Cantonal Court Formula

When, as an entrepreneur, you want to terminate an employment contract, you should carefully weigh your decision concerning termination in terms of financial impact. As an employer, it is possible that the dismissal of the employee requires indemnification. It may require payment of economic compensation for lost wages, for example to compensate an unemployment subsidy or the smaller compensation from his or her employer. Likewise, it may happen that you owe compensation for a lost pension and to prevent your employee from suffering a loss in retirement benefits. It is also possible that the dismissal damages the employer's image. Indemnification can be a means to make up for those damages.

The value of the economic compensation can be determined by the cantonal court or by mutual agreement between you and the employee. Starting on January 1, 1997, in order to estimate the cost of the indemnification, the court uses what is known as the cantonal court formula. According to this formula, the court estimates what is reasonable in each case.

The amount of the economic compensation depends on various factors, such as (a) the years of service, (b) the gross monthly salary, and (c) special circumstances stated in numerical form. These circumstances are determined by questions such as: Is bad performance attributable to the employer or the employee? Who spoiled the work relation? Does the employee have another job or prospects of having one? Why couldn't the employee be reinstated after an illness? Since January 1, 2009, the employee's position, the career path offered by the employer, and the employer's financial situation are also considered.

As the employer, try to reach suitable agreements with your employees. Try to get specialised employees to agree to receive training and development courses in order to avoid costly future redundancy payments and to ensure dismissal with a good labour adjustment plan or with a solid company plan, in the event of drastic reorganisation.

It is important that our lawyer can show you the aspects to consider in the event of dismissal, along with the corresponding economic procedure.

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