Switzerland is an attractive location for global businesses to expand and thrive due to its stable economy, highly qualified workforce, and strategic position in Europe. There is a growing demand for Swiss talent in the fields like  technology, banking, and pharmaceuticals.

But below the breathtaking scenery and pristine lakes lies a business world that is typically complex and expensive to enter into. For many years, the only path for business to enter Swiss marketing was to establish a legal entity, which was a lengthy process associated with many financial and administrative problems. These days, forward-thinking businesses use a smarter, leaner method called Employer of Record (EOR).

When choosing between establishing an entity, which is time consuming, and using an EOR that is fast and agile, more global companies are opting for the EOR. The reason is simple: it allows them to hire Swiss talent immediately, without upfront administrative costs or a long-term commitment. The EOR entry transforms a daunting growth process into a smooth, low-risk operation.

Challenges Associated With Setting up a Legal Entity in Switzerland

There are several challenges associated with setting up a legal entity in Switzerland. The country’s federal structure means its 26 cantons may have different corporation laws, requirements for commercial registers, and even tax laws. The procedure of forming a public limited company (AG) or limited liability company ( GmbH) involves several steps and requires a substantial investment in terms of time and money.

A GmbH requires at least CHF 20,000 in share capital to start, while an AG requires at least CHF 100,000. You must fully deposit and block these funds in a Swiss bank account during the registration process.

 Above the Capital investment, companies have to pay notary fees, commercial register fees, and legal consulting fees. These costs can add up to tens of thousands of francs before they even hire their first worker.

The administrative burden is also substantial as the process involves drafting articles of association, opening a Swiss corporate bank account (which can be challenging for foreign-owned companies), and registering with the commercial register, the Swiss Federal Tax Administration, and the cantonal social security authorities. 

This entire process can take three to six months, which is significant given the present fast-paced business environment. 

For a global enterprise testing the waters or hiring a small, specialised team, this investment is often disproportionate to the initial goal.

Why Global Enterprises are Choosing EOR for Switzerland

For large multinational companies with the resources, setting up a local subsidiary might seem like the obvious choice and the Employer of Record (EOR) model can appear to be just a temporary fix. But in reality, EORs offer strategic advantages that go far beyond short-term convenience.

1. Quick Market Entry
Today, “speed to market” is a key advantage in the current competitive landscape.With an EOR service in place, a company jumps on market opportunities quickly, hires top people before competitors do, and begins doing business in Switzerland in just a few weeks. This flexibility is very helpful for short-term projects, releasing a new product, or putting together a pilot team to test the Swiss market without making a long-term commitment. 

2. Cost Efficiency

With an EOR , the cost saving can be substantial as companies avoid the upfront capital and legal fees associated with entity formation. Second, they eliminate the ongoing cost of maintaining a legal entity, which includes accounting, annual audits, tax filing, and potentially hiring local HR and legal staff.

3. Managing Compliance with Confidence:
Switzerland has complicated labor laws in place from required notice periods and probationary periods to the 13th-month pay, which is a bonus. Switzerland's joint bargaining agreements (Gesamtarbeitsverträge) in some sectors make things even more complicated.  

An EOR is an expert in local compliance and makes sure that everything from employment contracts to working hours to termination processes and employee benefits is handled properly from the start.  This reduces the legal exposure for the client company and they can focus on core business operations.

4. Low Risk Market Entry

An EOR provides the ultimate flexibility and freedom to test a market before deciding on presence with a local entity.  

With little risk, a global company can send out a team, evaluate success, and see if the Swiss market is worth going after.  If the expansion works out, the business can transition to its local entity.

If the company's strategic goals change, ending the contract with the EOR is all that needs to be done to shut down operations. 

The EOR Advantage for Established Players

Established players in the Swiss market with a physical presence can also use EOR services, as these are not only intended for new entrants. They can partner with an EOR for tasks such as hiring international talent or independent contractors in a compliant manner, as well as supporting employees who wish to move to a different canton without affecting their payroll and benefits. These are examples of what may fall under this category.

Conclusion

Switzerland remains an ideal destination for businesses to expand, but setting up an entity the traditional way is no longer the only or best option. It is now clear that the Employer of Record model is a strong and effective strategic tool that meets the needs of modern, flexible global businesses.

By partnering with an EOR such as Swapp Agency,companies can skip the complicated and expensive process of setting up a legal entity. This lets them focus on what really matters: using Switzerland's top talent to drive growth and innovation.