Payroll and benefits in Switzerland

Every country has its own regulations and customs when it comes to payroll. In Switzerland, these are set by both labour law and collective agreements, which sometimes provide additional requirements for employers. Running payroll in Switzerland is particularly challenging because of the 26 separate tax authorities, which each have their own reporting specifications.

Basics of payroll in Switzerland

In Switzerland, it’s mandatory to conduct payroll monthly and to pay employees by the last working day of the month. Most employees receive their pay on the 25th of the month, and the normal payment method is by bank transfer. The tax year in Switzerland runs from 1 January to 31 December, and the local currency is the Swiss Franc (CHF).

Payslips and payroll records in Switzerland

Employers in Switzerland must provide their employees with a detailed payslip after each payroll run. This can be in either digital or paper form, and must include the following information:

• Pay period and date.
• Details of employer and employee.
• Gross salary.
• Social security deductions.
• Child and education allowance.
• Bonuses.
• Holiday pay, sick pay, and pay for public holidays.
• Advance payments.
• Other deductions.
• Reimbursement for expenses.

Employers must keep payroll records for at least 10 years.

Income tax in Switzerland

Employees in Switzerland must pay both federal and cantonal income tax on their income from employment. Federal tax rates range from 0.77% to 11% (1% to 11% for married taxpayers). Annual income up to CHF 17,800 is exempt from federal income tax. Cantonal tax rates vary significantly from one canton to another, and even between different municipalities in the same canton. Members of religious institutions are required to pay church tax, which is also levied at the cantonal level.

Unlike in most of Europe, income tax is not deducted at source by the employer in Switzerland. Instead, employees must submit an annual tax return and pay taxes themselves either in one single payment or in instalments throughout the year. Employees are required to file their tax return by 31 March each year. Married taxpayers file a joint return.

The exception to this rule is foreign employees temporarily living in Switzerland without permanent residence and cross-border commuters who work in Switzerland but live in another country. In these cases, employers must calculate the taxes each employee owes and deduct them from the employee’s monthly income. They must file a quarterly payroll tax report detailing the tax they have withheld.

Social security contributions in Switzerland

Unlike income tax, social security contributions must be withheld at the source by employers in Switzerland. Employers also make contributions based on their employees’ salaries. The Swiss social security system includes the following social insurances:

• Old age, survivors’ and disability insurance (AHV and IV).
• Unemployment insurance (ALV).
• Insurance coverage for family allowances (FAK).
• Income compensation for maternity and military services (EO).
• Occupational pension insurance (BV).
• Occupational and non-occupational accident insurance (BU/NBU).

Health insurance (KVG) is also compulsory, but this is handled privately by employees. Employers must register for all other social insurances withhold employee contributions from their salaries.

13th salary in Switzerland

The 13th salary payment is not compulsory in Switzerland, but it is very common. Certain collective agreements mandate that employees must receive a 13th salary, usually at the end of the year.