Employees must pay tax on their wage under all circumstances. If the simplified payment procedure is selected, the employer deducts 5% from the employee's wage and transfers this to the compensation fund office. As an employee, you receive a certificate for the tax that has been paid, which you can enclose with your tax return.
(Further information on the simplified procedure can be found here)
If the tax is settled with the compensation fund office using the standard payment procedure, a differentiation is made between whether the employee is Swiss or a foreign national. Foreign employees are subject to withholding tax, while Swiss citizens and individuals with a "C" residence permit are subject to ordinary direct taxation.
(Further information on the standard payment procedure can be found here)