Payroll in Switzerland - Tailored Solutions for Swiss Businesses
Payroll in Switzerland
Updated on Monday 01st April 2024 Rate this article
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Payroll is the process through which employees’ wages are computed and taxes associated with them are withheld and directed to the authorities. This process usually on the human resources department in a Swiss company, however, it can also be handled by the in-house accounting department. Another possibility is to outsource it to an outside company.
Payroll implies more than calculating and paying employment taxes, as it must also consider several Employment Law matters. This is why our lawyers in Switzerland will explain below what it entails.
| Quick Facts | |
|---|---|
| Employee/employer registration services (Yes/No) | Yes, our specialists offer employee and employer registration services for payroll purposes |
| Payroll setup services (Yes/No) | Yes, we offer payroll support for our clients in Switzerland |
|
Employee records setup and maintenance services (Yes/No) | Yes, our accountants can handle employee records, implying their creation and regular maintenance |
| Payslip generation services (YES/NO) | Yes, this is one of the most important tasks we can carry out |
| Employee remuneration computation | We can handle employee wage generation with variations from month to month |
| Mandatory contributions for employees | YES, we will handle the withholding of monthly contributions on behalf of employees |
| Employment contributions for employers | We can also handle the distribution of social security contributions on behalf of Swiss employers |
| Payroll reporting requirements | YES, our accountants in Switzerland issue monthly payroll reports |
| Social security contribution for employees | Employees must pay: - the social security contribution (AHV), - the unemployment insurance (ALV), - the accident insurance, - the social security administration, - the pension contributions (BVG) |
| Social security contribution for employers | Employers must consider the same social security contributions as employees |
| Employment statutory filing requirements support (YES/NO) | Yes, we offer support in filing statutory reports in Switzerland |
| Special requirements applicable to foreign employees (YES/NO) | No, there are no special conditions that apply to foreign employees in terms of payroll in Switzerland |
| Specific requirements applicable in terms of Swiss payroll (YES/NO) | YES, it is worth noting that the payroll taxes must be computed under federal and cantonal tax regulations |
| Assistance in drafting labor contracts (YES/NO) | YES, we can also assist in creating employment contracts in Switzerland |
| Other services (if available) | YES, our specialists are at your service if you want to open a company and/or bank account in Switzerland |
| Minimum salary (if any) | Switzerland does not have a minimum salary. |
| Canton-based social security requirements (YES/NO) | Yes, each canton has its own employment taxes. |
| Social security contribution rates for employees | Employees rates range from 14.375% to 28.375%, depending on the canton they work in. |
| Social security contribution rates for employers | Employer social contributions rates vary from 13.845% to 41.505%, depending on the canton. |
| Special requirements for Swiss citizens working abroad (YES/NO) | Swiss citizens may be subject to double tax agreements under certain circumstances. |
| Specific services for foreign companies (YES/NO) | Yes, our specialists are at the service of foreign companies with operations in Switzerland. |
| Assistance in employment regulations (YES/NO) | Yes, we can assist with employment regulations. |
| Authorities to register with in Switzerland | Federal Tax Administration |
| Salary payment frequency | Monthly |
| Employee benefits (if any) | - bonuses, - overtime, - maternity and paternity leave, - annual leave, etc. |
| Employment-related support for companies (YES/NO) | Yes, Swiss companies can benefit from employment support related to hiring workers under various types of employment contracts. |
| Support in setting up bank accounts for employees (YES/NO) | Yes, we can assist with the opening of bank accounts in Switzerland for employees. |
| Service available for SMEs (YES/NO) | Yes |
| Support in employment disputes (YES/NO) | Yes, our law firm in Switzerland can advise in labor litigation. |
| Payroll support availability at cantonal level (YES/NO) | Yes, our services are tailored to cantonal requirements. |
Payroll administration in Switzerland
Payroll administration in Switzerland is a quite complex process and is usually conducted by the senior management in a company. However, the current tendencies show that more and more Swiss companies require the services of specialists to handle HR and payroll administration. Payroll management in Switzerland implies the following activities:
- managing the employees database,
- calculating salaries,
- preparing pay slips,
- booking payments.
Our lawyers in Switzerland may also help you by providing you all the information related to the tax legislation at cantonal and federal levels.
What are the taxes covered by payroll in Switzerland?
When preparing the payroll for its Swiss employees, a company must take into account all the taxes to be paid. Swiss companies are required to withhold the following taxes and insurances:
- the social security contribution (AHV),
- the unemployment insurance (ALV),
- the accident insurance,
- the social security administration,
- the pension contributions (BVG),
Here are the rates to consider when it comes to payroll in Switzerland:
- AHV (old-age and survivor's insurance) which is 10.6% of gross wage is deducted as 5.3% for employee, 5.3% for employer);
- FAK (family compensation fund): 1.2% to 3.6% of the gross salary that the employer is required to pay (depending on the total of the company's and the social security office's salaries);
- VK (administrative costs) ranges from 0.1% to 5%. (payable by employer);
- ALV (unemployment rate): 2.2% of gross pay (up to CHF 148'200) and an extra 1.0% of gross pay over CHF 148'200 (50/50 employee/employer). The employer is required to withhold 1.1% or 0.5% of the gross compensation and pay 2.2, resp. 3.2% of the authority's fees;
- contribution for UVG (accident insurance) is based on individual contracts and is deducted from the gross wage (up to CHF 148'200 annually).
The cost of the UVG premium during working hours (professional accident insurance) is paid by the employer.
The KTG insurance is optional and covers salary compensation payments in the event of illness. Contributions are computed based on gross pay and vary depending on a number of criteria (insurance company, gender, branch of the company, contractual dispositions, such as waiting period and salary limitations etc.). A maximum of 50% of the employee's pay may be used to offset the employee's contribution to the illness insurance. The employee may receive an optional payment from the company. Typically, the premium is split 50/50 or paid in full by the employer.
Apart from these, employers are required to establish a pension plan (BVG) for their employees in addition to the governmental AHV pension plan, which constitutes a second pillar of the Swiss pension system. These are often defined contribution plans, however not for IFRS reporting. Regarding salary caps and insured benefits, there are legally mandated minimum standards. Splitting the cost of the pension funds is possible, with the employer covering at least 50% of the total cost.
The Swiss Employment Law also requires employers to grant a 20-day holiday per year to their employees. The holiday pay must also be calculated on a daily rate of 8.33% of the global salary and must appear on the salary statement. Our law firm in Switzerland can advise on the laws related employment.
The Swiss legislation also establishes payment rules on an hourly, daily, weekly, monthly and annual basis. Here is also an infographic on this subject:
The main taxes to be computed under payroll in Switzerland
The Swiss taxation system is more complex than those of other countries due to a major aspect: the 30-tier imposition system which divides levies into federal, cantonal, and municipal taxes. When also adding the progressive rates of the personal income tax, very much attention must be paid when computing it.
Here are the main taxes to be considered under the payroll system in Switzerland:
- the federal personal income tax;
- the cantonal and municipal income taxes (Switzerland has 26 cantons);
- social contributions.
Out of these, social contributions must be paid by both the employer and employee. These are withheld from the worker’s gross salary, thus when making the payment to the beneficiary’s account, the net amount will be deposited.
The employer must contribute 13.845% to 41.505%, while an employee must pay 14.375% to 28.375% as social contributions.
If you have any questions related to the rights of employees and employers, our Swiss lawyers are at your disposal with legal advice.
We also offer support in immigration to Switzerland, including for foreign employees who must meet specific requirements.
Compensation and benefits for Swiss employees
The Labor Act and Code of Obligations, two laws that regulate certain labor conditions and standards are the main regulations to abide by when discussing payroll in Switzerland.
You must first comprehend the different facets of the local law and how they affect payroll in order to ensure compliance with Swiss labor laws. Payroll typically consists of base pay plus additions (such as bonuses or benefits) and deductions (such as taxes and social programs).
The following employment requirements need to be taken into account when processing payroll:
- compensation;
- hours of work - people who work full-time in most industries often work Monday through Friday or a maximum of 50 hours each week;
- holidays;
- parental and maternal leave;
- sick time;
- severance payments and dismissal.
Overpay and bonuses are negotiated directly by companies and employees in Switzerland. The majority of industries do not have a legislated minimum wage, and this is mostly because employees and employers can reach an amicable agreement.
Employers provide additional compensation to workers who have families. In Switzerland, maternity leave is widely available. In the job contract, regular workweek hours and overtime are also negotiated.
The tax year in Switzerland runs from January 1 to December 31. Employers are required to file their tax returns by January 31 of the following year, while resident employees are required to file their returns (along with any taxes owed) by March. There are also different filing specifications applicable at cantonal levels.
If you want to open a company in Switzerland, one of the most important aspects to consider is the canton it will operate in. For this purpose, you can get in touch with our law firm for specialized advice.
Payroll for foreign employees in Switzerland
As employees of a Swiss company, nationals of the European Union are free to travel inside the country. Employees hired from non-EU or non-treaty countries must first have a work visa. Since Switzerland establishes visa caps, these foreign workers cannot be guaranteed a work permit.
Switzerland has double tax agreements with more than 100 countries worldwide to aid expats in avoiding double taxation.
Switzerland has joined the automatic exchange of information (AEOI) system, which attempts to stop international tax evasion. More than 100 other states have already signed up for this system.
Opening a Swiss bank account in recommended when moving to this country form any other EU or non-EU state. This is one of the services available from our law firm.
Recent data on the Swiss workforce
According to the most recent information gathered by Statista.com:
- at the level of 2021, the Swiss workforce enrolled 5.09 million employees;
- in 2022, this number grew to 5.14 million workers;
- for 2023, projections indicate another increase, the workforce being expected to reach 5.19 million employees.
Payroll services in Switzerland
Our law firm in Switzerland provides the following payroll and HR administration services:
- monthly payroll management,
- salary administration,
- payroll management for expatriates employees,
- concluding social insurance contracts,
- tax registration with the authorities.
Here is also our video on this subject:
Outsourcing payroll in Switzerland
The simplest, most adaptable, and economical method of managing Swiss payroll is choosing an outsourcing service. Other choices include internal payroll; however, doing so requires hiring additional HR personnel and having the financial substance to bear greater costs.
In the case of foreign companies operating through branches and subsidiaries in Switzerland, the parent company can assist in managing payroll remotely. This can be a straightforward and inexpensive choice, but it also requires familiarity with all of Switzerland's many labor rules.
Using a specialized accounting firm in Switzerland is also an option for many businesses. If you decide to use this strategy, you must conduct in-depth market research and make sure that the processing company you choose is reputable, skilled, and aware with Swiss rules and regulations.
You can rely on our Swiss specialists for tailored payroll solutions, if you opt for an outsourcing service.
With respect to foreign employees, the legislation provides more complex regulations which depend on the type of Swiss work permit granted to the employee. These regulations depend on the canton the employee is registered in. For detailed information about the taxation system applicable in each canton, please contact our Swiss attorneys.
