Employment and social welfare in Switzerland: what income insecurity means for SMEs

Introduction

In Switzerland, employment is often still seen as the main safeguard against financial insecurity. For a business, offering a job means contributing to economic and social integration. However, the reality is more nuanced: some workers are in employment – sometimes on a regular basis – whilst still relying on social security to cover their day-to-day needs. This situation is of direct concern to SMEs, self-employed employers, HR managers and payroll service providers responsible for managing payroll costs.

This issue is now particularly relevant because the Swiss labour market has become more diverse. Companies are increasingly using flexible working arrangements: hourly contracts, on-call work, temporary assignments, part-time work and variable working hours. These forms of employment can meet genuine operational needs, for example in the catering, retail, cleaning, logistics or service sectors. However, they can also result in unstable incomes for employees, particularly when their working hours remain low or unpredictable.

For an SME, the issue is not merely a social one. It also relates to compliance, reputation, staff retention and financial planning. An hourly wage may be in line with the contract, but may not allow for financial independence if the number of hours offered varies significantly. Similarly, part-time work may be chosen and suited to the employee’s circumstances, or, conversely, imposed due to a lack of available hours.

The challenge is therefore to understand what is meant by job insecurity and social assistance, without reducing the debate to a simple dichotomy between business flexibility and employee protection. For a manager, the practical aim is to check whether their employment model is sustainable, legally sound and consistent with current expectations in the Swiss labour market.

What are we talking about?

Social assistance is the final safety net when income and other benefits are insufficient to ensure a minimum standard of living. It is provided following an assessment of an individual’s personal and financial circumstances. It should not be confused with social insurance schemes, such as the AVS, the AI, unemployment insurance or health insurance, which cover specific risks and are governed by their own rules. In practice, social assistance is largely organised at cantonal and municipal level, which explains certain differences in how it is implemented.

Income insecurity refers to a situation in which income from work does not provide sufficient financial security. It may result from a low wage, but also from an insufficient number of working hours, variable working hours, an on-call contract or frequent interruptions to work. An employee paid a decent hourly rate may still face difficulties if the company only allocates them a few hours or if their work schedule varies significantly from one month to the next.

The term ‘working poor’ is also used to describe people in paid employment who live in a household whose income remains below the poverty line. This concept is important for employers, as it serves as a reminder that an individual’s wage alone is not always sufficient to understand their situation: household size, fixed costs, rent, childcare costs and periods of unemployment all play a role.

Several stakeholders are involved in this context. The Confederation sets and monitors certain mechanisms, notably supporting measures designed to combat wage undercutting. The cantons may introduce specific rules, including cantonal minimum wages. The social partners negotiate collective labour agreements, which may set out minimum wages, job classifications or rules on working hours. Finally, companies incorporate this framework into their contracts, work schedules, pay policies and budgets.

What the facts show

The available data show that precarious employment is not a marginal phenomenon, even in a country with a dynamic labour market. According to the Federal Statistical Office, Switzerland had 273,273 people receiving social assistance in 2021, corresponding to a social assistance rate of 3.2 per cent. Another indicator sheds light on the situation of the working population: in 2019, around 4.2 per cent of people in gainful employment were classified as ‘working poor’, meaning they lived in a household with an income below the poverty line.

The press extracts included in the report highlight a worrying trend: according to the Swiss Conference of Social Welfare Institutions, the proportion of social assistance recipients in employment rose from 28 per cent in 2018 to 33 per cent in 2023. In other words, some of those receiving support are not excluded from the labour market: they are participating in it, but their income is insufficient. The article also mentions situations observed in major cities: in Bern, more than 43 per cent of social assistance recipients are reported to be in employment, with only 16 per cent working full-time, whilst nearly half are said to have a working time of less than 50 per cent.

The structure of employment is also a factor. The article cites a 60 per cent increase in temporary work over thirteen years in Switzerland, according to Artias. It mentions examples of companies where part-time work or hourly pay play a significant role: nearly three-quarters of Swiss McDonald’s staff are said to work part-time, with a minimum hourly wage reported at 25.48 francs, whilst at Migros, some hourly-paid employees in logistics or catering are said to work an average of six hours a week.

In regulatory terms, Switzerland does not have a national minimum wage. Some cantons, notably Neuchâtel, Geneva, Jura and Ticino, have introduced cantonal minimum wages, which, according to the report, range from 19 to 23 francs an hour. Geneva introduced a minimum wage of 23 francs an hour in 2020. Finally, as part of the accompanying measures, the enforcement bodies inspected the working and pay conditions of 147,286 people and 38,567 businesses in 2025.

Practical implications for an SME or a self-employed person

For an SME, the first consequence is financial. When a canton sets a minimum wage or when a collective agreement imposes specific conditions, the total wage bill must be recalculated accurately. It is not enough to look at the gross hourly wage: one must also take into account annual leave, applicable public holidays, any allowances, social security contributions, compulsory insurance and administrative costs. An apparently modest increase can affect the margin on a contract or service if prices have not been adjusted.

The second consequence relates to the type of contract. An hourly or on-call contract can be useful when workload fluctuates, but it requires particular attention. If an employee is given very few hours or only finds out their rota at a late stage, they may end up with an irregular income, which is difficult to reconcile with a personal budget. For the company, this can lead to higher staff turnover, more absences, reduced motivation or tensions within teams. The flexibility sought may therefore end up costing more than anticipated.

Thirdly, income insecurity can affect a company’s reputation as an employer. In many sectors, attracting and retaining reliable staff is already a challenge. A company that offers better-planned working hours, transparent communication and prospects for increased working hours can set itself apart without necessarily overhauling its entire business model. Conversely, a system that is too unstable can undermine service quality, particularly when experienced staff leave for more predictable roles.

For a self-employed person employing a few staff, the issues are often even more sensitive. Cash flow is tight, peaks in activity are difficult to anticipate, and the temptation to resort to variable hours is strong. It is therefore essential to calculate the actual cost of a post before making a commitment, to check the applicable cantonal regulations and to avoid making informal promises about future working hours if these cannot be honoured. A clear contract protects both the employer and the employee.

Points to watch out for and uncertainties

The first point to bear in mind is the difference between formal compliance and genuine financial security. A company may comply with the applicable hourly rate but offer an insufficient number of hours to guarantee a stable income. Employment law, industry practices and cantonal regulations do not always provide a straightforward answer to this question. One should therefore avoid jumping to the conclusion that a contract is satisfactory simply because the hourly rate is correct.

The second point concerns cantonal differences. In the absence of a national minimum wage, obligations may vary depending on the location of operations. An SME operating in several cantons must be particularly cautious: the same post, the same role or the same working pattern may be subject to different requirements. Collective labour agreements may also introduce sector-specific rules. The assessment must therefore be carried out at the specific level of the establishment, the sector and the contract.

The debate on minimum wages remains open. Some stakeholders see them as a tool to combat low incomes and dependence on social assistance. Others, notably business organisations mentioned in the report such as economiesuisse and the Swiss Union of Arts and Crafts, have expressed reservations, particularly regarding SMEs which would have to absorb the additional costs. The risk discussed is that of a decline in job vacancies, increased pressure on profit margins or a shift towards less transparent forms of employment.

There is also uncertainty regarding the long-term impact of flexible forms of work. The report mentions potential gaps in social security contribution records where incomes are unstable. For employees, this could affect their future financial security. For the company, the issue is less apparent in the short term, but it may become a matter of corporate social responsibility and dialogue with the social partners. Platforms, temporary contracts and on-call work therefore remain areas to monitor closely.

What to do in practice

The first step is to carry out an internal assessment of jobs at risk of precariousness. The aim is not to judge individual situations, but to identify roles characterised by low working hours, highly variable schedules, hourly contracts, repeated temporary assignments or last-minute scheduling. An SME can analyse, over several months, the actual income paid and the number of hours offered. This practical overview is often more useful than simply reading through contracts.

Step two: check the applicable regulations. Depending on the canton, sector and type of activity, there may be a cantonal minimum wage, a collective labour agreement or binding industry practices. Companies operating in several cantons should avoid using one-size-fits-all contract templates copied from a website. An accountancy firm, a payroll specialist or a legal adviser can help ensure consistency between salary, role, place of work, working hours and payslips.

Thirdly, it is prudent to improve predictability wherever possible. Even without immediately increasing all working hours, a company can set deadlines for communicating work schedules, group certain hours together, avoid last-minute changes or prioritise offering available hours to existing staff. These measures can reduce financial instability and improve team organisation.

Fourthly, these issues must be factored into pricing. If an SME relies on an hourly-paid workforce with low profit margins, it must assess whether its business model remains viable in the event of pay rises or tighter controls. It is better to anticipate these issues in tenders, contracts and budgets than to have to make corrections under pressure following an audit or a dispute.

Finally, when an employee reports financial difficulties, the employer must stick to their role. They can clarify payslips, explain the contract, consider an increase in working hours if possible, and refer the employee to the relevant services. However, undocumented promises or informal arrangements should be avoided. Where in doubt, professional advice is recommended, as the consequences may affect employment law, social security, payroll taxation and HR management.

Key points

Job insecurity is not just a question of pay levels. It also depends on the number of hours worked, the stability of the work schedule, the sector, the canton and the type of contract. For Swiss SMEs, the issue warrants a structured approach, as it lies at the intersection of costs, compliance and employer responsibility.

• Monitor positions paid by the hour, on-call or with a low level of activity, by looking at the actual income paid over time rather than just the agreed hourly rate.

• Check the rules applicable in each canton where the business operates, including cantonal minimum wages and any collective labour agreements.

• Improve the predictability of working hours where possible: provide timetables earlier, group hours together, and limit last-minute changes.

• Include actual labour costs in quotations and budgets to avoid a model that is too tight and relies on a level of flexibility that is difficult for staff to sustain.

• Clearly document contracts, working hours, payslips and important communications, particularly where working hours vary significantly.

• Consult a payroll service provider or a specialist in employment law and social insurance before changing a pay system, expanding operations to another canton or addressing a sensitive individual situation.

For a company, taking this matter seriously does not mean giving up all flexibility. Rather, it involves checking whether flexibility is well-organised, transparent and compatible with the applicable rules. It is also a way of strengthening team stability and minimising social, administrative and reputational risks.