Employment Agreement
⚡TL;DR
- Have a written agreement signed with wet-ink signatures.
- Extend the probation period to 3 months.
- Limit the notice period to 1 month and allow for termination with effect during the month.
- Have a proper IP assignment to ensure that all IP created by the employee is assigned to the company.
An employment agreement governs the relationship between the company, as the employer, and the employee.
Have a written agreement: The law provides for rules that will automatically apply to the parties if nothing is provided otherwise. These rules mainly favor the employees. Therefore, it is important for the company to have a proper written agreement with its employees.
Sign it with wet-ink signature: Many key clauses require the written form to be legally enforceable (e.g., extension of probation period, assignment of certain IP). This means that you must always sign an employment agreement with a wet-ink signature or a qualified electronic signature (i.e., not DocuSign, Adobe, etc., only Swiss-certified electronic signature solutions such as SuisseID or Skribble).
An employment agreement includes the following topics:
Topic | Importance |
|---|---|
Position of the parties A generic description is sufficient. Mention if the employee has a senior management role and what role the employee reports to | Medium |
Salary and bonus State what is part of the salary and what is not (e.g., 13th salary). If you do not have a clear bonus calculation model (e.g., based on sales), clearly state that any bonus payment is discretionary and is paid without any obligation for future payments | High |
Work location Mention if frequent travel is required or home office is allowed. | Low |
Term and termination Define Start and End date (if any), as well as a probation period (up to 3 months which is highly recommended as only a 7 day notice period applies). Notice period for termination: Minimum 1 month is possible which is recommended for most roles. Also, we highly recommend to allow termination with effect during a calendar month and not only towards the end of a month. Check our our page on Terminate an employment agreement | High |
Work time and working hours Specify the amount of hours or the percentage (e.g., 80%) as well as the hours during which work is expected. | Medium |
Vacation 20 days is the legal minimum, 25 days is general practice. | Low |
Intellectual property rights Ensure that all IP created in the context of the employment agreement belongs to the company (or can be purchased by the company). Also, for founders or other employees who may have created IP for the company prior to being employed, ensure that this IP is transferred to the company as well. | High |
Confidentiality Employees have access to a lot of know-how and business secrets. A strong confidentiality clause (in particular in combination with a penalty) deters employees from disclosing confidential information to others. | Medium |
Non-compete A non-compete prohibits employees from working for a competitor after termination. For key employees, this can be highly desirable. However, non-compete clauses require careful drafting to be enforceable. All of the following conditions must be fulfilled:
| Medium |
Non-solicitation An additional protection for the time after the termination: A non-solicitation prohibits the employee from poaching current employees or even customers from your company. | Medium |
Penalty Breaches of confidentiality, non-compete and non-solicitation can be very painful to the company, but it may be hard to quantify the damage in absolute figures. In order to deter breaches and improve the chances of a successful claim in case of breach, a penalty can be an effective tool. However, many employees may also refuse to sign a contract if the penalty is too high. | Medium |
Secondary occupation Many employees may want to do some business on the side. Ensure they inform the company and get approval. | Low |
Employee data and access for correspondence A section explaining the way employee personal data is required. Also, include a clause that the company's communication infrastructure may not be used for private communication and that the company may access any correspondence of employees at any time (e.g., e-mails, chats). This way, after termination, the company can easily access the business correspondence without breaching data protection laws. | Medium |
Amendments The company should reserve the right to change non-core elements of the employment agreement without the consent of the Employee in order to facilitate the roll-out of minor changes across the company (e.g., an update of the expense policy). | Medium |
Jurisdiction: Know that the tribunal of the domicile of the employee or one of the places where they perform their contractual obligations is competent for any employment-related dispute. The employee may only agree otherwise after the occurrence of the dispute.
Applicable law: In an international context, the applicable law will always be the one of the domicile of the employee.
Best practices
Probation period: The probation period is extended to 3 months.
Termination notice: The termination notice is limited to the legal minimum of 1 month and allows for termination with effect during the month (and not only at the end of a month).
IP: All IP created by the employee (not only when performing their obligations) is transferred and assigned to the company. For more details, check our page on IP ownership & IP assignment
Remuneration:
13th salary: It is clearly stated whether the salary is paid 12 or 13 times per year.
Bonus: Bonuses are either tied to specific measurable goals, or labeled as discretionary in the employment agreement and on every single bonus payment letter.
Commissions: The type of transactions giving rights to commissions are clearly defined in the employment agreement, and a cap is added to limit the maximum amount that can be due as a commission on a yearly basis.
Expenses: A ruling is obtained from the competent Cantonal tax authority regarding the company's expense policy. This allows the company to pay a flat-fee expense reimbursement per employee per month, simplifying its accounting and potentially giving a tax advantage to the company and its employees.
Excess hours: For senior roles, it is agreed that excess hours are deemed already compensated by the salary. For other roles, it is agreed that excess hours must be compensated by time off at a 1-1 ratio and that no additional premiums are due if the excess hours are to be paid in cash.
Wet-ink: All employment agreements are signed with wet-ink signatures and a copy is stored by the company.
Social contributions: The company is registered with all applicable social contributions (AHV/AVS, IV/AI, etc.) and an accident insurance for employees is in place.
Why should I limit the notice period to a month and allow for termination with effect during the month?
As part of the 5 employment basics that we listed in our Intro, we mentioned that you should limit the notice periods to 1 month and allow for termination during the month; here's why:
- Example A - statutory notice periods
Employee has been working for Company for 3 years. Employee is fired by Company on June 30th. As the statutory legal provisions apply, meaning Employee has a 2 months termination notice towards the end of a month, Employee's contract will terminate on August 31st.
On July 12th, Employee is sick for 2 days and informs Company. This suspends the termination notice for these 2 days, delaying the last day of the contract to September 2nd. However, as the law provides that an employment agreement must terminate at the end of a month, this extends the contract until September 30th.
Company pays 3 full months of salary to Employee.
- Example B - 1 month notice period with effect during the month
Employee has been working for Company for 3 years. Employee is fired by Company on June 30th. A 1 month notice period has been agreed, meaning that Employee's contract will terminate on July 31st.
On July 12th, Employee is sick for 2 days and informs Company. This suspends the termination notice for these 2 days, delaying the last day of the contract to August 2nd. Since the parties agreed that the employment agreement may terminate during the month, the contract terminate on August 2nd.
Company pays 1 month and 2 days of salary to Employee.
Best practices
Alternatives: If you don't want to limit the notice period to 1 month, or if your employees do not accept it, you can choose one of the following options:
- Refer to the statutory notice periods (1 month during the first year, 2 months from the second to the ninth year, and 3 months thereafter), but add that the termination notice is effective during the month, at the corresponding date in the following month(s).
- Limit the notice period to 2 months with effect during the month. You can use the following wording: Two months written notice during the entire term with effect on the date that corresponds to one day after the date of notice in the following calendar months (e.g. notice on 10th of February, effective date on 11th of April.)
To ensure these clauses are valid, make sure to sign the agreement with wet-ink signatures and keep a copy.