Wage gaps in Switzerland: what does the 5 per cent threshold mean for SMEs?

Introduction

The issue of pay gaps is a recurring theme in HR discussions, including within Swiss SMEs. It is not limited to large companies, multinationals or public sector organisations. As soon as a company employs several people in comparable roles, it may be required to explain why two salaries differ: experience, responsibilities, performance, length of service, training, the nature of the work, the labour market or even internal organisation. When these criteria are unclear, the risks increase: misunderstandings, internal tensions, loss of trust, recruitment difficulties and, in some cases, legal exposure.

The angle often highlighted in the news is that of a pay gap of more than 5 per cent for the same role, which should be justified and rectified. However, it is important to be precise: the rules described in certain recent articles relate in particular to the French transposition of the European directive on pay transparency. According to the source cited, these provide for obligations regarding publication, explanation and rectification in certain companies. Switzerland does not automatically apply this European framework. On the other hand, Swiss law already recognises a strong principle: equal pay for women and men for work of equal value.

For SME managers, the challenge is therefore twofold. On the one hand, it is necessary to distinguish between what falls under Swiss law and what stems from European or French developments. On the other hand, it is prudent to document salaries before a dispute, an audit, a request for information or an internal comparison puts the company under pressure. Even when an SME is not subject to a formal obligation to carry out periodic analysis, it is still bound by the principle of equal pay.

In this context, the 5% threshold should be understood as a useful warning sign in the analysis of remuneration, and not as a universal Swiss rule applicable automatically to every employer and every post. The aim of this article is to clarify the framework, identify the established facts and propose concrete steps for Swiss companies.

What are we talking about?

Pay equality means that people must receive equal pay when they perform work that is identical or of equal value, unless a difference is based on objective and non-discriminatory criteria. The concept is therefore not limited to comparing two job titles. Two roles may have different titles whilst involving comparable responsibilities, skills, constraints and levels of autonomy. Conversely, two people with the same title may carry out different tasks, with distinct responsibilities or requirements.

In Switzerland, the principle of equal pay for women and men has been enshrined in the Federal Constitution since 1981, in Article 8, paragraph 3. It was subsequently implemented by the Equality Act, which was adopted on 24 March 1995 and came into force on 1 July 1996. This Act aims, in particular, to combat discrimination in employment relationships. In practice, a pay gap is not problematic in itself if it can be explained by verifiable, consistent factors applied in a comparable manner.

There are many stakeholders involved. Senior management sets the remuneration policy and approves the wage budgets. HR structures job roles, progression criteria and appraisal processes. Line managers often influence pay rises, bonuses or promotions. The accounts department and the payroll agency are involved in payroll management, payroll processing, budgets and traceability. Finally, employees may request an explanation if they perceive inequality or notice a difference that they consider unjustified.

The analysis process involves comparing salaries whilst taking relevant factors into account. For example, the role, working hours, responsibilities, required training, relevant experience, length of service in the role, variable pay components and benefits are examined. A robust analysis does not merely seek to identify discrepancies; it seeks to understand whether they are justifiable. It is here that the 5 per cent threshold, often mentioned in discussions, can serve as a practical benchmark for triggering an in-depth review.

What the facts tell us

The available evidence shows that pay equality is a long-standing issue in Switzerland, but one that remains relevant today. According to the research dossier, the constitutional principle has been in place since 1981, and the Equality Act dates from 24 March 1995, coming into force on 1 July 1996. An amendment to this Act came into force on 1 July 2020. It requires companies with 100 or more employees to carry out a pay equality analysis every four years, which must be verified by a third party. The first analysis was due to be carried out by the end of June 2021.

Figures released by the Federal Office for Gender Equality show that women in Switzerland earn on average 1,364 francs – or 16.2 per cent – less per month than men. Around 51.8 per cent of this gap is accounted for by factors such as occupation, economic sector, education or job position. The remaining portion, amounting to 657 francs, is described as unexplained. These figures serve as a reminder that whilst part of the gap may stem from measurable characteristics, another part remains problematic or insufficiently documented.

Another part of the report indicates that between 2018 and 2022, the overall pay gap between women and men fell by 2.5 percentage points to 9.5 per cent. This trend points towards an improvement, though it does not mean the issue has been resolved. At sector level, Swissmem points out that the pay gap in its sector is below the 5 per cent tolerance threshold prescribed by the Confederation, whilst criticising the methodology of the federal survey on wage structure.

A distinction must also be made between Swiss law and developments in France and at European level. The Econostrum article mentions, in the French context of transposing a European directive, transparency obligations, reporting requirements based on company size, and a rule requiring employers to explain and rectify certain gaps exceeding 5 per cent. This information does not, in itself, constitute a new general Swiss rule. It does, however, reflect a broader trend: employers are increasingly expected to demonstrate transparency, provide documentation and ensure consistency in remuneration.

Practical implications for an SME or a self-employed person

For a Swiss SME, the first consequence is organisational. Even though companies with fewer than 100 employees are not legally required to carry out regular pay reviews under the framework introduced in 2020, they must comply with the principle of equal pay. This means that a company employing, for example, several administrative assistants, technicians, project managers or sales staff must be able to explain pay differences using objective criteria. The absence of a formal obligation to carry out an analysis does not mean there is no risk.

In practice, pay gaps often develop over time. One person is hired in a tight labour market at a higher salary. Another was recruited several years earlier and has received only minor pay rises. One employee negotiated more firmly when they were hired. Another is returning from a career break and their pay progression is slowing down. These situations are not always intentional, but they can result in differences that are difficult to justify if the company does not have written policies in place.

For a self-employed person hiring their first staff, the challenge is to avoid developing a pay policy on a case-by-case basis. At first, this seems flexible and effective. But as soon as the team grows, comparisons begin to emerge. Salaries become a matter of trust. An employee might ask why her colleague, employed in a similar role, is paid more. Without a pay scale, job descriptions or a record of previous decisions, the employer finds themselves having to explain, after the event, decisions that were never formally documented.

The consequences also affect the employer brand. According to information reported by the Swiss Confederation’s SME portal, Lisa Rubli, director of the Equal-Salary Foundation, highlights the link between pay equality, workplace culture, innovation and productivity. For an SME, this translates in practical terms into a healthier internal working environment, greater staff retention and an increased ability to attract candidates who value fairness. Conversely, a perception of arbitrary pay practices can undermine staff commitment, even where no legal proceedings have been initiated.

Areas of concern and uncertainties

The first point to bear in mind concerns the much-discussed 5% threshold. It is tempting to present this as a simple rule: above this threshold, the pay gap is prohibited; below it, it is acceptable. In reality, the situation is more nuanced. The report mentions a 5 per cent tolerance threshold in the context of sector-specific analyses and positions, particularly within Swissmem. However, this does not exempt a company from examining the nature of the pay gap, the individuals being compared and the criteria used. A smaller pay gap may be problematic if it reveals targeted discrimination; a larger gap may be justified if it is based on sound criteria.

The second point concerns methodology. Measuring pay equality is not merely an accounting exercise. It is necessary to define comparison groups, account for employment rates, distinguish between fixed and variable pay and benefits, and then take relevant occupational characteristics into account. Swissmem criticises the methodology of the federal survey on wage structure, arguing that it does not accurately reflect certain sector-specific realities. This criticism highlights a practical difficulty: the results of an analysis depend heavily on the data used and the methodological choices made.

The third point concerns developments in the regulatory framework. An interim review is scheduled for 2025 to assess the effectiveness of the measures imposed on large companies. Its conclusions will need to be monitored closely, as they could fuel further political debate. The debate over a possible extension of the reporting obligations to SMEs with fewer than 100 employees remains open. SMEs often have limited HR resources, but they represent a vital part of the Swiss economic fabric; any extension should therefore be assessed pragmatically.

Finally, international comparisons can lead to confusion. The French obligations arising from the European Pay Transparency Directive, mentioned in the Econostrum article, should not be automatically transposed to Switzerland. They may, however, influence the expectations of employees, job applicants and international groups operating in the Swiss market. A Swiss subsidiary of a European group, for example, might find itself subject to internal standards that are more stringent than the Swiss legal minimum.

What to do in practice

The first step is to map out the roles. Before comparing salaries, an SME needs to know exactly what it is comparing. It is useful to have simple job descriptions setting out the main duties, the level of responsibility, the skills required, the degree of autonomy and any specific constraints. This step helps to avoid superficial comparisons based solely on a job title. It also helps to explain the differences between two roles that appear similar but do not have the same scope.

The second step involves formalising the salary criteria. The company can define the factors that influence remuneration: relevant experience, appropriate training, managerial responsibilities, complexity of tasks, documented performance, specific availability requirements, changes to the role or market conditions. The key is not to create a cumbersome bureaucracy, but to ensure consistency. When granting a pay rise, a promotion or a new appointment, the decision should be able to be linked to these criteria.

The third step is to carry out a periodic review. Even an SME not subject to the requirement for a four-yearly review can conduct an internal audit, for example prior to the annual pay rise process. The Federal Office for Equality provides Logib, a free tool for assessing the pay system and identifying potential discrimination. For an SME, this tool can serve as a starting point, provided its limitations are understood and the data is prepared correctly.

The fourth step is to document any corrections. If a pay gap appears difficult to justify, it is preferable to draw up an action plan rather than wait for a dispute to arise. The correction may take the form of an immediate adjustment, a planned pay rise or a more comprehensive review of the pay structure. Each case must be analysed carefully, taking into account the contract, the budget, internal equity and the risk of creating new imbalances.

Finally, it is advisable to consult a professional when pay gaps are significant, when several people hold comparable roles, during periods of rapid growth, or prior to any internal communication regarding salaries. A payroll service provider, HR specialist or legal adviser can help ensure the data is reliable, structure the analysis and avoid jumping to conclusions. The aim is not only to reduce legal risk, but to build a defensible, transparent and sustainable pay policy.

Key takeaways

For a Swiss company, addressing pay gaps should not be treated as a mere administrative burden. It relates to talent management, internal trust, reputation and compliance. The 5% threshold is worth noting, but it must be interpreted with caution in the Swiss context. It can serve as a monitoring indicator, but not as a legal shortcut applicable in all situations.

• First, check the applicable framework: Swiss obligations are not the same as French or European rules on pay transparency.
• Do not simply compare job titles: analyse the actual responsibilities, skills, requirements and working conditions.
• Document the criteria that explain pay differences, particularly when hiring, promoting and awarding pay rises.
• Use available tools, such as Logib, to obtain an initial structured overview of your pay system.
• Address unexplained pay gaps promptly: a phased corrective plan is often preferable to an ad hoc justification.
• Have sensitive situations reviewed by a specialist, particularly if the company is approaching or has exceeded the 100-employee threshold.

The right approach is a preventative one. An SME that clarifies its roles, pay bands and progression criteria reduces the risk of unintentional discrimination. It also improves the quality of its management: pay decisions become more consistent, discussions with staff more fact-based and budgets more predictable.

Finally, there must be scope for case-by-case analysis. A pay difference is not automatically unlawful, but it must be able to be explained. Conversely, an apparently uniform pay policy may conceal disadvantages in access to bonuses, promotions or responsibilities. For Swiss SMEs, the challenge in the coming years will therefore be less about total transparency and more about the ability to demonstrate genuine fairness, based on reliable data and traceable decisions.