An introduction to Swiss payroll Module 3

An introduction to Swiss payroll Module 3

Agenda Gross to Net Pay the Requirements Overview Social Insurance Pension Schemes

Gross to Net Pay the Requirements Overview

Social Insurance

AHV, Basic Pension Insurance IV, Disability EO, maternity and army service insurance Maternity insurance (GE) FAK, family allowance UVG, work-related accident insurance UVG, non-work related accident insurance UVG-Z, additional accident insurance KTG, sick leave insurance Health insurance Stop-Loss insurance, in conjunction with an collective health insurance ALV, unemployment BVG, Pension Social insurances overview

Social security AHV/IV/EO, ALV, Maternity (GE), FAK Overview There is a set of mandatory insurances, set by the state but with small variances in each canton. The canton that the employer is located in is used to determine the social security rates Each component is based on a different rate and and a different base salary with varying caps and ceiling All insurance must be reported and paid to the same authority at the same time It is possible to deal with more than one social security authority depending on the set up of the company Maternity insurance is only applicable to employees based in Geneva FAK employee deductions are only applicable to employees in VS

AHV/IV/EO The basic pension insurance is known as Alters-, Hinterlassenen- und Invalidenversicherung (AHV) IV provides the disability pension EO provides the maternity insurance and compensates for salary paid when an employee is in the military service

IV/EO Who is insured? All employees based in Switzerland on a local contract Liability starts on the 1 st January in the year a person becomes 18 years of age Liability ends with retirement (64 women and 65 men) A retired person who continues working is still liable but receives a free allowance of CHF 1400 per month

ALV The ALV provides the unemployment insurance Employee Deductions and Employer Contributions The employee deduction is 1.1% capped at CHF 148 200 and 0.5% for salaries above. The company contribution is 1.1% capped at CHF 148 200 and 0.5% for salaries above. Who is insured? All employees based in Switzerland on a local contract. Liability starts on the 01.01. of the year when a person becomes 18 years of age. Liability ends with retirement (64 women and 65 men).

Maternity - Republic and Canton of Geneva Geneva (only) state insurance for the extended maternity leave The maternity insurance is only applicable if the employee is based in the Canton of Geneva. Employee Deductions and Employer Contributions The employee deduction is 0.041%. The company contribution is 0.041% Who is insured? All employees based in Geneva on a local contract Liability starts on the 1 st January when a person becomes 18 years old Liability ends with retirement A retired person who continues working is still liable but receives a free allowance of CHF 1400 per month.

FAK - Family allowance FAK pays a monthly child allowance per child up to the age of 16 and an education allowance for 16 to 25-year-olds. The amounts may vary per canton and number of children In certain cantons, FAK also provides a birth and/or adoption allowance as a one off payment. Amounts may also vary per canton and number of children Payments are subject to an application process and approval by the social security authority Everyone who is liable for social security (AHV/IV/EO) is covered

FAK Family allowance Employee Deductions & Employer Contributions Employers contribute between 0.1%-4% of the total social security (AHV) liable gross pay. The rates vary depending on the social security authority Employees have no deduction. The only exception is the Canton of Valais. The deduction is 0.3%

FAK Family allowance Differential payment If both parents are employed in different cantons and one parent is already receiving the child allowance in a canton, the other parent has the right to claim the difference if the amount paid is higher in the other canton.

FAK - Birth and adoption allowance 1. VS The second amount is payable per child in case of twins or more. The same is applicable for adoption if someone adopts more than one child at a time. 2. GE - First amounts for the first two children, second amount for the third and following. Canton Birth Allowance Adoption Allowance LU 1000 1000 UR 1000 1000 SZ 1000 - FR 1500 1500 VD 1500 1500 VS1 2000/3000 2000/3000 NE 1200 1200 GE2 2000/3000 2000/3000 JU 850 850

Family allowance child & education allowance 1) ZH - First amount for children up to 12 years of age, second amount for children over 12 years of age. 2) LU - First amount for children up to 12 years of age, second amount for children over 12 years of age. 3) ZG - First amount for children up to 18 years of age, second amount for children over 18 years of age. 4) FR - First amounts for the first two children, second amount for the third and following. The amounts mentioned are the minimum, every authority can increase the amount if funds are available. 5) VD - First amounts for the first two children, second amount for the third and following. Child allowance will be matched with education allowance should the child be under 16 when education starts. The amounts mentioned are the minimum, every authority can increase the amount if funds are available. 6) VS - First amounts for the first two children, second amount for the third and following. Child allowance will be matched with education allowance should the child be under 16 when education starts. The amounts mentioned are the minimum, every authority can increase the amount if funds are available. 7) NE - First amounts for the first two children, second amount for the third and following. The amounts mentioned are the minimum, every authority can increase the amount if funds are available. 8) GE - First amounts for the first two children, second amount for the third and following. Education allowance will also be paid if a child is unable to work (16-20 years of age)

FAK Family allowance Application process Entitlement New local hires will let you know if they need to receive child allowance Foreigners moving to Switzerland on a local contract will need to be asked if they have children Only one parent is entitled to receive the allowance. There are certain criteria for determining which parent is entitled to the allowance

FAK Family allowance Application process completing the from The employee has to complete the application form from the social security authority and hand it back to the employer. The following documents are to be enclosed: Copy of Birth certificate or the family booklet Copy of the child s permit (for foreigners) Confirmation of ongoing education from the university, school or apprenticeship if the child is over 16 years of age Copy of divorce decree if parents are divorced The employer completes the rest of the form and checks if all necessary documents are enclosed. The application is then sent to the authorities.

FAK Family allowance Application process approval by social security The social security authority will consider the case and send a confirmation of payment. The confirmation is usually either sent to the employer and a copy to the employee or both copies go to the employer, one of which needs be forwarded to the employee The confirmation details the payment period and the amount to be paid

FAK Family allowance Application process rejection by social security The social security authority will consider the case and if the application is not successful send a rejection. The rejection is usually either sent to the employer and a copy to the employee or both copies go to the employer, one of which needs be forwarded to the employee The rejection will detail the reason for it. The next steps can be taken once the reason for rejection is known

FAK Family allowance Payments to employees Usually the child allowance will be paid through the payroll to the employee The employer receives a credit on his social security invoice in the same amount. Only to start paying once the confirmation is received Certain social security authorities pay the employee directly and there will be no credit on the social security invoice

FAK Family allowance Once the confirmation is received the child allowance can be processed as a payment on payroll Payments are not liable for social security but are taxable It is important to enter start and end date in the payroll system to ensure no overpayment is made The child allowances must be included in the salary certificate

FAK Family allowance Processing on payroll If payment made by Social Security Payments are made directly by the social security Social security sends a monthly list with payments made to employees These payments need to be taxed via the payroll. This applies only to taxed at source employees There should be a note on the salary certificate that the child allowance amounting xx has been taxed The social security authority sends a year end document to the employees to include in the tax return. This should be confirmed with the authority

FAK Family allowance Managing the child allowances during the year The end dates need to be reviewed on a monthly basis A confirmation of ongoing education needs to be provided on a yearly basis (before the end date) so the payment of the allowance can be continued. The education confirmation letter needs to be sent to the social security authority Employees need to be reminded to submit the necessary documents

FAK Family allowance Notification of change of circumstances Unpaid leave longer than 3 months Child over 16 stops education All changes in personal situation involving parents and the child

Accident insurance (UVG) Every employer is obliged to provide an accident insurance for its employees. The accident insurance is usually provided by a private insurer unless the employer works in a certain type of industry then the accident insurance will be provided through SUVA, a state insurance The accident insurance is split in two types of insurances: Work- and non-work-related accidents There is also the option to extend the basic coverage with an additional policy (UVG-Z)

Accident insurance (UVG) Details on how to pay an employee during the leave of absence is outlined in the employment contract or collective bargaining agreement Payments from the insurance for salary cover (Taggeld) are to be processed on the payroll. These payments are not liable to social security The employee could potentially receive more net pay during sickness

Accident insurance (UVG) UVG (basic) Covers 80% of the salary after the 3rd day of absence (only up to the UVG maximum of 126 000 p.a.) - hospital costs will be covered in 3rd class only UVG-Z (additional) Salary coverage can be extended from day one and also above the UVG maximum of 126 000 p.a. - hospital costs will be covered in 1st class

Accident insurance (UVG) How to register for an accident insurance? The accident insurance is usually provided by a private insurer unless the employer works in a certain type of industry then the accident insurance will be provided through SUVA, a state insurance It may be advisable to go through an insurance broker to ensure all needs are covered as there are multiple solutions and benefit options (legal minimum or additional benefits) Once the policy is signed the contract is in force

Accident insurance (UVG) Contributions and deductions Usually, the employer pays the work-related accident insurance contributions and the non-work-related accident insurance will be deducted of the employee s pay. Companies are free to cover both of the contributions with no deductions for their employees if they wish The premium for the accident insurance depends on the nature of the business and the volume of salaries Percentages can be found in the insurance policy

Accident insurance (UVG) Leavers An employee who leaves and has no employment afterwards (therefore no accident insurance) has two options: Remain with the same insurance on a personal contract. The employer is then to complete a form (Abredeversicherung) Or include the accident coverage in the health care insurance

Accident insurance (UVG) Payment of contributions and deductions The accident insurance will send an invoice for the full year based on the insured salaries according to the policy. The invoice will be sent around December/January Payment terms are indicated on the invoice The final invoice will be issued once year end is filed

Year end Accident insurance (UVG) Towards the end of the year the accident insurance will send a salary declaration form This form needs to be completed and returned The payroll system will have a special report listing the amounts to be declared The deadline to return the form will be indicated in the cover letter

Accident insurance (UVG) Payroll processing Employees who work less than 8 hours a week are only insured for work-related accidents (No deduction for non-work related insurance) UVG basic is capped, CHF 126 000 p.a. is insured. No deductions or contributions for higher salaries UVG-Z calculation base, deductions and contributions vary. The insurance policy will provide the details

Sick leave salary insurance (KTG) KTG (Krankentaggeld) is a salary cover insurance in case of long-term sickness It is not mandatory but most companies choose to insure its workforce The premium for this insurance is usually halved unless the company agrees to cover the total cost The insurance is provided by most insurance companies Standard KRG covers 80% of the salary after a 30 days waiting period for 730 days (minus waiting period)

Sick leave salary insurance (KTG) Personalised KTG insurance Coverage can be extended up to 100% of the salary The waiting period can be reduced or even be extended All these factors will have an impact on the premium

Sick leave salary insurance (KTG) How to register for a KTG insurance? The KTG insurance is usually provided by a private insurer It may be advisable to go through an insurance broker to ensure all needs are covered as there are multiple solutions and benefits in place Once the policy is signed the contract is in force

Sick leave salary insurance (KTG) Contributions and deductions The premium for this insurance is usually halved unless the company agrees to cover the total cost The premium for the KTG insurance depends on the nature of the business and the volume of salaries Percentages can be found in the insurance policy

Sick leave salary insurance (KTG) Changes during the year There is no data exchange between the insurance during the year apart from when an employee is sick. Payroll or HR might need to inform the insurance even before the waiting period is over. The insurance policy will outline the details.

Sick leave salary insurance (KTG) Leavers An employee who leaves and has no employment afterwards has the option to remain with the same insurance on a personal contract The employer is then to complete a form and send it to the employee Note: Some insurances require the employer to hand over the form to every leaver

Sick leave salary insurance (KTG) Payment of contributions and deductions The KTG insurance will send an invoice for the full year based on the insured salaries according to the policy. The invoice will be sent around December/January. Payment terms are indicated on the invoice The final invoice will be issued once year end is filed

Sick leave salary insurance (KTG) Year end Towards the end of the year the KTG insurance will send a salary declaration form This form needs to be completed and returned The payroll system will have a special report listing the amounts to be declared The deadline to return the form will be indicated in the cover letter

Pension schemes

The Three Pillars The pension system rests on 3 pillars: Federal Old Age, Survivors and Invalidity Insurance Occupational Pension Schemes Private Pension Schemes

Federal Old Age, Survivors and Invalidity Insurance The basic pension insurance is known as Alters-, Hinterlassenen- und Invalidenversicherung (AHV) in German, Assurance vieillesse et survivants (AVS) in French and Assicurazione vecchiaia, superstiti e invalidità (AVS) in Italian According to article 112 of the Swiss federal Constitution, the first pillar should cover basic living expenses adequately It is a PAYGO system, financed by contributions from employees and employers, from the selfemployed and from the people not engaged in paid employment.

Federal Old Age, Survivors and Invalidity Insurance The authorities also contribute via direct funding, VAT and the revenues of the tax on gambling clubs People s contributions are collected and benefits are distributed by different bodies, some managed by the cantonal or federal authorities, some managed by union of employers, like the Fédération des Entreprises Romandes Genève The first pillar provides old age pensions as well as benefits for widowers and orphans The ordinary age of retirement is 65 years for men, 64 for women at the moment It can be anticipated or postponed, with financial consequences

Pension scheme (BVG) The pension scheme in Switzerland is mandatory and usually provided by insurance companies or specialised pension funds Employees earning more than CHF 21 150 annually need to be insured. However, the rules of each pension fund provider or insurance company vary: therefore, the benefits and insured salaries can be better than the minimum required by law Usually the age of the worker will be reflected in the rates and these change on the employee s birthday

Occupational Pension Schemes The occupational pension scheme is known as Berufliche Vorsorge in German, Prévoyance professionnelle in French and Previdenza professionale in Italian In daily life, it is more often referred to as the second pillar (German: die Zweite Säule, French: le deuxième pilier, Italian: il secondo pilastro) According to article 113 of the Swiss federal Constitution, the occupational pension scheme, together with the Old-age, Survivors' and Invalidity Insurance, enables the insured person to maintain his or her previous lifestyle in an appropriate manner It is a funded pension plan It is compulsory for employees and is financed by both employees and employers The sum of the contributions of the employer should be at least equal to the sum of the contributions of his employees

Occupational Pension Schemes It is also open to the self-employed on a voluntary basis The contributions differ according to the regulations of the institutions providing it Pension funds are organised as foundations They can be created by authorities or private corporations for their own personnel, by private companies, like insurance companies, and be opened to any company, or by professional associations or union of employers, like the Fédération des Entreprises Romandes Genève, for their members The second pillar offers old age pensions. Some of the pension funds also provide benefits in case of invalidity and benefits to survivors in case of premature death Under certain conditions, the second pillar can be used before retirement to buy a principal home or to start an independent activity

Private Pension Schemes The third pillar consists of private pension schemes provided by the private sector. It is optional and financed entirely by the person

Pension scheme (BVG) How to register for a pension scheme An employer is free to choose a pension scheme with an insurance (Allianz, AXA, Zurich, Basler etc.) or a specialised pension fund provider (Swisslife, Pax etc.) It may be advisable to go through an insurance broker to ensure all needs are covered since there are multiple solutions and benefit options There is the possibility of separate polices for senior management and remaining employees Once the policy is signed the contract is in force

Pension scheme (BVG) Pension scheme policy (Vorsorgereglement) The following payroll relevant terms and conditions can be found in the policy: Entry level (minimum salary) Insured salary How to calculate contributions and deductions Special arrangements during long term sick leave

Pension scheme (BVG) How to register an employee with the pension scheme: Either HR or payroll will complete a registration form for the employee This form will be sent to the pension fund The pension fund will send confidential forms, a health questionnaire and payment instructions for prior savings to the employee directly to finalize the registration process After the registration is finalized, the employee will receive an insurance statement (either sent to the employee or to the employer in a sealed envelope to be distributed) The pension fund will send a statement detailing the contributions and deductions to be processed

Pension scheme (BVG) Contributions and deductions Pension contributions are calculated as fixed amounts based on the age and the income of the employee. Employees and employers usually pay equal amounts to the pension fund (according to the statement of the pension fund) Note: the statement might not be available prior to the first payday. It is advisable to calculate an approximate amount (to be corrected next pay run) to avoid double deduction in the following month

Pension scheme (BVG) Changes during the year are to be submitted with the required form to the pension fund: Salary FTE percentage Personal details such as: Address change marriage divorce or deceased partner

Pension scheme (BVG) Leavers The pension fund needs to be informed if an employee leaves the company The necessary form needs to be completed by either HR or payroll

Pension scheme (BVG) Payment of contributions and deductions to the pension fund Usually payments are due by 31 st December for the current year. Advance payments can be made at any time Payment terms may vary by insurance. Details can be found in the policy Interest is due for late payments

Pension scheme (BVG) Year end The pension fund will send a list to confirm salaries and FTE s for the following year The deadline to return the list will be indicated in the cover letter

Pension scheme (BVG) Data exchange Certain insurances or pension providers do have portals in place whereas all the information can be submitted online There may also be the possibility to set up an automated interface if there is a large population of employees

End of Session