Anyone hiring for the first time usually budgets with the gross salary and is then surprised. On top of the salary come contributions that you don't deduct but owe in addition – and the largest of them depends not on the canton but on the person's year of birth. In this guide, we go through employer costs item by item, calculate them for a concrete case and show what the common rule of thumb leaves out.
What counts as employer costs
The cost of a hire has three layers. The first is the gross salary itself, including the 13th-month salary, allowances and everything you have agreed to in the contract. The second is the social security contributions you owe on top of the gross salary – the part this guide is about. The third is costs that never show up in a percentage: the workplace, equipment, recruitment and onboarding.
With social security, a further distinction is worth making. Some contributions you share half and half with your employees – you owe the full amount to the compensation fund, but deduct half from the salary. Others you bear alone; they never appear as a deduction on the payslip. How a payslip is structured is explained in our guide to the payslip.
The contributions you share half and half
Old-age and survivors' insurance, disability insurance and income compensation (AHV, IV and EO) add up to 10.6% of the relevant salary. Of this, you bear 5.3%, as stated in fact sheet 2.01 of the AHV/IV information centre. There is no upper limit: even on an annual salary of CHF 300,000, the full 5.3% applies.
Unemployment insurance (ALV) costs 2.2%, split half and half, so 1.1% for you – but only up to an annual salary of CHF 148,200. Since 1 January 2023, nothing is due on anything above that, according to fact sheet 2.08. For high salaries, your percentage surcharge therefore falls slightly.
The contributions you bear alone
Three items are entirely at your expense and so never appear in a calculation that only looks at the payslip.
- The family compensation fund: The family allowances for your employees are financed through a family compensation fund (FAK), and you pay the contributions on the entire payroll. The rate is set by the canton and the fund, so it varies considerably depending on where your business is based. You only find out your actual rate from your FAK.
- Occupational accident insurance: You bear 100% of the premium for occupational accidents and occupational diseases. How high it is depends on the risk in your industry – a software company pays a fraction of what a construction company pays. The premium for non-occupational accidents, on the other hand, is borne by the employees, as fact sheet 6.05 on the Accident Insurance Act (UVG) states.
- The administrative cost contribution: On top of the social security contributions, compensation funds charge an administrative cost contribution. This too is entirely at your expense and may not be deducted from the salary. The amount varies from fund to fund.
Daily sickness benefit insurance and supplementary accident insurance can be added voluntarily. Neither is required by federal law; how the premium is split follows from the employment contract or a collective labour agreement.
The BVG share: the biggest variable
For the pension fund, the law only sets a lower limit: your contribution must be at least as high as the contributions of all your employees combined. In practice, that means at least half, and many pension fund regulations provide for more.
The contribution is not calculated on the gross salary but on the coordinated salary: the annual salary minus the coordination deduction of CHF 26,460, insured from an annual salary of CHF 22,680 and capped at CHF 90,720. The current threshold amounts are published by the Federal Social Insurance Office. And the rate rises with age: under Art. 16 of the Occupational Pensions Act (BVG), it is 7% between the ages of 25 and 34, then 10%, 15% and, from age 55, 18% of the coordinated salary.
That is why two identical salaries can cost different amounts.
A worked example: the first hire
A 35-year-old person, full-time, monthly salary of CHF 6,000 with a 13th-month salary, making an annual salary of CHF 78,000. The coordinated salary is CHF 78,000 minus CHF 26,460, so CHF 51,540. For the FAK, we use an example rate of 1.5%, and for occupational accident insurance 0.5%.
| Item | Rate | Amount per year |
|---|---|---|
| Gross salary (13 × CHF 6,000) | Annual salary | CHF 78,000.00 |
| AHV, IV and EO | 5.3% | CHF 4,134.00 |
| ALV | 1.1% | CHF 858.00 |
| Family compensation fund | 1.5% (example rate) | CHF 1,170.00 |
| Occupational accident insurance | 0.5% (example rate) | CHF 390.00 |
| BVG, employer share | 10% of CHF 51,540, half and half | CHF 2,577.00 |
| Total additional costs | 11.7% of the gross salary | CHF 9,129.00 |
| Total employer costs | Per year | CHF 87,129.00 |
So around 11.7% is added to the gross salary. That is at the lower end of what you usually hear – the common rule of thumb of 15 to 20% assumes an older workforce, a higher-risk industry or a pension fund that goes beyond the legal minimum.
Why age matters more than the canton
The same person at 56 instead of 35: the retirement credit rises from 10 to 18%, and with it your share from CHF 2,577 to CHF 4,639 per year. The additional costs grow to around CHF 11,191, the surcharge to around 14.4%. With an otherwise identical salary.
The reverse applies to a 27-year-old: 7% instead of 10%, your share falls to CHF 1,804 and the surcharge to around 10.7%.
At this salary, there are therefore around 3.6 percentage points between the youngest and the oldest savings bracket. Anyone doing workforce planning should calculate with people's actual ages rather than an average surcharge.
Caution: The percentage surcharges only cover social security. They don't include continued salary payment in case of illness and accident where no insurance applies, the workplace and equipment, recruitment and onboarding costs, or the time employees are paid but not working – holidays and public holidays are already included in the gross salary, but people are productive on far fewer than 365 days.
What family allowances are not in this calculation
A common misconception: family allowances are not an additional cost block. You pay them out with the salary, but you claim them back from the family compensation fund – they are financed through your FAK contributions, which are already in the calculation. Counting them twice would therefore be wrong.
The minimum amounts are CHF 215 per month for the child allowance and CHF 268 for the education allowance; the cantons may set higher amounts and usually do. Entitlement starts from AHV-liable income of CHF 630 per month or CHF 7,560 per year, as the Federal Social Insurance Office states – so for very small part-time positions, there is no entitlement.
Employer costs in payroll accounting
Calculating the surcharges once is easy. Keeping them correct over twelve months, several employees, pay rises, people joining and leaving, and a birthday that moves someone into the next BVG bracket is not.
If you keep your accounts in Infinity, you can run payroll in the same system. Infinity Payroll calculates AHV, ALV, BVG, UVG and withholding tax to Swiss standards and records the payroll entries automatically in your accounts – so personnel expenses appear in the income statement without any intermediate step. If a salary or a workload percentage changes, everything is recalculated in real time.
All processes run through a Swissdec-certified partner, which means the ELM 5.0 standard is supported too. 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 about employer costs
How much does an employee cost on top of the gross salary?
For mandatory social security, expect around 11 to 15% on top of the gross salary, depending on age, industry and canton. The pension fund is open-ended: regulations that go beyond the legal minimum can raise the surcharge considerably.
Which contributions do I bear alone as an employer?
The contributions to the family compensation fund, the premium for occupational accidents and occupational diseases, and the compensation fund's administrative cost contribution. These items never appear as a deduction on the payslip.
Why does an older person cost more?
Because of the retirement credits under the BVG. They amount to 7% of the coordinated salary between the ages of 25 and 34 and rise via 10 and 15% to 18% from age 55. On an annual salary of CHF 78,000, that makes a difference of around 3.6 percentage points between the youngest and the oldest bracket.
Are family allowances an additional employer cost?
No. You pay them out with the salary, but you get them back from the family compensation fund. They are financed through your FAK contributions, which are already in the calculation.
Does the surcharge fall for high salaries?
Somewhat, yes. ALV is only levied up to an annual salary of CHF 148,200, and the coordinated salary under mandatory BVG is capped at CHF 90,720. AHV, IV and EO, on the other hand, continue without an upper limit.
Do the same surcharges apply to part-time work?
In percentage terms mostly yes, but often less for the BVG. The coordination deduction of CHF 26,460 is deducted regardless of the workload, so for small part-time positions the coordinated salary – and with it your contribution – shrinks sharply or disappears entirely.
Salaries and accounting in one system
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