Continued pay, vacation and working hours: what employers need to know

The basics - employment contract, probation period, notice periods and minimum vacation - are covered in the article Your first employee. This one deals with the questions that come up day to day once you have staff.

Pay during illness: the legal obligation

If your employee is prevented from working through no fault of their own for reasons relating to their person, you keep paying the salary for a limited time. The law lists illness, accident, the performance of legal obligations (military service, for example) and the exercise of a public office. The same applies to pregnancy (Art. 324a paras. 1 and 3 CO).

The condition is that the employment has lasted more than three months or was entered into for more than three months. In a normal open-ended job, the entitlement therefore usually begins in the fourth month. The Office of Economy and Labor of Basel-Stadt names two exceptions where it applies from day one: a fixed-term contract of more than three months that cannot be terminated early, and an open-ended contract that can be terminated at the earliest for a date after three months.

In the first year of service, you owe the salary for three weeks, and after that "for a reasonable longer period" (Art. 324a para. 2 CO). The courts have set out in tables what is reasonable. The full salary is paid.

After that, the entitlement keeps rising; the Basel scale, for example, provides 6 months from the 21st year of service, and the Zurich scale one more week per year of service. Your cantonal labor office can tell you which scale applies in your canton; a collective or standard employment contract may provide more.

Important for the calculation:

• The period applies per year of service and to all absences combined. If someone is sick several times in the same year of service, you add up the days. A new entitlement starts with each new year of service.
• The year of service runs from the start date, not from January 1.
• Separately from continued pay, protection against dismissal applies: after the probation period, you may not give notice while the employee is ill or after an accident for 30 days in the first year of service, 90 days from the second to the fifth year of service and 180 days from the sixth year of service (Art. 336c CO). Notice given during this period is void.

Daily sickness allowance instead of the scale

If an illness drags on, a small business without insurance bears the full salary itself - and once the scale runs out, the employee is left without income. Daily sickness allowance insurance (KTG) solves both problems. It may replace the statutory rules if this is agreed in writing and the arrangement is at least equivalent for the employee (Art. 324a para. 4 CO).

According to the practice described by the cantonal labor offices of Basel-Stadt and Schwyz, insurance is typically considered equivalent if it provides:

• benefits of 80% of the salary,
• for 720 days within 900 consecutive days,
• no more than a few waiting days (Basel-Stadt mentions up to three unpaid days),
• and premiums that the company and the employee split equally.

State in the employment contract that the insurance replaces continued pay, who pays which share of the premium and what applies during the waiting period before the insurance pays. Without a clear agreement, it is disputed whether you owe the full salary or 80% during the waiting period; in the Basel area, the labor court's more recent practice requires the full salary. Give your employees the policy terms. You don't deduct AHV/IV/EO contributions (old-age, survivors', disability and income compensation insurance) or unemployment insurance (ALV) contributions from the daily allowances themselves - only from the salary.

What KTG costs and what to look out for when you take it out is covered in the article Insurance for SMEs.

The medical certificate

The law doesn't say from which day your employees must bring a medical certificate. Set this in the employment contract or in company regulations, for example from the third day of illness. If you have daily sickness allowance insurance, also check its terms for reporting incapacity for work. The certificate confirms that someone is fully or partially unable to work and for how long. You may only process data about your employees that is needed for the employment relationship (Art. 328b CO) - and you don't need the diagnosis for that. Medical certificates are health data: keep them in the personnel file so that only authorized people can access them.

Accidents: accident insurance pays from the third day

Your employees have compulsory accident insurance (UVG). After an accident, the insurer pays a daily allowance of 80% of the insured earnings from the third day after the day of the accident (Art. 16 and Art. 17 of the Accident Insurance Act, UVG, in German) - not limited by the scale, until the person can work again or a pension starts.

For you, under Art. 324b CO, this means:

• If the insurance covers at least 80% of the salary, you don't have to top anything up for the limited period under the scale.
• If it pays less, you owe the difference up to 80%.
• For the waiting period until the daily allowance starts, you pay at least 80% of the salary.

You may pay more than 80% voluntarily or by contract. As soon as you learn of an accident that requires medical treatment or leads to incapacity for work, report it to your accident insurer without delay (Art. 45 UVG).

Maternity and paternity

Pregnancy: If a pregnant employee is unable to work before the birth, you pay her salary under the scale, as for illness (Art. 324a para. 3 CO). Pregnant employees may stay away from work simply by notifying you; from the 8th week before the birth, they may not be employed between 8 pm and 6 am (Art. 35a ArG, in German). You may not give notice during pregnancy or in the 16 weeks after the birth (Art. 336c CO).

Maternity leave: After the birth, the employee is entitled to at least 14 weeks of leave (Art. 329f CO). She may not work during the first eight weeks (Art. 35a para. 3 ArG). For 98 days, the EO pays a maternity allowance of 80% of her average earned income, up to CHF 220 a day (Art. 16e and Art. 16f of the Income Compensation Act, EOG, in German). A monthly salary of CHF 8'250 reaches the maximum. To qualify, the mother must have been insured under the AHV (old-age and survivors' insurance) for the nine months before the birth and have worked for at least five of them (Art. 16b EOG).

Leave for the other parent: The father - or the mother's wife - is entitled to two weeks of leave, to be taken within six months of the birth, in weeks or individual days (Art. 329g CO). The EO pays up to 14 daily allowances at 80%, likewise capped at CHF 220 a day (Art. 16k and Art. 16l EOG).

If you keep paying the salary during the leave, the compensation office (Ausgleichskasse) pays the allowance to you; otherwise it goes directly to the employee. Employees apply through you to your compensation office. AHV/IV leaflets 6.02 and 6.04 explain the procedure.

Military service, civilian service and civil protection

Service is a legal obligation - so continued pay under Art. 324a CO applies. Because the EO is compulsory insurance, Art. 324b CO also applies: if the EO covers at least 80% of the salary, you owe nothing more for the limited period; if it covers less, you pay the difference up to 80%.

• For refresher courses and other service, the basic allowance is 80% of the average earned income before the service, and the total allowance is capped at CHF 275 a day (Art. 10 and Art. 16a EOG).
• In basic military training (Rekrutenschule), recruits without children receive a flat allowance of CHF 69 a day (leaflet 6.01) - so within the scale, you usually pay a difference here.
• During service, the employee receives an EO registration form and gives it to you. You forward it to your compensation office; if you keep paying the salary, the EO goes to you (Art. 19 EOG).
• AHV/IV/EO contributions and, where applicable, ALV contributions are levied on the EO allowance (Art. 19a EOG).
• You may not give notice during the service and - if it lasts more than eleven days - during the four weeks before and after it (Art. 336c para. 1 let. a CO).

Granting vacation correctly

The minimum is four weeks per year of service, or five weeks for employees up to their 20th birthday; for an incomplete year of service, the entitlement is pro rata (Art. 329a CO). For part-time staff, you scale the entitlement to their workload. In addition:

• You decide when, but take your employees' wishes into account as far as the business allows. At least two weeks must be taken in a row (Art. 329c CO).
• Full salary: During vacation, you pay the full salary attributable to it (Art. 329d para. 1 CO).
• No payout while employment lasts: Vacation may not be replaced by money or other benefits (Art. 329d para. 2 CO). This rule is absolutely mandatory; even an agreement with the employee doesn't change that (Art. 361 CO).
• Public holidays during vacation don't count as vacation days.

Reducing vacation after a long absence

Under Art. 329b CO, you may reduce vacation in certain cases by one twelfth for each full month of absence:

Reducing vacation is a right, not an obligation. The calculation with the reduction-free "grace period" is explained, for example, by the Office of Economy and Labor of Basel-Stadt (in German).

Vacation pay for hourly workers

People paid by the hour are also entitled to paid vacation. If someone works very irregularly, the Federal Supreme Court exceptionally allows vacation pay to be paid out with each wage payment - but only if both the employment contract and every payslip (Lohnabrechnung) clearly show which part of the wage covers vacation (BGE 129 III 493). Wording such as "vacation included" is not enough - otherwise you risk having to pay the vacation pay a second time. These supplements on the gross wage are common:

The supplement is calculated this way because vacation is paid but doesn't show up in the hours worked: of 260 working days a year, someone with four weeks of vacation works 240.

Vacation when employment ends

Vacation that could not be taken by the end of the employment is paid out with the final salary - the ban on paying out vacation only applies while the employment lasts. After notice has been given, you must also give the employee the time off needed to look for a new job (Art. 329 para. 3 CO).

Public holidays

The only federal public holiday is August 1. Under labor law, it is treated like a Sunday and is paid (Art. 110 para. 3 of the Federal Constitution, Cst.) - including for hourly employees if it falls on one of their working days. All other public holidays are set by the cantons: they can treat up to eight further holidays like Sundays (Art. 20a ArG).

With a monthly salary, cantonal public holidays are usually paid. With an hourly wage, there is only a right to pay for these days if it has been agreed. If a public holiday falls on a day off anyway, there is no extra pay. Employees who want time off on other religious holidays may take it, but must give at least three days' notice (Art. 20a para. 2 ArG).

Working time: overtime and extra time

Two terms are often confused:

• Overtime (Überstunden) means hours beyond the working time agreed in the contract or customary in the business - for example, beyond 42 hours a week. It is governed by the Code of Obligations.
• Extra time (Überzeit) means hours beyond the statutory maximum working hours under the Labor Act. It is only allowed in exceptional cases.

Overtime under the CO

If overtime is necessary, your employees must work it as far as they are able and it can reasonably be expected of them (Art. 321c para. 1 CO). You can compensate it with time off of at least the same length - but only with the employee's consent (para. 2). Otherwise, you pay the normal wage plus a premium of at least 25% (para. 3).

You can only depart from the payout and the premium in writing, for example with a clause stating that overtime is covered by the salary or compensated without a premium. A collective or standard employment contract may also provide otherwise.

Maximum working hours and extra time under the Labor Act

The Labor Act applies to almost all private businesses as soon as they employ someone (Art. 1 ArG). Exceptions include agriculture and private households (Art. 2 ArG), businesses where only the owner's spouse and close relatives work (Art. 4 ArG), and people in senior management positions (Art. 3 let. d ArG).

The legal basis is Art. 9, Art. 12 and Art. 13 ArG. Extra time is only allowed for urgent work or an exceptional workload, for stocktaking, year-end closings and liquidations, or to deal with operational disruptions. If, with the employee's consent, you compensate it within a reasonable period with the same amount of time off, no premium is due. Unlike the overtime premium, you cannot simply exclude the extra-time premium in the contract. If office staff work in the same business as staff subject to the 50-hour limit, the 50-hour limit applies to them as well (Art. 9 para. 5 ArG).

Further limits: day and evening work, including breaks and extra time, must fall within a span of 14 hours (Art. 10 para. 3 ArG). Breaks must be at least a quarter of an hour for more than 5½ hours of work a day, half an hour for more than 7 hours and one hour for more than 9 hours (Art. 15 ArG). As a rule, there must be at least 11 hours of rest between two working days (Art. 15a ArG).

Recording working time

If your business is subject to the Labor Act, you must keep records showing, among other things, the daily and weekly hours worked, including compensatory time and extra time and when they were worked, rest days, breaks of half an hour or more, and the wage and time supplements owed (Art. 46 ArG, Art. 73 of Ordinance 1 to the Labor Act, ArGV 1, in German). You must keep them for at least five years.

Simplified recording: If employees can set a significant part of their working hours themselves, it is enough to record only the daily hours worked; for night and Sunday work, the start and end times as well (Art. 73b ArGV 1, in German). In businesses with fewer than 50 employees, you can agree on this in writing with each individual employee. The agreement must refer to the rules on working and rest time, and once a year you hold a documented meeting about the workload. Recording can only be waived entirely through a collective labor agreement and for high earners (Art. 73a ArGV 1). SECO offers templates and an overview on its page on working time recording.

Recording time is worthwhile even outside the Labor Act: anyone claiming overtime has to prove it - and if there is a dispute, you want to be able to show what was actually worked.

Working hours belong in the contract

The weekly working hours are among the points you must confirm in writing no later than one month after the start of employment; if they change, you must also confirm this in writing within one month (Art. 330b CO). They are also the basis for everything else: only once the agreed hours are clear can you say what counts as overtime. Ideally, the contract should also settle how overtime is compensated, from which day a medical certificate is required and whether daily sickness allowance insurance replaces continued pay.

Checklist for employers

1. Clarify the rules: Does a collective or standard employment contract apply to your industry? Which scale do the courts in your canton use? Which cantonal public holidays apply?
2. Decide on daily sickness allowance: With or without insurance - if with, put it in writing in the contract (at least 80% for 720 out of 900 days, premium split, waiting period, insurance replacing continued pay) and hand out the policy terms.
3. Complete the contract: weekly working hours, vacation (five weeks for under-20s), rules on overtime, from which day a medical certificate is required.
4. Hourly wages: Show the vacation supplement and, if applicable, the public holiday supplement separately in percent and in francs in the contract and on every payslip.
5. Record working time and keep the records for five years; for simplified recording, don't forget the written agreement and the annual meeting.
6. Track absences: add up sick and accident days per year of service, file medical certificates, keep vacation balances up to date.
7. Report: accidents immediately to the accident insurer, incapacity for work on time to the daily sickness allowance insurer, EO registration forms for service, maternity and paternity to the compensation office.
8. Respect the protection periods before giving notice to someone who is ill, injured, pregnant or on service.

How it works in Easly

Easly helps you with the contract, insurance and payroll run - you track the absences themselves outside Easly:

• Working hours and vacation in the contract: In the personnel master data, you enter the hours per week (pro rata for part-time) and the vacation days per year at 100%. Both appear in the employment contract that Easly creates as a PDF, under "Working hours and vacation" - vacation in weeks and days, pro rata for part-time. Easly doesn't allow fewer than 20 vacation days; for employees under 20, you enter the 25 days yourself.
• Filing the daily sickness allowance policy: Under Staff > Contracts, you file the KTG policy. AI With AI access, Easly reads the monthly KTG deduction and suggests it in the master data. If the company pays the full premium, "Fully paid by employer" sets the deduction to CHF 0 and adds a clause to the contract.
• KTG onboarding step: The checklist reminds you that the obligation to continue paying the salary exists even without insurance, and lets you consciously tick off your decision.
• Payroll run: You can adjust the gross salary per employee and month, for example when continued pay ends.

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Frequently asked questions

Information as of: see above. Sources: Swiss Code of Obligations (Art. 321c, 324a, 324b, 328b, 329, 329a–329d, 329f, 329g, 330b, 336c, 361 CO), Labor Act (in German; Art. 1, 3, 4, 9, 10, 12, 13, 15, 15a, 20a, 35a, 46 ArG) with Ordinance 1 (in German; Art. 73, 73a, 73b ArGV 1), Accident Insurance Act (in German; Art. 16, 17, 45 UVG), Income Compensation Act (in German; Art. 10, 16a, 16b, 16e, 16f, 16k, 16l, 19, 19a EOG), Federal Constitution (Art. 110 Cst.), BGE 129 III 493, AHV/IV leaflets 6.01, 6.02 and 6.04, Office of Economy and Labor of Basel-Stadt: leaflets on wages and public holidays and vacation (Basel scale, daily sickness allowance, vacation reduction, vacation supplements; in German), Schwyz Labor Office: employer's obligation to pay wages (Bern and Zurich scales; in German) and vacation pay and public holidays (in German), SECO: working time recording (in German). The scales are court guidelines, not statutes; collective and standard employment contracts may contain different rules. This article does not replace legal advice.