How to calculate payroll deductions in Switzerland correctly

A Swiss payslip rarely shows fewer than four deductions, and each one follows its own rules. Employers and employees split old-age and survivors' insurance (AHV), disability insurance (IV) and income compensation (EO) exactly in half. Unemployment insurance stops at a certain salary. Non-occupational accident insurance only applies to part of the workforce. And the occupational pension deduction (BVG) rises with age. In this guide we go through each deduction in turn: which rate applies, from and up to which salary it kicks in, who bears it – and which items on the payslip are not deductions at all.

What payroll deductions in Switzerland are calculated on

The basis for social security deductions is the relevant salary (massgebender Lohn). It includes everything someone receives for work performed: monthly and hourly pay, overtime and night supplements, commissions and gratuities, the 13th monthly salary, holiday and public-holiday pay, bonuses, monetary benefits from employee participation plans and regular benefits in kind such as meals, accommodation or a company car for private use. The full list is in leaflet 2.01 of the AHV/IV information centre (in German).

Two deductions are not calculated on this basis. The BVG starts from the coordinated salary, which is what remains of the annual salary after two deductions. And withholding tax depends on the income that determines the rate and on a cantonal tariff code. How the deductions must be shown on the payslip is covered in the guide to the payslip.

AHV, IV and EO: 5.3% with no ceiling

The three contributions of the first pillar are levied and settled together: 8.7% for AHV, 1.4% for IV and 0.5% for EO, 10.6% in total. Employers and employees each bear half. So you deduct 5.3% from the salary and pay it to the compensation office together with your own 5.3%.

Unlike every other social insurance, there is no ceiling here. Even on an annual salary of CHF 400,000, the full 10.6% applies. Employees are liable to contribute from 1 January following their 17th birthday.

One point that is easily forgotten: compensation offices also charge an administrative cost contribution. It is borne entirely by you and must not be deducted from the salary.

Unemployment insurance (ALV): 1.1% up to an annual salary of CHF 148,200

The contribution to unemployment insurance is 2.2% of the relevant annual salary, also split half and half. The key difference from AHV is the ceiling: 2.2% is levied up to an annual salary of CHF 148,200, and since 1 January 2023 nothing at all on anything above it.

In practice, this means for payroll: up to this limit, 12.8% goes to AHV, IV, EO and ALV, above it only 10.6%. For your employees, that is a 6.4% deduction up to the limit and 5.3% above it.

With monthly payroll, the annual maximum is applied as one twelfth, i.e. CHF 12,350 per month. But that is only provisional. At the end of the year or when someone leaves at the latest, you must do a final settlement and balance out the difference – with strongly fluctuating salaries, bonuses or employment for part of the year, the annual figure will otherwise differ from the twelfth-based approach. For employment during part of the year, the maximum is calculated pro rata: CHF 148,200 divided by 360 days, multiplied by the number of days employed.

Employees no longer pay ALV contributions from the end of the month in which they reach the reference age. AHV, IV and EO continue, ALV drops away. The details are in leaflet 2.08 (in German).

BVG: the deduction that rises with age

With the BVG, two thresholds first decide whether a deduction appears at all. Anyone who earns more than CHF 22,680 a year with you is insured. The coordination deduction of CHF 26,460 is then subtracted from the annual salary, and what remains is the coordinated salary – the amount the contributions are calculated on. At the top, the eligible annual salary is capped at CHF 90,720; at the bottom, a coordinated salary below CHF 3,780 is rounded up to this amount. The current limits are published by the Federal Social Insurance Office (in German).

Between 18 and 24, contributions only cover death and disability. Only from 1 January following the 24th birthday does saving for retirement begin as well – and it is precisely this savings component that makes up most of the deduction. The statutory minimum rates under Art. 16 BVG are staggered by age:

• 25 to 34 years: 7% of the coordinated salary
• 35 to 44 years: 10%
• 45 to 54 years: 15%
• 55 years to reference age: 18%

These percentages are the statutory minimum and not the deduction on the payslip. They represent the entire retirement credit, which employer and employees share, and most pension funds are comprehensive, meaning they insure more than the mandatory minimum and calculate according to their own regulations. On top of that come risk premiums for death and disability, plus administrative costs. The specific deduction is therefore always determined by the regulations of your pension fund.

The law does set one lower limit, though: your contribution as the employer must be at least as high as the contributions of all your employees combined. And as with AHV, you owe the full amount – you deduct the employee share from the salary and pass it on.

For part-time positions, the deduction is often surprisingly small. The coordination deduction of CHF 26,460 is subtracted regardless of the workload. With a 50% position and an annual salary of CHF 42,000, only CHF 15,540 of coordinated salary remains; with a full-time position at CHF 84,000, it would be CHF 57,540.

Non-occupational accident insurance (NBU): the deduction not everyone has

With mandatory accident insurance, the split is clearly regulated and specifically not half and half. You as the employer bear the premium for occupational accidents and occupational diseases in full – it never appears as a payroll deduction. The premium for non-occupational accidents is borne by employees and deducted through payroll.

But the NBU deduction doesn't apply to everyone. Only those who work for you at least eight hours a week on average are insured against non-occupational accidents. Anyone below that is insured against occupational accidents only and accordingly has no NBU deduction – for these people, however, accidents on the way to and from work count as occupational accidents.

There is no uniform rate. The premium depends on the risk in your industry and is set by Suva or your private insurer. What applies to everyone: premiums are only levied on salary up to CHF 148,200 per year or CHF 406 per day. You can read up on this in leaflet 6.05 (in German) on the Accident Insurance Act (UVG).

Withholding tax, daily sickness allowance and what the contract governs

Withholding tax is not a social insurance, but it appears on the same payslips. It applies to employees without a permanent residence permit (C permit) and to people without a tax residence in Switzerland. The rate follows from a cantonal tariff code and the income that determines the rate, and it is settled with the competent canton. The tariff code and the rate-determining income must be shown on the payslip.

For daily sickness allowance insurance, there is no obligation under federal law. Whether insurance exists and how the premium is split follows from the employment contract or a collective labour agreement. The same applies to other agreed deductions, for example for a parking pass or a staff loan: without an explicit agreement, you may not deduct them from the salary.

What appears on the payslip but is not a deduction

Not every item on the payslip reduces the net salary, and not every contribution you pay is a deduction.

Family allowances are processed through payroll and paid out, not deducted. They also don't form part of the relevant salary as long as they stay within the range customary for the location or industry – so they don't increase social security deductions. They are funded through the family compensation fund, and you as the employer bear this contribution alone. The rates vary from canton to canton.

Expenses are reimbursements, not salary. They are only added to the net salary after the deductions. How to settle and book them correctly is shown in the guide to expense reports.

And the premium for occupational accidents, as described above, is entirely part of your employer costs. The same distinction applies at the end of the year: on the salary statement (Lohnausweis), section 9 may only show the employee share for AHV, IV, EO, ALV and NBU, never an employer contribution.

A worked example: CHF 7,000 gross

A concrete case shows what the deductions mean in figures: a 38-year-old employee, full-time, monthly salary CHF 7,000 and therefore an annual salary of CHF 84,000. The coordinated salary is CHF 84,000 minus CHF 26,460, i.e. CHF 57,540. For the BVG we use the statutory minimum rate of 10%, for NBU an example rate of 1.0%.

So from CHF 7,000 gross, about CHF 6,242 net remains. For a 56-year-old with the same salary, it would be about CHF 192 less because of the higher retirement credit of 18%; for a 27-year-old, about CHF 72 more.

When there are no deductions or lower ones

Four situations mean that less or nothing is deducted.

• Small salaries: If the relevant salary per employment relationship does not exceed CHF 2,500 in the calendar year, contributions are only levied at the request of the insured person. Exceptions are people employed in private households – where contributions must always be settled – and people working in the arts and media
• Young employees: The obligation to contribute begins on 1 January following the 17th birthday. Before that, no AHV, IV, EO or ALV contributions are due.
• Employees of retirement age: Anyone who keeps working after the reference age still pays AHV, IV and EO, but benefits from an allowance of CHF 16,800 per year or CHF 1,400 per month.
• Salaries below the BVG entry threshold: Below an annual salary of CHF 22,680, there is no mandatory BVG coverage and therefore no pension fund deduction.

One detail of the retirement-age allowance is worth knowing: it applies separately to each employment relationship, and employees can waive it if they want to close contribution gaps. They must tell you about this waiver in good time, at the latest with the first salary payment of the calendar year.

Calculate payroll deductions automatically

Keeping all these rates, limits and exceptions up to date by hand is the real work in payroll – and the point where mistakes happen. If you run your accounting in Infinity, you can process salaries 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 accounting. If a salary or workload 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 – so salary data subject to reporting goes directly to tax offices and social insurances.

Two points belong in an honest assessment. Infinity Payroll is an add-on and requires an active Infinity subscription; it costs CHF 9 per employee per month excl. VAT. And it covers the usual pay models – fixed monthly salaries, hourly and daily rates, variable components such as commissions or allowances – but it is not designed for very complex industries such as staff leasing.

Frequently asked questions about payroll deductions

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