When an employee is sick: what it means for payroll

When employees are off sick, it affects more than day-to-day operations and staffing plans. Payroll also brings a number of points you need to keep in mind.

Switzerland has clear rules on continued pay, insurance and documentation. Knowing them helps you act on solid legal ground and support the people affected as well as possible. So what exactly does an illness mean for your payroll administration, and how do you handle it well?

The legal basis at a glance

In Switzerland, the Code of Obligations (OR) sets the legal framework for continued pay during illness. Under Article 324a OR, employers must keep paying sick employees their salary for a certain period. The exact length of this obligation depends, among other things, on length of service. In practice, the Basel, Bern or Zurich scales are often used for this. They are not cantonal laws, but guidelines that courts and companies use for orientation when there is no clear contractual or statutory rule that is more favourable for the person concerned. Each scale sets different levels of continued pay depending on years of service, so employees with longer service can be entitled to longer continued pay.

Which scale applies usually depends on the place of jurisdiction, that is, the company’s registered office or place of work. Individual employment contracts or provisions in a collective labour agreement (GAV) can also affect the choice of scale, though. Where the obligation to continue pay is not clearly regulated, the scales serve as orientation, and courts use them as common practice or a reference point. If you want to handle sickness absences correctly, it pays to know these legal requirements.

Depending on employment terms and company policy, you can also take out KTG (daily sickness allowance insurance). It covers salary costs in part or even in full when employees are absent for a longer period. This relieves the employer financially and also gives the people affected some security: they continue to receive part of their salary without placing a lasting burden on the company.

Reporting: what to do when someone is ill

For continued pay to run smoothly, it helps to set up a clearly defined reporting process in the company. As soon as employees call in sick, a medical certificate is usually required that confirms their inability to work and states, at least roughly, how long they are expected to be absent. Especially in smaller companies, people may recover quickly and miss only a day or two. Even without medical certificates, formal documentation shouldn’t be neglected, so that in case of longer or repeated absences you can always trace when the obligation to continue pay began and how long it lasts.

It’s also important to structure internal communication. Not everyone in the company needs detailed information about an employee’s health. The person responsible for payroll, however, should have the information needed to run payroll correctly. This information is often passed on to payroll by a line manager or someone responsible in HR.

Impact on payroll

When an employee is off sick, payroll must make sure that the salary for the first days of illness continues to be paid correctly. If there is a daily sickness allowance insurance (KTG) and it takes effect, the insurance can cover part of the salary. In such cases, the daily allowance is often paid directly to the employer, who in turn continues to pay the salary to the person concerned. How this works in detail, and any waiting periods, depend on the insurance contract.

Without KTG insurance, the employer bears the full risk of continued pay according to the scale. Depending on how long the illness lasts, this can lead to high costs that weigh heavily on smaller companies in particular. It is therefore advisable to keep track from the start of how long the obligation to continue pay will last and what options there are for cover.

Illness and HR administration

The administrative work in case of illness goes beyond payroll itself. Absences have to be recorded and documented correctly in the time tracking system. A longer absence can also affect holiday entitlement, bonuses or other benefits. It’s advisable to record all relevant information precisely: copies of medical certificates, the length of the absence in the payroll or time tracking system, and the contractual rules that apply in case of illness.

Clear steps and transparency matter not only for the company but also for employees. People in a difficult health situation value reliable information and continued pay that runs smoothly. Well-organised payroll administration builds a lot of trust here and prevents misunderstandings.

Long-term absences and their consequences

Longer sickness absences in particular can raise further questions for payroll and HR administration. Holiday entitlement may be reduced, for example, if the people affected are fully unable to work for a long time. In Switzerland, such a reduction is possible in principle, with the exact conditions set out in the Code of Obligations (Art. 329b OR) or specified further in collective labour agreements (GAV) or company regulations.

BVG (occupational pension) also plays an important role. In case of longer illness, both employees and employers may be entitled to a temporary waiver of BVG contributions, depending on the pension fund’s regulations. Some pension funds take over the contributions when insured persons can no longer work because of illness. In such cases, it’s best to clarify the details individually with the pension fund concerned.

Notice periods also matter for long-term absences. In principle, notice may not be given during certain protection periods (for example in the first weeks or months of an illness). These protection periods are set out in the Code of Obligations (Art. 336c OR) and protect employees in a particularly vulnerable phase. Once the protection period has ended, notice can in principle be given again, observing the contractual or statutory notice periods. Careful documentation of absences and deadlines is essential here to stay within the law.

What is particular to Switzerland

Unlike some other countries, Switzerland has no uniform statutory rule that obliges employers to take out daily sickness allowance insurance. Still, many companies have such insurance to cushion the financial consequences of a long illness. In addition, there are three different scales for continued pay, which can lead to different obligations and rights. If you operate across regions or employ people in different cantons, it pays to know these differences well.

Years of service are another important factor. Employees who have been with the company for only a few months usually have a shorter entitlement to continued pay than those who have been there for several years. It is therefore essential to record precisely in the payroll system when the employment began.

Conclusion

When employees fall ill, payroll above all needs foresight in organisation and precise knowledge of the legal requirements. It takes reliable reporting and documentation, careful time tracking, the right scale applied correctly and existing insurance such as daily sickness allowance insurance taken into account. Long-term absences are a particular challenge: alongside continued pay, they bring in questions such as a possible reduction in holiday, a BVG contribution waiver and protection periods against dismissal.

This is where well-thought-out payroll administration pays off. It creates transparency, reduces administrative errors and strengthens trust between employers and employees. If you set up the right steps early and find out about insurance options, you are well prepared to handle every case of illness calmly and in the interest of everyone involved.