Social insurance and payroll accounting for SMEs in Switzerland
Basics of social security obligations
Payroll accounting in Switzerland is subject to a complex set of social security obligations. Companies must take out and manage various mandatory insurance policies, the contributions for which are divided between the employer and employee.
The central social insurance schemes include AHV/IV/EO (old-age and survivors' insurance, disability insurance, income compensation scheme), unemployment insurance (ALV), accident insurance (UVG) and occupational benefits insurance (BVG). In addition, there are cantonal regulations for family allowances (FAK) and, depending on the collective labour agreement, other obligations such as daily sickness benefits insurance (KTG).
Registration and login processes
Before the first salary payment, companies must be registered with the relevant AHV compensation fund. The compensation fund is selected either via the industry association or the cantonal compensation fund. Registration with accident insurance depends on the sector to which the company belongs: certain sectors such as construction, industry or catering are subject to compulsory insurance with Suva, while others can choose a private insurer.
The pension fund registration becomes relevant as soon as employees reach the BVG entry threshold of CHF 22,680 annual salary. Registration for withholding tax takes place at the cantonal tax office and applies to all foreign employees without a C residence permit.
Insurance obligations by employee category
BVG insurance obligation
Occupational benefits insurance is mandatory for employees with an annual salary of CHF 22,680 or more. The insurance obligation varies according to age: employees under the age of 17 are not insured, between the ages of 17 and 24 there is only risk insurance for death and disability, and from the age of 25 there is also retirement savings. Once the normal retirement age has been reached, the insurance obligation no longer applies.
Accident insurance
Occupational accident insurance is compulsory for all employees, regardless of their level of employment. Non-occupational accident insurance (NOI) is compulsory from a weekly working time of 8 hours. The premiums for occupational accident insurance are paid in full by the employer, while non-occupational accident insurance premiums are paid by the employee as standard.
Contribution rates and cost structure
Social security contributions are made up of various components:
| Insurance | Employer share | Employee share | Assessment basis |
|---|---|---|---|
| AHV/IV/EO | 5.3% | 5.3% | Total salary |
| ALV | 1.1% | 1.1% | Up to CHF 148,200, over CHF 148,200 0.5% |
| FAK | 0.5-3% | 0-1.5% | Varies from canton to canton |
| UVG BU | 0.5-3% | 0% | According to hazard class |
| UVG NBU | 0% | 1-2% | By insurer |
| SNB | At least 50% | At least 50% | Coordinated wage |
The effective non-wage labour costs for employers typically range between 10% and 20% of the gross payroll, depending on the pension fund solution chosen and the industry-specific accident insurance premiums.
Deadlines and reporting obligations
Payroll accounting is subject to various deadlines. Monthly obligations include the salary payment (usually on the 25th of the month) and the withholding tax settlement (by the 30th of the following month). The AHV/IV/EO/ALV settlement with the compensation office takes place quarterly.
Annual reporting obligations are concentrated in January: salary statements must be issued by 31 January and the AHV annual salary declaration must be submitted electronically by 30 January. The BVG salary declaration and UVG salary declaration are also due at the end of January.
Pension fund choice: Decision criteria
Various factors must be taken into account when selecting a pension fund. The funding ratio should be above 100% in order to avoid reorganisation measures. The conversion rate is 6.8% in the mandatory sector, but can be significantly lower in the non-mandatory sector.
The administrative costs vary between CHF 100 and CHF 400 per insured person per year. In addition, the risk benefits (IV pension, lump-sum death benefit) and the flexibility with regard to plan changes and purchase options must be evaluated.
Daily sickness benefits insurance
KTG insurance is not compulsory, but can cover the obligation to continue salary payments in accordance with OR 324a. Without KTG, the employer bears the full risk of continued salary payments in the event of illness. After an agreed waiting period, the insurance covers 80% or 100% of the salary for a maximum of 730 days.
The waiting period has a significant influence on the premium amount: a 14-day waiting period results in premiums of 2.5-3.5% of the payroll, while a 90-day waiting period reduces the costs to 0.8-1.2%. The choice of waiting period should take into account the company's liquidity situation.
Special regulations for foreign employees
Foreign employees without a C permit are subject to withholding tax. The tax rate varies according to canton, marital status and church affiliation. Registration with the cantonal tax office must be made within 8 days of taking up employment.
Cross-border commuters with a G permit are subject to a reduced withholding tax rate of 4.5%, as the main taxation takes place in the country of residence. Social security obligations correspond to those for Swiss employees.
Special features specific to the legal form
Social security obligations vary depending on the legal form of the company. Owners of corporations (GmbH, AG) are considered employees of their own company and are subject to all social security obligations. Owners of partnerships (sole proprietorship, general partnership) are self-employed and only subject to AHV/IV/EO.
Directors' fees of CHF 2,300 or more per year are subject to compulsory AHV insurance, but are not usually subject to compulsory BVG insurance.
Requirements for the payroll software
Professional payroll software must fulfil various technical and regulatory requirements. Swissdec certification enables electronic payroll reporting (ELM) to all relevant insurance companies and authorities. Automatic updates ensure that limits and rates are always up to date.
Other essential functions include a withholding tax module with cantonal rates, automated document creation (salary statements, employer certificates) and interfaces to financial accounting and time recording systems.
Monthly payroll accounting process flow
The monthly payroll run follows a standardised procedure: After updating the master data, variable wage components such as working hours, absences and expenses are recorded. A control run enables a plausibility check to be carried out before final posting.
After approval, the wage payments are triggered and the payslips are distributed to the employees. Integration into financial accounting takes place via the export of the payroll journal.
Change of insurer and cancellation periods
The options for changing insurer vary depending on the social insurance scheme. The AHV equalisation fund cannot be changed. The pension fund can be cancelled at the end of the year with 6 months' notice. Accident insurance can be changed annually, with the exception of mandatory Suva companies. Daily sickness benefits insurance is subject to contract-specific cancellation periods, usually 3 months.
