Government Licensing and Security Guarantee

In Switzerland, recruitment and contractor services are strictly regulated, and all service providers are required to be licensed and bonded by the Government. The relevant Federal Act on Recruitment and Contractor Services came into force in 1989. The main aim of this law is to protect the contractors and employees from abusive working conditions, and to ensure the quality of services provided in this area of the economy.

Service providers who wish to engage in recruitment and contractor business not only need to apply for a license, they also need to place a bond with the Government. Such bond needs to be provided either in cash, Government-backed securities or by a bank guarantee, and amounts to at least CHF 50,000 for business limited on a national level, and a minimum of CHF 100,000 for international business. This bond serves as a guarantee deposit, primarily to secure the salaries of the employees.

Essentially, a license is required whenever a company is not running an own production or service business, but is providing its employees to other businesses for their needs. The employee is either employed for an unlimited period and is assigned to different customers or the employee is employed temporarily for a specific assignment.

A licensed company is subject to supervision by the Cantonal and Federal Government authorities. A licensed company must comply with the following requirements, among others:

• Employment contracts are subject to the general rules of the Swiss Code of Obligations and other general rules and specifically to the rules of the law on Recruitment and Contractor Services, which provides for minimum protection regarding dismissal of the employee, entitlement to holidays and other employee's rights.

• The licensed company must assure that foreign employees only work here in Switzerland after obtaining the required work and residence permits.

• The licensed company's management must have sufficient professional experience in the field and must be have a clean personal record. Experience must be proven in the areas of employment law, work and residence permits, tax and social security matters, etc.

Foreign Contractor Companies are not allowed to do business in Switzerland.Usually such companies use local companies as subcontractors. This will assure that no legal provisions, specifically tax and social security as well as labour law, is violated.