Your first employee: salary, social security and what an employee really costs

Before the first working day

1. Compensation fund: Register as an employer with the cantonal compensation fund or with the compensation fund of your industry association. It collects contributions for AHV (old-age and survivors' insurance), IV (disability insurance), EO (income compensation), unemployment insurance and family allowances.
2. Accident insurance: Every employee must be insured against occupational accidents. Anyone who works for you at least eight hours a week is also insured against non-occupational accidents. Depending on the industry, Suva is responsible; otherwise you choose a private insurer.
3. Pension fund: Occupational pension provision (BVG) is mandatory for an annual salary above CHF 22,680. You join a collective foundation or an industry association scheme.
4. Sickness daily allowance insurance: Not required by law, but strongly recommended. Without it, you continue to pay the salary yourself for a limited period in case of illness.
5. Withholding tax: For foreign employees without a C permit (settlement permit), you deduct the tax from the salary and report it to the canton. Exempt are people married to a Swiss citizen or to a holder of a C permit.

What a salary really costs

The employer's contributions come on top of the gross salary. An example for a 40-year-old employee with a gross salary of CHF 80,000:

AHV, IV, EO (5.3%)

CHF 4,240

Unemployment insurance (1.1%)

CHF 880

Family compensation fund (assumed 1.5%)

CHF 1,200

Pension fund, employer's share of the retirement credit (5% of CHF 53,540)

CHF 2,677

Accident, sickness allowance and risk premiums, administration costs (assumption)

around CHF 1,000

Employer costs on top of the gross salary

around CHF 10,000

The insured salary in the pension fund is the gross salary less the coordination deduction of CHF 26,460. At this age, the statutory retirement credit is 10 percent, of which the employer pays at least half. The family compensation fund rates and insurance premiums depend on the canton, industry and contract. For budgeting purposes, allow for 12 to 14 percent on top of the gross salary, and more for older employees.

Calculator

What does a salary cost you?

2026 figures. The family compensation fund rates and premiums depend on the canton, industry and contract and can be adjusted.

Gross salary per year (CHF) Age of the employee25 to 3435 to 4445 to 5455 to 65 Family compensation fund (%) Other premiums and costs (%)

Additional employer costs

Total cost per year

Every month and every year

• Payslip: Every employee receives a payslip showing the gross salary, all deductions and the net salary.
• Instalment payments: The compensation fund invoices provisional contributions, usually monthly or quarterly, based on the payroll you reported.
• Payroll declaration: After the end of the year, you report the actual salaries to the compensation fund by 30 January and to the accident insurer. The final statement follows. The pension fund, by contrast, is notified of the relevant annual salary when someone joins and at the start of each year.
• Salary certificate: At the beginning of the following year, every employee receives a salary certificate (Lohnausweis) for their tax return.
• Adjust the payroll total: If your payroll rises sharply, notify the compensation fund. Otherwise a large back payment with late-payment interest will follow.

Part-time, hourly wages and temporary help

Even for small workloads, social security applies from the first franc. The only exception is for minor salaries of up to CHF 2,500 per year and employer: in that case, AHV contributions are only settled at the employee's request. This exception does not apply to domestic staff and some professions in the arts.

For hourly wages, holiday and public holiday pay must be shown separately and clearly, otherwise it is considered unpaid. And anyone who works less than eight hours a week is only insured against occupational accidents. Accidents in their free time are then covered by their own health insurance.

Common mistakes

• Flat-rate expense allowances without an approved expense policy, which are treated as salary in an audit
• Private use of a company car that is not shown on the salary certificate
• Family members working in the business who are not correctly registered with social security
• Part-time workloads with several employers, where the pension fund obligation is assessed incorrectly
• No written employment contract with clear rules on working hours, holidays and notice

Keeping it simple

For one to three employees, dedicated payroll software is rarely worth it. Many accounting programs have a payroll module, or payroll can be outsourced. What matters is that payroll, accounting and social security records match at the end of the year. This reconciliation is also checked by the auditors and, during an employer audit, by the compensation fund.