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Payroll accounting Switzerland simply explained

Have you just received your first payslip or are you generally wondering how one is actually structured? The many percentages and deductions can sometimes be quite confusing. That's why this article exists: Payroll accounting Switzerland explained. 

In addition to the individual components, you will also find an example of a classic payslip. And if you are confused by a technical term or abbreviation, you will find an overview of the most important terms at the end.

Table of contents

Payroll example Switzerland

Payroll accounting Switzerland simply explained 1

Some employers even voluntarily pay 100% of the BVG contribution, as in this example. Therefore, there is no BVG contribution for the employee.

What is a payslip?

A payslip is a Document from your employerwhich explains how much you earn each month and how your salary is made up. Your employer is obliged to send this to you every month.

You will usually receive your payslip at the end of the month, usually at almost the same time as your wages are paid. If you Permanently employed then this settlement is probably the same every monthunless you have received a pay rise or have been paid additional expenses, for example for training or expenses.

If, on the other hand, you are Hourly wage If you are employed, the payroll will probably look a little different every month, as you may have worked different hours or shifts.

At the end of the year, you will also receive a Wage statement. The entire Gross and net wages and all social security deductions for the whole year visible.

Tip: With the Gross-net calculator you can also calculate your net salary yourself.

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How is payroll accounting organised in Switzerland?

Payroll accounting is always structured relatively similarly in Switzerland. First the Gross wage listed, below you will find the Social deductions and further deductions and if necessary Allowances. At the bottom you will find the Net wage.

If you Cross-border commuter your employer must also fulfil the Withholding tax and deduct it directly from your salary.

Gross wage

The gross wage is the wage agreed in your employment contract. This wage includes virtually all the direct labour costs that your employer has for you. However, this is not the amount that is paid into your account.

Social deductions

Various deductions are made from your gross salary. Your employer must pay these into various social insurance schemes so that you are insured against various risks associated with the world of work. Most of these are compulsory in Switzerland and protect you from suddenly losing your income in the event of unemployment or after retirement, for example.

In the deductions you will find different percentages for the AHV/IV/EO, ALV, NBUV and BUV. You will also find a BVG deductionif you earn more than around CHF 22,000. This is your contribution that goes into your Pension Fund and will be used for your pension in addition to the AHV. However, some employers even pay up to 100% of the BVG contribution, but normally it is financed equally by the employer and employee.

Good to know: In the case of deductions for the pension scheme, i.e. AHV and BVG, the employer also pays at least the same contribution as is deducted from your salary. In total, therefore, twice as much is paid into the insurance scheme as you have to pay out.

Allowances

You will also find all allowances on the payslip. These are additional payments that are not included in your salary. These include, for example Night or shift allowances, commissions, expenses or overtime compensation. This also includes Family allowancesif you have children.

If you work on an hourly wage, you will probably also see bonuses for holidays or the 13th month's pay here.

Further deductions

Below you will find further deductions, depending on the situation. If you do not live in Switzerland, an additional Withholding tax deducted. Another common deduction is the Daily sickness benefits insurance. This is not compulsory, but is taken out by many employers and pays your lost wages in the event of prolonged illness if you are unable to work during this time.

Net wage

The net wage is the Amount that is actually paid out to your account is calculated. This is the gross salary - all deductions + all allowances.

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Conclusion on the article Payroll accounting Switzerland explained

The payslip shows you every month how much salary you receive from your employer, what the individual Insurance is deducted and what may be Allowances is added. In addition to the gross wage, you will also find the Net wage, the effective will be paid out to your account.

Some employers are particularly generous and pay certain contributions to a greater extent than required by law. Incidentally, this would also be an idea for your next Wage negotiation.

As a cross-border commuter, you also have the Withholding tax listed. Speaking of which, in this case a Cross-border commuter account may also be of interest to you.

Here are some other articles that might be of interest to you:

The most important terms briefly explained

AHV deduction on salary statement

AHV stands for old-age and survivors' insurance, which is the so-called 1st pillar of old-age provision. It is the compulsory pension insurance scheme into which all employees must pay a small portion of their salary. After retirement, you will receive a pension depending on how long and how much you have paid in.

These deductions are usually also labelled "IV" and "EO". IV stands for disability insurance and pays your loss of earnings if you become permanently unable to work, i.e. disabled.

EO stands for Income Compensation Ordinance and is another state insurance that pays your loss of earnings during military service, civilian service or maternity leave.

ALV deduction wage statement

ALV stands for unemployment insurance. This deduction allows you to continue to receive 80% of your last salary even if you are unemployed until you find a job again. This insurance is valid for 2 years of unemployment. After that, you are no longer taxed and will not receive any further payments.

Withholding tax on salary statement

Withholding tax must be deducted directly by the employer for employees domiciled abroad and submitted to the cantonal tax authorities. These are taxes that you must submit with your tax return if you are resident in Switzerland.

However, if you are a cross-border commuter resident abroad, for example, the tax is collected directly via your employer to ensure that it is actually paid. The amount of withholding tax varies from canton to canton.

BVG salary deduction

BVG is the abbreviation for "Federal Law on Occupational Retirement, Survivors' and Disability Pension Plans" and stands for the occupational pension scheme, also known as the pension fund. In addition to the AHV, it forms the so-called 2nd pillar of your pension.

This insurance is also compulsory if you earn more than around CHF 22,000 and are over 17 years old. This is intended to cover 60% of your previous salary in addition to AHV after retirement.

NBUV deduction salary deduction

NBUV stands for non-occupational accident insurance and covers the costs of accidents that did not occur in connection with your work.

This insurance is compulsory for all employees who work for an employer for at least 8 hours per week.

BUV deduction (no salary deduction)

Occupational accident insurance (OAI) covers accidents that occur at work or on the way to work. It is fully financed by the employer so that no salary is deducted. Occupational accident insurance is compulsory for all employees in Switzerland. If you work more than 8 hours a week, you are also insured against non-occupational accidents (NBU) that occur in your free time. In the event of an accident at work, BUV covers the medical costs and pays daily benefits amounting to 80% of your salary if you are unable to work as a result of the accident.

Daily sickness allowance on salary statement

The daily sickness allowance is paid out of the voluntary daily sickness allowance insurance. If your employer has taken out this insurance, you will probably also find deductions for it on your payslip. In this case, you would also receive daily benefits amounting to 80% of your salary if you are temporarily unable to work due to illness.

If your employer has not taken out such insurance, they only have to continue to pay your salary for three weeks during the first year.

FAQ

In Switzerland, a payslip usually consists of the gross salary, social security deductions, any other deductions, any allowances and the net salary.

Various social deductions are made in Switzerland, in particular for AHV/IV/EO, ALV and BUV. Under certain circumstances you will also find deductions for NBUV, BVG and daily sickness benefits. As a cross-border commuter, withholding tax is also deducted.

Pay slips look similar throughout Switzerland. Especially for the same employer, it doesn't matter whether you work in Zurich, Bern or Basel. Take a look at our payslip example above.

4 responses

  1. Hello!

    I don't know who to turn to, so I would like to ask my question here.

    I occasionally work through an agency on an hourly basis. The employer agrees to pay 50 % of the cost of the train ticket. In practice, however, the reimbursement for the ticket is first added to my salary and then all taxes are deducted from it.

    In my opinion, the reimbursement of travelling expenses does not constitute additional income, as I actually bear these expenses myself. This calculation means that I ultimately pay more tax.

    Could you please tell me who I can contact to clarify this situation and protect my rights?

    Thank you in advance for your help!

    Reply

    1. Hello Viktoria

      Your employer's practice is correct under Swiss law:
      The journey to work is considered a private matter. If the employer is involved
      is part of the salary and therefore subject to AHV and tax.

      What you can do: Include the travel costs in your tax return as
      deduct professional expenses (commuter deduction). This offsets the effect on
      The tax side is partially cancelled out.

      Kind regards
      Eric

      Reply

  2. Taking a salary of CHF 10,000 as an example for a payslip is completely over the top! Of course, this figure simplifies the calculations, but it is a very unrealistic amount for the majority of the population!

    Reply

    1. that was actually for "simpler numbers" - but I'll gladly take your feedback on board for next time!

      Reply
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