PwC’s Legal Services – Employment News – Bonuses: gratuity or salary component?

 

ABSTRACT

It is quite common for employee compensation to comprise a basic salary plus a variable component (usually referred to as a “bonus”). As the Swiss legal system does not know the term ‘bonus’ as such, deciding how variable compensation should be categorised legally and whether it qualifies as a gratuity or as part of an employee’s salary, is problematic. Making the distinction involves taking a closer look at both the underlying contractual basis and the company’s practice. What at first seems to be a fairly trivial question of definition turns out to have significant legal implications.

  1. LEGAL CATEGORISATION
    Whether a bonus is to be considered a gratuity, performance pay, profit-sharing or a hybrid depends primarily on how the contract is drafted. But it also depends on the company’s practice when it comes to paying the bonus, and how it relates to the employee’s salary (its accessory nature).

a) Contractual formulation
The key here is whether the bonus can be viewed as a voluntary gratuity, or whether it’s been formulated in such a way that the amount has been determined, or is at least determinable, and is thus no longer at the employer’s discretion. In the first scenario, a bonus can be considered a gratuity. If the amount of the bonus has been determined or is determinable, it’s generally assumed to be a component of salary. For example, a bonus linked solely to operating profit or other specific financials would be determinable. But if a bonus is linked to personal performance targets that have not been measurably formulated respectively the achievement of these targets involves a subjective appraisal, or if its payment (despite the bonus being determinable) is at the employer’s discretion, the bonus should be treated as a gratuity. This also applies if the bonus is paid out by the employer as a completely voluntary special payment.

Continue to read in our current newsletter.

If you have questions, please contact your usual PwC contact person or one of PwC Switzerland´s legal experts named below.

Martin Zeier
Legal Services
martin.zeier@ch.pwc.com
Myriam Büchi
Legal Services
myriam.buechi-baentli@ch.pwc.com
Christine Bassanello
Legal Services
christine.bassanello@ch.pwc.com

Mass dismissals – beware of the pitfalls

EmploymentIN A NUTSHELL
Under Swiss law, mass dismissals require compliance with special procedures, which are stated in the Swiss Code of Obligations (CO). It is important to adhere to the rules, as non-compliance may result in lawsuits (for unfair dismissal) or the continuance of the employment relationships. However, when do we speak of mass dismissals and what are the required procedures?

DEFINITION OF MASS DISMISSAL
Notices of termination given by the employer within a period of 30 days for reasons unrelated to the individual employee and affecting the following numbers of employees are considered as ‘mass dismissals’ (art. 335d CO):

  • 10 employees in a business usually employing more than 20 and less than 100 employees;
  • 10 percent of the workforce in a business usually employing more than 100 and less than 300 employees;
  • 30 employees in a business employing more than 300 employees.
    While terminations for altered conditions and early terminations of a temporary contract are considered to be relevant for purposes of the rules on mass dismissal, terminations based on termination agreements or due to the employer’s bankruptcy are not included within the coverage of the rules.

Continue to read in our current newsletter.

If you have questions, please contact your usual PwC contact person or one of PwC Switzerland´s legal experts named below.

Martin Zeier
Legal Services
martin.zeier@ch.pwc.com
Myriam Büchi
Legal Services
myriam.buechi-baentli@ch.pwc.com
Christine Bassanello
Legal Services
christine.bassanello@ch.pwc.com

Recording of working time – what applies and what has changed?

 

RecordingOfWorkTimeGeneral information
According to the Swiss Employment Act (“EmpA”) and its Ordinance 1, employers are obliged to keep all employee records. This also covers the employer’s obligation to track the working time of each employee, provided that the employer and employee are subject to the EmpA. There are only very few exceptions to the applicability of the EmpA, however.

The employer also has the possibility to delegate this obligation to its employees, although the ultimate responsibility remains with the employer. In this case, each employee has to record not only the duration of their individual daily and weekly working time, but also the start and end time of work, as well as the start and end time and duration of all breaks exceeding 30 minutes.

It is at the discretion of the employer to decide on the way working time is recorded, provided that the selected method is clear and understandable (e.g. software-based recording, apps).

Read what is going to change in detail in our current newsletter.

If you have questions, please contact your usual PwC contact person or one of PwC Switzerland´s legal experts named below.

Martin Zeier
Legal Services
martin.zeier@ch.pwc.com
Myriam Büchi
Legal Services
myriam.buechi-baentli@ch.pwc.com
Christine Bassanello
Legal Services
christine.bassanello@ch.pwc.com