By Felix W. Egli, Fan Wu
Switzerland is an ideal place for establishing European headquarters or distribution centers of Chinese companies.
Highly Qualified, Multicultural Employees
Switzerland has excellent schools and leading universities, a unique dual education system and one of the world highest qualities of life easily attracting talent from abroad.
Powered by the pressure from global competition for the best quality of products and services it is the source of Switzerland qualified and skilled work force.
In addition, Switzerland work force is one of the most multicultural and multilingual in Europe. Switzerland proportion of foreigners is approx. 23% which ranks third in Europe after Luxemburg and Liechtenstein . The metropolitan areas of Zurich, Basel and Geneva are multicultural and multilingual societies where English can be heard almost everywhere, and English has become the standard corporate language of almost all major international Swiss companies.
It is noteworthy that although Switzerland is made up of German, French and Italian speaking parts, English is more prevalent in each of them than the languages of the other linguistic areas.
Liberal Labor Law, High Labor Productivity, Reasonable Labor Unions and Traditional Absence of Strike Actions
Switzerland has one of Europe most liberal labor laws, a low degree of unionization and moderate unions, all of which encourage hiring and essentially contribute to Switzerland's unemployment rate of 3.3% (December 2012) which is exceptionally low compared to the European Union's average of 10.7% (EU of 27), 4.5% in Austria and 5.4% Germany (all November 2012) . These features will be further explained below.
No Workers' Councils with a Say on Managerial Decisions
There is no statutory duty for Swiss companies to have workerscouncils, but in companies with more than 50 employees they may elect a workers' representation. Employees and workers' representation (if any) have a statutory general information right to be timely informed about matters that need to be known for the performance of their jobs, and once a year they must be informed of how the company's results may affect their jobs. Further, they have some specific statutory information and consultation rights in the following cases:
The employer company is about to be sold by way of an asset deal or merger;
The employer plans large-scale layoffs; and
The selection of pension fund carriers and certain matters of occupational health and safety.
Nevertheless, neither employees nor the workers' representation (if any) have a statutory right to have a say in management matters (even if affecting their work place environment) except that the employer company may not exchange a pension fund carrier without their consent.
No Statutory Minimum Wages and No Severance Pay
There are, in contrast to most EU member states, no statutory minimum wages. Later this year the Swiss people will have to vote on a popular initiative aiming to introduce a constitutional minimum wage of CHF 4'000 per month. Nevertheless, we are confident that Swiss voters will turn it down, realizing that such a minimal wage would increase the traditionally low Swiss unemployment rate of currently 3.2%. Nowhere in Europe it is as easy and inexpensive to terminate employment agreements as in Switzerland. Terminations, respecting the applicable notice period, may be given at any time, without giving reasons and without any severance pay.
Short Notice Periods
Statutory notice periods are 1 month during the first year of service , 2 months in the 2nd through 9th year of service and 3 months from (including) the 10th year of service.
Such statutory notice periods may be set aside by mutual agreement provided that the notice period is not less than one month and further provided that no different notice periods are agreed for notices given by the employee. Usually, agreed notice periods are 1 or 2 months for employees without management functions, 3 months for lower management, 6 - 12 months for higher management and 12 - 24 months for top level management. The employer is entitled to put the employee on garden leave during the entire notice period. The employer may deduct from the garden leave salary any income from other gainful activities which the employee obtains or intentionally avoids obtaining.
Moderate Dismissal Protection and Continued Pay Obligations
The statutory protection from dismissal is limited to the following events:
The employee pregnancy and 16 weeks after childbirth;
The employee military service and, if lasting more than 11 days, the four weeks preceding or following it;
The first 30 days (in aggregate) of a sickness and accident leave during the 1st year of service;
The first 90 days (in aggregate) of a sickness and accident leave during the 2ndth year of service;
The first 180 days (in aggregate) of a sickness and accident leave after (including) the 6th year of service.
During these termination protection periods the employer is obliged to pay the salary for a limited period of time which has been determined by courts to range slightly below the length of the applicable termination protection period, but with respect to military service and pregnancy, social security has stepped in, covering the continued pay obligation in whole or in part (depending on the amount of the relevant salary). Sickness and accident leave insurance covering 80% of the salary during a maximum of 720 days within a period of 900 days of sickness or accident leave is customary; premiums are usually borne in equal shares by the employer and the employee.
Swiss unions negotiate collective employment agreements improving statutory working hours, holiday leave entitlements, notice periods and retirement matters to the benefit of the employee side, and introducing minimum wages. Nevertheless, the results are as a rule moderate, as the unionsbargaining power is limited. In 2009, only about 16% of all gainfully employed persons were unionized and in 2011 only about 20.9% of employees who were full-time or working at least 50% of full time hours were employed under collective employment agreements.
Switzerland not only has one of Europe most liberal labor laws, it also has one of Europe highest labor productivity rates, which is due to: (i) 41.7 average weekly working hours (2012) in contrast to an EU average of 39.7 hours (2011); (ii) statutory holiday leave entitlements of, as a rule, four weeks only (five weeks for those less than 20 years old. Employees over 50 under collective employment agreements, as well as managers under individual employment agreements, are usually granted five or six weeks annual holiday leave); and (iii) a traditional absence of strike actions.
The absence of strike actions is rooted in the 1937 contractual "peace" commitment between the tariff partners of the metal and machinery industry renouncing on the right to strike and lock-outs in favor of good faith negotiations. In 2007 the most recent year with relevant available data for both Switzerland and the EU Switzerland number of annual strike days per 1,000 employees was 2 compared to an average 34 in the EU member states.
Situated in the Geographical Center of Europe
Switzerland is located right in the heart of Europe, sharing borders with Germany, France, Italy and Austria. Zurich intercontinental airport operates as Switzerland and southern Germany national and international transport hub with excellent connections to all major cities of the world including Beijing, Shanghai and Hong Kong. Other, smaller, international airports are situated in Basel and Geneva. From Zurich airport almost all European capitals can be reached by a 1-2 hour flight.
Domestic and cross border road and railway transportation is easy due to a wide network of highways and excellent public transportation networks with intercity trains departing at least hourly and regional trains departing even more frequently. Switzerland spent billions on railways and highways crossing the Alps in record-breaking long tunnels connecting northern and southern Europe.
Although Switzerland has no sea front, its three Basel Rhine harbors and container handling facilities enable maritime transportation from and to Switzerland. The Rhine is navigable from Basel to its Rotterdam mouth, the passage taking about 3-4 days from Basel to Rotterdam (830 kilometers) and one week in the opposite direction. Ever since mediaeval times, the Rhine harbors have made Basel an important terminal between the North Sea and the Mediterranean.
Economical Integration in the European Union's Markets
We have in the past seen some Chinese investors fearing that Swiss exports may be discriminated in the EU as Switzerland has not acceded to the EU as a member state. However, although it is true that Switzerland is not a member of the EU, this does not, due to a set of various bilateral treaties between Switzerland and the EU, adversely affect free trade and free movement of persons between Switzerland and the EU.
With respect to the free movement of persons Switzerland is characterized by, as a rule, the freedom to immigrate for EU/EFTA nationals (certain exceptions apply) and immigration control applying to all other foreigners seeking access to the Swiss employment market, with work permits being issued only to qualified applicants for which no Swiss or EU/EFTA nationals are suitable or available and in the case of applications for stays exceeding four months in twelve only subject to limited quotas allocated to each of the 26 Swiss states.
Nevertheless, on February 9, 2014, the Swiss people and Cantons voted for a constitutional amendment designed to prevent the past six years' massive immigration from the EU from continuing. The Swiss legislator has a three years grace period to implement the new constitutional law. Should the legislator be unable to implement the new constitutional law in a way compliant with the Swiss/EU treaty on free movement of persons the EU would have the right to terminate all their bilateral treaties with Switzerland. Nevertheless, the wording of the new constitutional law leaves room for an EU compliant implementation. On the one side, its wording does not prohibit self-regulation by the Swiss economy. On the other side, even if the implementing law would request yearly maximum work and stay permit numbers for EU nationals, the Swiss/EU treaty on free movement of persons would not be breached as long as such maximum numbers are not exhausted.
Therefore, Swiss/EU treaty compliance may be reached by implementing laws providing for a largely sufficient growth rate for EU immigration permits whenever yearly maximum permit numbers are set and for permit fees pricing EU work permits proportionally to demand. As an alternative path, the implementing law could, as far as EU immigrants are concerned, refer the setting of yearly maximum permit numbers to self-regulation by the Swiss economy. As they have only a right to immigrate if they are offered a job, self-regulation would reduce jobs offered without any relevant governmental restriction. In such a system, the government would only intervene subsidiary and its interventions could still be conceived in an EU compliant manner (see above). But even if such governmental interventions were not always strictly EU compliant, the EU would barely terminate all bilateral treaties with Switzerland if non-compliance happened only once within a couple of years.
Therefore, we have little doubt that by 9 February 2017 Switzerland will have implementation laws acceptable to, and accepted by, the EU, all the more that the EU is the largest trade partner of Switzerland and Switzerland the fourth-largest trade partner of the EU (behind the US, China and Russia).