Paying out overtime and excess hours

When workloads peak or important projects are due, extra hours are often unavoidable in Swiss companies. But how should these hours be paid or compensated correctly?

In practice, people often talk about “overtime” across the board, even though Switzerland makes a clear distinction: overtime (Überstunden) under the Swiss Code of Obligations (CO) and excess hours (Überzeit) under the Labour Act (ArG). The two forms of extra work have different legal consequences that both employers and employees should know. This article explains the basics and shows how extra hours can be fairly offset or paid.

Overtime or excess hours: what’s the difference?

One of the core questions in compensating extra work is the distinction between overtime and excess hours. Overtime arises as soon as employees work more than their individual employment contract or the collective labour agreement (GAV) sets out, while staying below the statutory maximum working time. The Code of Obligations (Art. 321c CO) governs how such additional hours are handled.

Excess hours go one step further: they occur when the maximum working time defined in the Labour Act (45 or 50 hours a week, depending on the industry) is exceeded. However, the Labour Act doesn’t apply to every occupational group and position. Senior executives and certain occupational groups in particular may be exempt. Only those actually covered by the Labour Act must follow its rules. Where it does apply, it states that excess hours are only permitted as an exception and must generally be compensated with a salary supplement of at least 25%, unless equivalent time off is agreed.

Legal basis and obligations

Anyone dealing with paying out extra hours should know the relevant legal basis. The Code of Obligations states that overtime must generally be compensated with a 25% salary supplement, unless the employee and employer have agreed otherwise in their contract. Employment contracts or GAVs often set out exceptions, such as a flat-rate payment or an agreement that overtime can be compensated with time off. What matters is that any waiver of the statutory supplement is set out clearly and transparently in the employment contract or collective labour agreement. Only then can the supplement be legally “contracted out”. Clear wording is therefore essential, so that misunderstandings or legal disputes don’t arise later.

For excess hours, on the other hand, the rules are stricter and can’t be excluded by contract. The Labour Act, which focuses more on health protection and permissible maximum working times, requires a mandatory minimum supplement of 25% when the statutory maximum working time is exceeded and no time off is given in compensation. It also sets out in detail when and how excess hours may be worked, contains rules on breaks and rest periods and generally requires complete time recording. Employers must make sure they don’t breach legal requirements or overburden their employees. Employees also have the right to a say in how excess hours are compensated: in principle, a payout may only be made with their consent, since the law also gives them the option of time off. For those not covered by the Labour Act, these provisions apply only in part or not at all, which in practice can lead to very different approaches.

Compensation options: money or time off?

In practice, there are two basic ways to compensate extra hours: payment or time off. With payment, the extra hours are shown on the monthly payslip and, where applicable, paid with the corresponding supplement. This option is relatively easy to implement but requires the extra work to be recorded and assigned reliably.

Alternatively, extra hours can be compensated with time off, by crediting them to a working time account. Employees can use this time later, for example through shorter working days or extra days off. This option is often popular when companies want to foster a flexible working culture and give employees more freedom to shape their work-life balance. Here too, precise documentation is essential, so that it’s always clear how many hours are still to be worked or taken off.

Extra hours under flexitime

More and more companies use flexitime to give employees more flexibility and make operations more efficient. This quickly raises the question of when extra hours count as overtime and when they become excess hours. What matters is the comparison with the contractually agreed working time and, if the Labour Act applies, the statutory maximum.

If only the weekly hours set in the contract or GAV are exceeded, without reaching the Labour Act limit, it’s overtime. As soon as the statutory maximum working time is exceeded and the Labour Act applies, it’s excess hours. Part-time employees can be affected too if they work more than their agreed workload. Although they have fewer contracted hours, the same limits apply to them for the statutory maximum working time (this limit isn’t adjusted pro rata for part-time work).

Documentation is the key

The most important basis for fair payment or compensation of overtime and excess hours is reliable time recording. Employers must make sure that every employee can record their working hours correctly. Whether this happens digitally or on paper matters less than how accurate and transparent the system is.

Regular checks by managers help prevent too many hours from building up. They also protect employees from overload and ensure that no legal provisions are breached. If anything is unclear (for example, if employees stay longer without agreement and then ask to be paid for it), well-kept time records give both sides a solid basis for a decision.

Opportunities and risks

Paying or compensating extra work correctly is not just a legal obligation. It can also be an advantage in the competition for skilled workers. If you treat your employees fairly and set clear rules, you not only build loyalty in the team but also show potential applicants that appreciation and transparency matter in your company.

At the same time, extra hours carry risks. Companies that rely on overtime and excess hours for the long term risk overburdening their employees. High hour balances can also become a cost risk if they have to be paid out at some point. A healthy balance and forward-looking workforce planning are therefore essential to use extra work sensibly without straining the legal framework.

Conclusion

Whether extra hours in Switzerland count as overtime or excess hours, and how they are compensated, is far more than a bureaucratic formality. If you know the difference between these two forms of extra work and keep the relevant legal framework (CO and ArG) in view, you can find a solution that is fair for everyone involved. Consistent time recording and clear lines of communication within the company are essential to avoid misunderstandings and minimise legal risks. It also matters whether the Labour Act applies at all, since it doesn’t cover certain occupational groups or positions. It is just as important to state clearly in the employment contract whether, and if so under what conditions, the statutory overtime supplement is waived. A supplement for excess hours, by contrast, can’t be contracted out, and a payout is generally only possible with the employee’s consent, since employees are in principle entitled to compensation.

So what looks like a dry topic adds real value: implementing it in a legally sound way not only ensures fair working conditions but also creates stable structures in payroll administration that benefit everyone involved.