The base salary is the easy part of a payslip. It gets complicated with everything that comes on top irregularly: the 13th-month salary, supplements for overtime and night work, allowances and the holiday entitlement. These items have their own legal basis, their own due dates and, in the case of holidays, even an explicit ban on paying them out. This guide goes through them one by one.
The 13th-month salary is not a legal obligation
Contrary to popular belief, no federal law requires a 13th-month salary. It is only owed if it is agreed in the individual employment contract, in a collective or standard employment contract – or if it has been paid out without reservation for years and has thereby become established company practice.
What matters is how it is classified. If the 13th-month salary is a fixed part of the salary, it is owed just like the base salary, and anyone joining or leaving during the year is entitled to a pro rata temporis share. If, on the other hand, it is a genuine bonus (Gratifikation), it is at your discretion – but then you need a clear reservation that is meant seriously and is not just boilerplate in the contract.
For payroll, this means: the 13th-month salary is part of the relevant salary for social insurance and is fully subject to old-age and survivors' insurance (AHV), disability insurance (IV), income compensation (EO), unemployment insurance (ALV) and occupational pension (BVG) contributions. How this affects the individual deductions is explained in the guide to payroll deductions.
Withholding tax is a special case. If the 13th-month salary is not paid monthly, it has to be extrapolated proportionally to determine the rate – 25 percent for quarterly, 50 percent for half-yearly and 100 percent for annual payment. Smoothing it out by notionally allocating it to each month is explicitly not permitted.
Overtime and excess working time are not the same thing
In everyday language the two terms (Überstunden and Überzeit) are used interchangeably, but legally they are not – and the difference decides whether you owe anything at all.
| Feature | Overtime (Überstunden) | Excess working time (Überzeit) |
|---|---|---|
| Benchmark | Above the contractually agreed working hours | Above the statutory maximum working hours of 45 or 50 hours per week |
| Legal basis | CO, Art. 321c | Employment Act, Art. 9 and 13 |
| Supplement | At least 25% | At least 25% |
| Can be excluded by contract | Yes, in writing | No |
| Special feature | Can be compensated with time off of equal length, then without supplement | For office staff and sales staff in large companies, compensation only due beyond 60 hours per year |
Overtime is the hours worked above the contractually agreed working hours. It is either paid at the normal salary plus a supplement of at least 25 percent or compensated with time off of at least equal length – when compensated with time off, the law does not provide for a supplement. Both can be arranged differently in writing: the supplement can be reduced or excluded altogether, and full compensation can also be ruled out by contract.
Excess working time is something else: working time above the statutory maximum of 45 hours per week for office staff, technical employees, industrial companies and sales staff in large companies, and 50 hours in all other companies. Here, compensation cannot be excluded by contract. There is one restriction, however, for office staff, technical and other employees, and sales staff in large retail companies: compensation is only due for excess working time above 60 hours per year. The details are summarised in the SECO FAQ on overtime.
Both can occur at the same time. Someone with 40 contractual hours who works 52 hours in one week performs 7 hours of excess working time plus 5 hours of overtime.
Allowances and supplements
For night and Sunday work, the Employment Act provides for salary or time supplements. How high they are depends on whether the work is temporary or regular – temporary night work earns a salary supplement, while permanent or regular night work earns compensatory rest time instead. The exact rates and the permit requirements are set out in SECO's guidance on the Employment Act.
Shift allowances, on-call pay, function allowances and location allowances, on the other hand, do not exist in federal law. They arise only from the contract or a collective employment agreement – but then they are binding.
Family allowances are a special case in the other direction. They are processed through payroll, but they are paid out rather than deducted, and within the range customary for the location or industry they are not part of the relevant salary. So they do not increase the social insurance deductions.
Holidays must not be paid out
Under CO, Art. 329a, the minimum holiday entitlement is four weeks per year of service, and five weeks for employees up to the age of 20. A contract or collective employment agreement may provide for more, but not less.
For payroll, however, another provision is more important: CO, Art. 329d para. 2 prohibits replacing holidays with money while the employment relationship continues. The purpose of holidays is rest and recovery, and that purpose cannot be paid out.
Caution: If you regularly pay out holidays despite the ban, you risk owing them a second time. The ban applies to both sides: even with the employee's consent, no valid agreement on paying them out can be made.
There are two exceptions. When the employment relationship ends, a holiday balance may be paid out if it can no longer be taken as time off. And for very irregular employment, case law allows holiday pay to be compensated on an ongoing basis together with the salary – but only under strict conditions.
Holiday pay for hourly wages
Employees paid by the hour receive no salary during their holidays, because no hours are worked. That is why holiday pay is paid as a percentage supplement. The usual rates are 8.33 percent for four weeks of holiday, 10.64 percent for five weeks and 13.04 percent for six weeks – calculated on 260 working days per year, minus the 20, 25 or 30 days of holiday.
For this compensation to be permitted, three conditions must be met: the employment must be irregular, the written employment contract must clearly and explicitly set out the holiday portion, and the amount must appear as a separate item on every payslip. If any of these requirements is missing, you risk owing the holiday pay a second time.
The Federal Supreme Court interprets the exception narrowly. With a fixed full-time workload at the same employer, the justification – practical difficulties in calculating it – no longer applies, and ongoing compensation is then not permitted, even if the salary fluctuates from month to month.
What to calculate when an employee leaves
When an employee leaves, three calculations come together. The pro rata 13th-month salary is owed, provided it is part of the salary. The holiday entitlement for the started year of service is calculated pro rata and, where it has not been taken, paid out. And holiday balances that are paid out count towards the relevant salary, so they are fully subject to contributions.
Withholding tax has a special rule: holiday balances paid out, severance payments and bonuses are non-periodic salary components. When someone leaves in the middle of the month, they are not extrapolated to 30 calendar days to determine the rate, but only added after the periodic components have been converted.
Special payments in payroll
The 13th-month salary in December, a bonus in March, a holiday balance when someone leaves in August: each of these payments changes the contribution bases, the ALV maximum and, under the annual model of withholding tax, the rate for the entire year.
If you keep your accounts in Infinity, you can run payroll in the same system. Infinity Payroll calculates AHV, ALV, BVG, accident insurance (UVG) and withholding tax according to Swiss standards, handles variable components such as commissions and allowances, and posts the payroll entries automatically in your accounts. If a salary or a workload changes, everything is recalculated in real time.
All processes run through a Swissdec-certified partner, which means ELM 5.0 is supported as well. Infinity Payroll is an add-on and requires an active Infinity subscription; it costs CHF 9 per employee per month excl. VAT. It is not designed for very complex industries such as staff leasing.
Frequently asked questions
Am I entitled to a 13th-month salary?
Only if it is agreed in the contract, follows from a collective employment agreement or has been paid out without reservation for years. There is no statutory entitlement.
Is the 13th-month salary paid pro rata when an employee leaves?
If it is a fixed part of the salary, yes – pro rata temporis for the months worked. If it is a genuine bonus with a valid reservation, it depends on the agreement.
What is the difference between overtime and excess working time?
Overtime exceeds the contractually agreed working hours, excess working time exceeds the statutory maximum of 45 or 50 hours per week. Compensation for overtime can be excluded in writing, compensation for excess working time cannot.
Can I pay out holidays instead of having them taken?
Not while the employment relationship continues. CO, Art. 329d para. 2 prohibits replacing them with money, even if both sides agree. When the employment relationship ends, however, untaken holidays may be paid out.
How high is the holiday supplement for hourly wages?
The usual rates are 8.33% for four weeks of holiday, 10.64% for five and 13.04% for six weeks. The supplement is only permitted for irregular employment and must be shown separately both in the employment contract and on every payslip.
Are special payments subject to social insurance contributions?
Yes. The 13th-month salary, bonuses, gratuities, overtime pay and holiday balances paid out are part of the relevant salary and fully subject to contributions.
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