• Employees aged 50 or older with 20 or more years of continuous service.
• Employees covered by a collective bargaining agreement (CBA) or employment contract that specifically grants severance pay.
• Executives or senior managers whose contracts include negotiated severance clauses.
• Employees terminated due to company restructuring, redundancy, or closure, if contractual or company policies provide for it.

What Are the Legal Timelines for Paying Severance?

When severance pay applies, employers must pay it upon termination or with the final salary payment. Swiss labor law does not specify a separate statutory deadline for severance, but standard practice is to settle all outstanding payments, such as salary, unused vacation, and any severance, by the final working day or the next payroll cycle.

In cases where severance is agreed contractually or through a CBA, the timing may be explicitly stated in the agreement. Employers are expected to follow those terms closely to remain compliant and avoid potential disputes over delayed payment.

What Penalties Apply if Severance Is Not Paid Correctly?

Failing to pay owed severance in Switzerland can expose employers to several risks:

• Legal claims by the employee for breach of contract or unpaid entitlements.
• Interest charges on late payments as per the Swiss Code of Obligations.
• Reputational damage and potential loss of trust, particularly in industries where long-service employees are common.
• Court-ordered penalties or mediation outcomes requiring additional compensation.

While enforcement typically happens through civil proceedings rather than government-imposed fines, Swiss courts tend to uphold employee claims when contractual severance obligations are clear.

Does Outsourcing Employment via an EOR Change Severance Liability?

Yes, when using an Employer of Record (EOR) in Switzerland, the EOR becomes the legal employer responsible for severance and other termination-related payments. The client company does not directly bear the legal obligation but remains indirectly involved through the commercial contract with the EOR.

This setup minimizes compliance risks, as the EOR ensures that any severance owed, whether contractual or statutory, is calculated and paid correctly under Swiss labor law. Employers benefit from predictable costs and reduced exposure to employee claims or administrative errors.

Be 100% Compliant in Offering Severance with Playroll

Severance obligations in Switzerland can vary widely depending on age, tenure, and contract terms. Staying compliant means knowing which employees qualify and when payments must be made. That’s where Playroll comes in.

Playroll helps employers stay fully compliant with Swiss employment laws by managing all aspects of termination, from calculating severance accurately to ensuring payments are made on time. Our platform automatically applies local regulations and monitors changes to Swiss labor law, so you don’t have to. With Playroll, you can focus on your business while we handle compliance with precision and care, ensuring every exit is smooth, lawful, and respectful.