Minimum wages and extended collective agreements: why Guy Parmelin is critical of the new law

Introduction

The issue of minimum wages is back in the spotlight in Switzerland, not because a national minimum wage is being introduced, but because Parliament has decided to amend the relationship between cantonal or municipal minimum wages and the wages set out in certain collective labour agreements. For businesses, this debate may seem highly political. Yet it has direct operational implications: it affects how wages are set, how payslips are checked for compliance, and how staff costs are forecast.

The key issue is this: when collective labour agreements declared to be binding provide for a minimum wage, this should take precedence over minimum wages set at cantonal or municipal level, even when the latter are higher. This approach has provoked strong reactions. Employers’ associations see it as a strengthening of social partnership and a way to avoid a patchwork of local rules. Trade unions, on the other hand, see it as an attack on low-wage earners and popular rights.

Notably, the criticism does not come solely from the left or the trade unions. Federal Councillor Guy Parmelin, Minister for Economic Affairs, has also expressed significant reservations. According to the information reported in the research dossier and the sources cited, he highlighted constitutional difficulties, an encroachment on cantonal powers and practical implementation issues. For a Swiss SME, the challenge is therefore not merely a question of which amount to apply, but of understanding who sets the rules, who monitors them, and how to safeguard its wage practices within a framework that is still under discussion.

In this context, it is prudent to distinguish between political positions, the rules actually applicable and the possible scenarios in the event of a referendum. A company should not jump to conclusions without checking its collective agreement, its canton, its sector and the status of the legislative process.

What are we talking about?

In Switzerland, minimum wages are not based on a single model. The system combines labour law, federalism and social partnership. In many sectors, wages are governed by collective labour agreements, negotiated between employers’ organisations and workers’ organisations. When a collective labour agreement is declared binding, it applies not only to members of the signatory organisations: it is binding on all companies and workers falling within its scope.

Alongside this collective bargaining mechanism, some cantons have introduced statutory minimum wages following referendums. The research report cites Geneva and Neuchâtel in particular. The concept is different: this is not a sectoral agreement, but a territorial rule aimed at setting a wage floor for activities carried out in the canton concerned, subject to the exceptions and conditions provided for by applicable law.

The Confederation has not introduced a national minimum wage. This means that, depending on the sector, the canton, the municipality or the applicable collective labour agreement, the framework may vary. It is precisely this overlap that creates the difficulty: what should be done when a company is subject to an extended collective agreement providing for a minimum wage, but a canton or municipality sets a higher floor? Until now, the answer could have meant that employers had to apply the strictest rule depending on the context. The bill currently being debated in Parliament aims to give priority to the minimum wages set out in extended collective agreements.

There are many stakeholders involved. Employers must apply the wage rules, workers bear the brunt of the effects, the social partners negotiate the collective agreements, the cantons organise their inspections where they have a statutory minimum wage, and the Confederation intervenes when it comes to altering the hierarchy between these standards. For an SME, this framework requires a very practical approach: identifying its sector, its place of business, the potentially applicable collective agreement, and the relevant cantonal or municipal rules.

What the facts show

The research dossier indicates that on 17 March 2026, the Council of States adopted a bill stipulating that minimum wages set in extended collective agreements take precedence over cantonal minimum wages, even when the latter are higher. On 1 June 2026, the National Council confirmed this decision, thereby resolving the final point of disagreement with the Council of States. According to the same dossier, this amendment was drafted by the Federal Council reluctantly, under a mandate from Parliament, notably in connection with the Ettlin motion.

The positions are clearly opposed. The Swiss Employers’ Association and the Swiss Union of Arts and Crafts support the primacy of extended collective agreements. Their central argument is that this solution would strengthen social partnership and limit labour market fragmentation. Conversely, the Swiss Trade Union Federation and Travail.Suisse reject the amendment. They present it as an attack on low-wage earners and on direct democracy, and are considering or announcing a referendum, according to sources in the dossier.

Guy Parmelin’s position is particularly significant for businesses, as it goes beyond a mere political disagreement. According to the extracts provided, he asked who would ensure compliance with a frozen minimum wage, noting that these amounts would be neither genuine cantonal minimum wages nor wages derived from a collective agreement. Direct magazine also reports the following statement: “The Federal Council cannot support a proposal that undermines several constitutional principles, encroaches on cantonal powers and raises issues regarding its implementation.”

Another factual point concerns the so-called grandfather clause mentioned by direct. To mitigate criticism of a wage cut in areas where the statutory minimum wage is higher than that under extended collective agreements, the Council of States reportedly sought to include a safeguard for the cantons of Geneva and Neuchâtel as well as the city of Lucerne. According to this source, wages would then not be reduced, but frozen. This point is central, as it shifts the debate: the issue is no longer just the nominal level of wages, but also their future development and the possibility of controlling them.

Practical implications for an SME or a self-employed person

For an SME, the first consequence is a more detailed review of the applicable pay framework. A company operating in a sector covered by an extended collective agreement will need to determine whether this agreement provides for a minimum wage, whether its staff fall within its scope, and how this rule relates to any cantonal or municipal standards. This analysis cannot be carried out solely from the company’s head office: the place where the work is performed, the actual activity and the category of staff may also play a practical role.

A company employing staff in a canton with a statutory minimum wage, such as those mentioned in the research dossier, may face a shift in approach. If the primacy of the extended collective agreement applies, the instinct to apply the highest cantonal minimum wage may need to be reconsidered. This does not mean that wages should be reduced or contracts automatically amended. Individual contracts, internal practices, commitments made, transitional rules and any protection of acquired rights must be analysed with care.

From an administrative perspective, the reform may increase the burden of compliance. SMEs will need to maintain clear documentation: the applicable collective agreement, job classifications, pay scales used, place of work, supporting documents in the event of an audit, and internal decisions regarding wages. A payroll agency or HR department will also need to monitor political developments, particularly if a referendum is successful. The risk is not solely financial; it is also organisational and reputational.

For a self-employed person who hires staff on an ad hoc basis, the difficulty can be even more immediate. A small business does not always have an HR department to monitor collective agreements, cantonal decisions and parliamentary debates. It may therefore apply, in good faith, a rule that has become contested or is transitional. In sectors with tight margins, uncertainty over staff costs can also complicate quotations, budgets and negotiations with clients.

Points to watch out for and uncertainties

The first point to watch concerns the effective entry into force and stability of the reform. Sources indicate that Parliament has resolved the final point of disagreement, but trade unions, including the Swiss Trade Union Federation and Travail.Suisse, have announced or are considering a referendum. Until the political outcome is definitively clarified, a company should avoid basing its entire pay policy on a single assumption. The timetable, final texts and any transitional provisions must be checked before any significant decisions are taken.

The second point of concern relates to acquired rights and so-called ‘frozen’ wages. Guy Parmelin’s criticism highlights a practical issue: if a minimum wage is no longer entirely a cantonal matter and does not stem directly from a collective agreement, who controls it and by what means? For an employer, this uncertainty is unsettling. A rule that is difficult to define can lead to differences in interpretation between authorities, social partners and businesses.

The third point is federalist in nature. The research paper mentions the reservations of the cantons of Geneva and Neuchâtel, which have already introduced statutory minimum wages and fear that democratic decisions may be called into question. This could spark a prolonged debate over the division of powers between the Confederation, cantons, municipalities and social partners. Companies operating in several cantons must be particularly vigilant, as they may be exposed to differing practices and sensitivities depending on the location.

Finally, the actual economic impact remains to be assessed. Trade associations supporting the reform highlight the coherence of the social partnership and the limitation of fragmentation. Trade unions emphasise the risks to purchasing power and low wages. For SMEs, the reality will depend on the sector, the current wage levels, local competition and the ability to absorb wage costs. It would be unwise to generalise: a company that already pays above the minimum levels will not experience the reform in the same way as a company whose wages are very close to the minimum.

What to do in practice

The first step is to map out the applicable rules. An SME should identify the extended collective agreements that apply to its activities, check which categories of staff are covered, and compare these rules with any cantonal or municipal minimum wages in the areas where it employs staff. This mapping exercise must be retained and kept up to date, as it forms the basis of a defensible pay policy.

Next, it is advisable not to rush into changing salaries. Even though the reform aims to give priority to extended collective agreements, individual employment contracts, internal practices and transitional rules may limit or regulate the possible changes. A pay cut, for example, is a sensitive decision that can have consequences under employment law and on the internal working atmosphere. It should never be decided without prior analysis.

Companies should also prepare their control processes. This involves checking job classifications, working hours, any allowances, places of work and the documentation of salary decisions. Where several establishments or sites are involved, internal coordination is necessary to prevent each site from applying a different interpretation. Payroll administrators and payroll managers have a key role to play here: transforming a political debate into clear, comprehensible and auditable procedures.

From a budgetary perspective, it is prudent to work with several scenarios. One scenario might assume the application of extended collective agreements, another the temporary retention of cantonal rules, and a third the uncertainty associated with a referendum. This approach helps avoid surprises when planning costs, preparing commercial offers or renewing contracts.

Finally, you should consult a professional when the situation involves several factors: operating in a canton with a statutory minimum wage, the possible application of an extended collective agreement, staff in several cantons, wages close to the minimum thresholds, or plans for contractual amendments. A payroll agency, a payroll specialist or a legal adviser can help verify the applicable legislation and reduce the risk of non-compliance.

Key takeaways

Guy Parmelin’s criticism serves as a reminder that the minimum wage reform is not merely a debate about pay levels. It touches on the hierarchy of standards, federalism, regulatory controls and legal certainty for businesses. For an SME, the right response is neither to sit back and wait nor to rush into action, but to carry out a structured analysis of its own situation.

• Check whether your business is subject to a collective agreement declared to be binding and whether this agreement sets out minimum wages for the relevant roles.
• Compare the CLA’s provisions with the applicable cantonal or municipal minimum wages in the areas where you operate, particularly if you are active in a canton that has introduced a statutory minimum wage.
• Do not amend existing contracts or salaries without first analysing acquired rights, transitional rules and the consequences under employment law.
• Document your salary decisions: job classifications, pay scales used, places of work, working hours and regulatory sources consulted.
• Keep abreast of political developments, particularly the prospect of a referendum announced or being considered by the trade unions, as the outcome may influence the timetable and practical implementation.
• Have sensitive cases reviewed by a payroll service provider or specialist, especially if your wages are close to the minimum thresholds or if your company employs staff across several cantons.

In summary, this reform may alter standard practices regarding minimum wages. It does not eliminate the need for analysis; it increases it. Companies that anticipate, document and seek advice at the right time will be better placed to manage the changes without creating unnecessary risk.