News Salary Administration / Social Security Insurances

Settlement of vacation pay with the current salary

The issue of vacation pay in lieu of salary is regularly dealt with by the Swiss courts. This summer, the Federal Supreme Court once again confirmed the strict regulations in this regard in its ruling of July 16, 2024 (BGer 4A_222/2024).

 

Legal basis

According to Art. 329d para. 2 of the Swiss Code of Obligations, it is generally not permitted to pay out vacation during an ongoing employment relationship. In practice, however, many salaries are paid on an hourly basis with vacation and public holiday pay. For these to be valid, the following conditions must be met:

  1. Irregular employment: The employment must be irregular.
  2. Clearly stated vacation pay: The portion of the salary intended for vacations must be clearly stated in the employment contract - either as a fixed amount or as a percentage. It is not sufficient to simply state this on the payslip.

 

The current Federal Supreme Court ruling

In the ruling of July 16, 2024, an employee who was employed as a language teacher on an hourly wage basis demanded back payment of her vacation pay for the period from September 25, 2017 to December 31, 2020. The Federal Supreme Court ruled in her favour, as there was no indication in her employment contract that she had agreed to vacation pay. The fact that the vacation allowance was shown separately on the payslips was also not sufficient. The employer was unable to provide sufficient evidence of the alleged verbal agreement on vacation payouts and the court made it clear that such agreements must be recorded in writing.

 

Recommendations for action

For employers, this means that vacation payouts should remain an exception and clear regulations must be made. Therefore, check existing and new employment contracts in which vacation or public holidays are paid out for the following points:

  • Has a vacation payout been clearly stipulated in the employment contract? (As an amount or percentage)
  • Are vacation and public holiday allowances shown separately on the payslips in terms of amount and percentage?
  • Is the employment irregular?

If one of these questions is answered in the negative, there is a risk that employees may subsequently assert vacation entitlements and enforce them in court.

 

If you have any questions, please do not hesitate to contact us.

 

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Keywords: Vacation pay, Federal Court ruling, Federal Supreme Court, Salary administration