Releasing an employee from the duty to work in Switzerland: rights, obligations, holiday and overtime

When an employment relationship is dissolved in Switzerland — by an ordinary termination from the employer, by a mutual termination agreement or after a serious falling-out — the company often opts to release the employee from their duty to work (a "garden leave" arrangement). For those affected, this usually means, from one day to the next: away from the workplace, no further obligation to attend, but continued pay.

Tempting as that sudden free time may look at first glance, in practice a release raises numerous complex legal questions. What about crediting outstanding holiday? Can accrued overtime be offset? And what employment-law obligations during the release (such as crediting interim earnings) do employees absolutely have to observe?

This comprehensive expert guide sets out the legal nature of a release under the Swiss Code of Obligations (CO), clarifies every detail on continued pay, holiday and overtime, and shows how to organise the process on entirely sound legal footing.

1. What is a release in legal terms? (The status quo)

A release (often also described as a dispensation or an irrevocable release) is not expressly anchored as a separate provision in the Swiss Code of Obligations (CO), but has developed out of the Federal Supreme Court's general case law and the principle of the employer's duty of care (Art. 328 CO).

• Discharge from the duty to work: with the release, the employer discharges the employee from the duty to attend the workplace and to provide the work owed under the contract.
• The claim to pay remains: because this is a unilateral instruction from the employer (the employee, after all, continues to offer their labour), the claim to pay remains in full. The employee is released from the duty to work, while the employer remains obliged to pay.
• Revocable versus irrevocable: a distinction is drawn between a revocable release (the employer reserves the right to recall the employee to the workplace at short notice if needed) and an irrevocable release (the employer finally dispenses with their services). Only the irrevocable release triggers all the legal consequences regarding the immediate crediting of earnings from elsewhere.

2. Rights and obligations during the release

Even though no presence in the office or at the business is required during the release phase, the employment relationship legally continues unchanged until the ordinary notice period expires. Both parties have to observe certain rules.

A. The employee's rights

• Continued pay: the agreed monthly salary must be paid until the final leaving date. Expense allowances owed, or fixed bonuses provided for in the contract (where they accrue pro rata temporis), must also be settled.
• Reference and testimonials: the entitlement to a full, benevolent employment reference remains. A release must in principle not be mentioned negatively in the reference (unless it occurred in the context of a summary dismissal for good cause).
• Protecting business secrets: the duty of loyalty (Art. 321a CO) and the duty of confidentiality regarding company secrets remain fully in force beyond the end of the employment relationship.

B. The employee's obligations (the duty to mitigate)

• Crediting interim earnings: if the released employee finds a new job during the notice period still running and earns an income there, the former employer can in principle have that new income credited against what it owes (the crediting of interim earnings under Federal Supreme Court case law). That means: the former employer only has to pay the difference to the previous salary, where total income exceeds the previous amount.
• The duty to search immediately: the employee is obliged to look actively for a new position during the release, in order to keep the loss to the employer (or the unemployment fund) as small as possible.

3. The great point of dispute: crediting holiday during a release

A classic in employment disputes in Switzerland is the question of whether and how outstanding holiday days count as taken during a release.

• The purpose of holiday: under Swiss law, holiday serves the employee's recuperation. The Federal Supreme Court takes the strict view that holiday falling within an irrevocable release only counts as taken where the employee knew they could rest during that period and the release lasts long enough.
• When does holiday count as used in a dispute? If the employee had already expressed concrete, demonstrable plans at the time of the release (a planned trip, for instance), or if the release is very long relative to the remaining term, the employer can offset outstanding holiday.
• No blanket settlement: a blanket reduction or automatic offsetting of remaining holiday without clear communication is not permissible. Ideally, holiday compensation is expressly recorded in writing in a termination agreement or in the release letter.

4. Offsetting overtime: can hours worked be set off?

Alongside holiday days, accumulated overtime is often at stake.

• The statutory rule (Art. 321c CO): overtime is in principle to be compensated by time off of equal length, unless something else has been agreed in writing (or payment is covered by the monthly salary).
• Compensation during a release: because a release by definition means complete free time, the released period counts in legal terms primarily as reducing overtime — unless the release is so short that it covers only the ordinary notice period.
• Paying out overtime: if overtime can no longer be compensated by time off because of the release or the company's circumstances, it has to be paid out financially as of the leaving date (in principle at 100 % of the normal salary, unless a contractual clause says otherwise).

5. Step by step: arranging a release on sound legal footing

• Record the release agreement in writing: a release should never be given orally alone. Record whether it is revocable or irrevocable.
• Define the end date and the pay: the exact date the contract ends and the assurance that pay continues until that day must be clearly stated.
• Settle holiday and overtime: list exactly how many holiday days and overtime hours are outstanding and whether they count as settled or will be paid out in full and final settlement.
• Clarify the return of company property: agree when the company car, laptop, smartphone and access badge are to be returned to the business.

6. Legally sound template: confirming a release

If you want to document a release clearly, use this professional template text:

[Employer's / company letterhead]
[Name of the employee][Street and number][Postcode and town]
[Place], [date]
Subject: irrevocable release from the duty to work within the existing employment relationshipEmployee / personnel number: [number]
Dear Ms/Mr [name]
Further to our conversation on [date] and the ordinary termination of your employment contract of [date], we hereby confirm the following:
1. **Release:** you are hereby released irrevocably from your duty to work with immediate effect, or from [date], until the ordinary end of the employment relationship on [date]. 2. **Continued pay:** your gross monthly salary and any contractual salary components will be paid to you without interruption until the ordinary end of the contract on [date].3. **Holiday and overtime balances:** the [number] outstanding holiday days and [number] hours of overtime count as fully compensated and settled during the release period.4. **Return of work equipment:** we ask you to hand over all company property (company keys, laptop, mobile phone, access badge) to the HR department by [date] at the latest.
We thank you for your commitment and wish you all the best for your professional and personal future.
Yours sincerely
[Employer's signature]                [Employee's signature acknowledging receipt]

Conclusion and next step: check your legal protection and manage termination processes

A release in Swiss employment law offers both sides a clean separation, but it demands absolute clarity about continued pay, holiday compensation and the crediting of interim earnings. Unclear arrangements quickly lead to painful employment disputes.

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