The payslip is only the visible end of a process. Behind it are three results that must all come out of the same payroll run: the payment to your employees, the entry in the financial accounts and the reports to the social insurance funds, insurers and tax authorities. If these three drift apart, you usually only notice at the year-end close. This guide shows how a payroll run works, how it is posted and what comes on top at the end of the year.
What payroll accounting has to do
Payroll accounting is not a separate accounting system but a subsidiary ledger: it calculates per person and per period, and its result flows into the financial accounts as a collective entry.
Three parties depend on it. Your employees need a clear payslip and their pay. Your accounts need the personnel expense in the right period and the contributions as a liability until they are paid. And the AHV compensation fund, the family allowance fund (FAK), the accident insurer, the pension fund, the daily sickness allowance insurer and the tax authorities need reports – some monthly, some annually.
For this to work, the master data has to be right: workload, pay type, date of birth for the BVG age bracket, marital status and permit for withholding tax, children for the allowances. Almost every error in a payroll run is a master data error.
The payroll run in six steps
Joiners and leavers, salary changes, workload adjustments, new children, changed permits. Everything that affects the payroll run has to be recorded beforehand.
Hours, overtime, commissions, expenses, absences and daily allowances that are paid out through you.
Gross salary, deductions, employer contributions and any withholding tax per person.
Compare the payroll journal with the previous month. Conspicuous deviations are almost always data entry errors.
Create the payment file, send out the payslips, transfer the entries to the financial accounts.
Withholding tax return to the canton, change notifications to the funds and insurers.
The most important step is the check before approval. A payroll run can be corrected after payment, but the correction runs through the accounts, the reports and, under the annual model of withholding tax, also through the rate determination of the following months.
How a payroll run is posted
A payroll entry is never a single figure. It breaks down into three transactions: the gross salary, the deductions from your employees and the contributions you owe on top as the employer.
The gross salary is expense in full – including the part you do not pay out because it is withheld as a deduction. This withheld part does not become an expense but a liability: you owe it to the funds. Your own contributions, on the other hand, are additional expense and at the same time an additional liability.
An example: monthly salary CHF 6,000, annual salary CHF 72,000, coordinated salary CHF 45,540, employee aged 35. Deductions of CHF 633.75, employer contributions of CHF 693.75 – calculated with example rates of 1.0% for non-occupational accident insurance (NBU), 1.5% for the FAK and 0.5% for occupational accident insurance.
| Transaction | Debit | Credit | Amount |
|---|---|---|---|
| Net salary payment | 5000 Wages and salaries | 1020 Bank | CHF 5,366.25 |
| Employee deductions withheld | 5000 Wages and salaries | 2270 Social security liabilities | CHF 633.75 |
| Employer contributions | 5700 Social security expenses | 2270 Social security liabilities | CHF 693.75 |
| Payment to the funds | 2270 Social security liabilities | 1020 Bank | CHF 1,327.50 |
The account numbers follow the Swiss SME chart of accounts. In practice, social security expenses are often broken down further – one account each for AHV/IV/EO/ALV, FAK, BVG, UVG and daily sickness allowance – so that the annual statements of the individual funds can be reconciled directly. Account 5800 takes the other personnel expenses: recruitment, training, flat-rate expenses. How the items on the payslip itself come about is explained in the guide to payroll deductions.
Why account 2270 rarely comes out at exactly zero
Account 2270 collects everything you owe the funds and should balance out again after payment. In practice it often does not – and there is usually a harmless reason for that.
Most funds bill provisional contributions during the year, estimated on the basis of the last total payroll. The actual statement only follows after the annual declaration. A difference therefore systematically arises between what you set aside each month and what you pay. That is normal, but it has to be managed deliberately: the liability from the payroll run and the provisional payment go through the same account, and only the final statement brings the two together. If you do not reconcile this, you carry differences along for years.
What comes on top at the end of the year
Four things are due after the last payroll run of the year.
- Salary declaration: The actual annual payroll totals go to the AHV compensation fund and the family allowance fund, followed by the final statement with an additional payment or a credit. The same happens with the accident, daily sickness allowance and BVG insurers.
- Salary statements: Prepare and send them for all employees. What has to go in them is covered in the guide to the salary statement.
- Withholding tax: Depending on the canton, an annual or final return is due.
- Reconciliation: The total gross salaries from payroll accounting must match the balance of account 5000, and the declared payroll totals must match both.
This reconciliation is the real test of whether payroll accounting ran cleanly throughout the year. You then have to keep everything for ten years: under the Swiss Code of Obligations (Art. 958f CO), business records and accounting vouchers are subject to a ten-year retention period that starts at the end of the financial year.
One standard, many recipients
Handling these reports one by one on paper or through six different portals is why the year-end close is so unpopular in payroll accounting. This is exactly what the Swiss salary standard (Lohnstandard-CH, ELM) is for.
Swissdec is a non-profit association of Suva, AHV, the Swiss Tax Conference, the Swiss Insurance Association and the Federal Statistical Office. The standard lets you transmit payroll data to all recipients in a single transaction: AHV and FAK, Suva and other accident insurers, supplementary UVG and daily sickness allowance insurers, BVG insurers, the cantonal tax administrations and the Federal Statistical Office.
Two points matter in practice. Swissdec provides the infrastructure to companies free of charge – costs only arise through the licence for the payroll software. And only those using Swissdec-certified payroll accounting can transmit: the certification belongs to the software, not to the company. Swissdec publishes a list of recipients showing which funds and insurers are ready to receive data.
Payroll and financial accounting in one system
The break that many SMEs know: payroll runs in one program, accounting in another, and the link between the two is a monthly export or a collective entry entered by hand. That is exactly where the differences come from that you end up hunting for in November.
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, creates a payslip for each employee and automatically files the related payroll entries in your accounts – the personnel expense appears in the income statement without any intermediate step. 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 about payroll accounting
What does payroll accounting include?
Calculating salaries per person and period, the payslips, the transfer to the financial accounts, the reports to the funds, insurers and tax authorities, and the year-end work with the salary declaration and salary statements.
Which accounts are salaries posted to?
Under the Swiss SME chart of accounts, to 5000 Wages and salaries for the full gross salary, 5700 Social security expenses for the employer contributions and 2270 Social security liabilities for everything owed to the funds. The payment goes through 1020 Bank.
Is the full gross salary an expense, including the part that is deducted?
Yes. The entire gross salary is personnel expense. The withheld part is not paid out but posted as a liability to the funds and transferred later.
Why does my account 2270 not add up?
Usually because of provisional payments. The funds bill estimated contributions during the year, while payroll accounting sets aside the actual amounts. Only the final statement after the annual declaration brings the two together.
Do I need Swissdec-certified software?
For electronic transmission via ELM, yes – the certification belongs to the payroll software. The Swissdec infrastructure itself is free for companies; you only pay for the software licence.
How long do I have to keep payroll records?
Under Art. 958f of the Swiss Code of Obligations, business records and accounting vouchers must be kept for ten years. The period starts at the end of the financial year.
Payroll and accounting in the same system
Try Infinity free for 14 days, no credit card required, and see how payroll and accounting work together. What the payroll add-on costs on top of your subscription is listed on the pricing page.