How to run payroll in Switzerland

Switzerland employers are required to pay employees monthly. The standard pay date is the last working day of each month, though some companies choose the 25th.

The Swiss payroll system is straightforward but includes several mandatory components beyond regular salary. Here's how the complete cycle works:

Payment frequency and timing

Most Swiss companies process payroll monthly, with payments due by the last working day of the month. Some organizations opt for the 25th to allow processing time for international transfers.

Legal requirements:

• Salaries must be paid at least monthly
• Payment delays beyond agreed dates can trigger penalty interest at 5% annually
• Employees must receive advance notice of any pay date changes

13th month salary

The 13th month payment is mandatory in Switzerland, typically paid in December alongside regular salary. Some companies split it between summer vacation (June) and December.

Calculation method:

• Full 13th month for employees working the complete calendar year
• Prorated based on actual months worked for partial-year employees
• Includes base salary but excludes overtime and bonuses

Tax treatment: The 13th month payment is subject to regular income tax and social security contributions, calculated at standard rates.

Holiday and vacation pay

Swiss employees receive minimum 4 weeks paid vacation (5 weeks for employees under 20 and over 50). Vacation pay is built into monthly salary rather than paid separately.

Vacation payment rules:

• Vacation days must be taken within the calendar year or by April 30th of the following year
• Unused vacation can only be paid out in exceptional circumstances
• Vacation pay continues during the first 3 weeks of sick leave (varies by canton)

Payment methods and currency

Bank transfer requirements:

• All salary payments must be made to Swiss or EU bank accounts
• Payments in CHF are mandatory for Swiss-resident employees
• International wire transfers typically take 1-2 business days

Payslip delivery: Companies can provide payslips electronically or on paper. Electronic delivery requires employee consent and secure access systems.

Language considerations: Payslips must be provided in the local official language (German, French, or Italian) or English with employee agreement.

Before your first payroll run in Switzerland, you'll need three separate tax registrations - federal, cantonal, and communal. Each canton handles registration differently, so budget 2-4 weeks for the complete process.

Income tax brackets

Switzerland operates a complex three-tier tax system. Federal income tax applies nationwide, while cantonal and communal taxes vary significantly by location.

Federal income tax rates for 2026:

Cantonal and communal taxes add 15-25% in most locations. Zug has the lowest combined rates (around 22% total), while Geneva and Basel-Stadt reach 40%+ for high earners.

Withholding requirements

Employers must withhold taxes at source for all non-resident employees and Swiss residents in specific situations. Most Swiss residents file annual returns instead of having taxes withheld.

Who requires withholding

You'll withhold taxes for employees who:

• Hold B or L permits (temporary residents)
• Earn over CHF120,000 annually (regardless of permit)
• Work in hospitality, construction, or cleaning industries
• Are cross-border commuters from neighboring countries

Monthly filing deadlines

Submit withholding tax returns by the 15th of the following month. Late submissions incur penalties of 1-3% of the tax amount, with minimum fines of CHF50 per employee.

Annual reconciliation occurs between January-March. Employees can claim refunds for overpaid taxes during this period.

Tax registration

Federal registration

Register with the Federal Tax Administration (FTA) within 30 days of hiring your first employee. You'll need:

• Company registration documents
• Proof of business address
• Employment contracts for initial hires

The process takes 5-10 business days and costs CHF100.

Cantonal registration

Each canton requires separate registration for cantonal and communal taxes. Processing times vary from 1-3 weeks depending on location.

Geneva and Zurich offer online registration, while smaller cantons may require paper submissions. Expect to provide the same documentation as federal registration plus local business permits.

Special tax considerations

Non-resident taxation

Non-residents pay withholding tax on Swiss-source income only. Rates vary by canton but typically range from 4.5% (Zug) to 8.5% (Geneva) for standard income levels.

Cross-border workers from Germany, France, Italy, and Austria benefit from special agreements that may reduce withholding rates or allow taxation in their home country.

Tax treaty benefits

Switzerland maintains tax treaties with 100+ countries. Employees may claim reduced withholding rates by submitting treaty claim forms to cantonal authorities.

Processing treaty claims takes 30-60 days, so file early to avoid cash flow issues for affected employees.

Common tax mistakes

Incorrect permit classification accounts for 40% of compliance issues. B-permit holders always require withholding, regardless of salary level. The penalty for missed withholding is 100% of the unpaid tax plus interest.

Missing communal tax registration catches many employers. Some municipalities require separate registration even when the canton handles collection. Fines start at CHF500 per missed filing.

Late annual reconciliation creates problems for employees expecting refunds. Submit reconciliation forms by March 31st to avoid processing delays that can extend into the following tax year.

The biggest employer cost in Switzerland? Occupational pension (BVG) at up to 8.5%. But that's just the start of your contribution obligations.

Contribution breakdown

Here's what you'll pay on top of every salary:

Total employer cost example

For a CHF 60,000 annual salary, you'll pay:

• Base salary: CHF 60,000
• AHV/IV/EO: CHF 3,180
• Unemployment: CHF 660
• Occupational pension: CHF 2,100-5,100
• Accident insurance: CHF 420-1,680
• Family allowances: CHF 1,080-2,100
• Administrative costs: CHF 36

Total employer cost: CHF 67,476-72,756 Cost multiplier: 1.12-1.21 (you pay 12-21% more than base salary)

Contribution caps and ceilings

AHV/IV/EO has no cap - you'll pay 5.3% on every franc of salary, even for executives earning millions.

Unemployment contributions stop at CHF 148,200 annually. High earners save CHF 1,630+ per year once they hit this threshold in September.

BVG pension only applies to income between CHF 25,725 and CHF 88,200. Employees earning less pay no pension contributions. Those earning more don't pay BVG on amounts above CHF 88,200.

Registration requirements

You must register with multiple agencies before your first payroll:

Compensation office (AHV) - Register within 30 days of hiring your first employee. You'll need your business registration, employee contracts, and estimated annual payroll.

Pension foundation - Choose and register with a BVG provider before employees start work. Compare rates - they vary significantly between providers.

Accident insurer - Register with SUVA or a private insurer within 14 days. Your industry classification determines your rates.

Family allowance fund - Registration required in each canton where you have employees.

Payment deadlines

Monthly contributions are due by the 25th of the following month. January contributions must be paid by February 25th.

Quarterly reporting is required for most businesses. Submit wage statements and pay contributions by the 25th of the month following each quarter.

Late payments incur 5% annual interest plus administrative fees of CHF 50-200 per reminder. The compensation office doesn't negotiate - automate your payments to avoid penalties.

Maternity leave in Switzerland is 14 weeks at 80% pay. Here's how it affects your payroll.

The good news? Social insurance covers most of it. But you'll still need to handle the calculations and potentially top up payments depending on your company policy.

Annual leave

Every employee gets 20 days minimum vacation (4 weeks). Employees under 20 get 25 days (5 weeks).

Calculate vacation pay at their regular daily rate. No special formulas needed - just pay them normally during vacation.

Carryover and payouts

Unused vacation carries over, but employees must use it within one year. After that, you can forfeit it if you gave proper notice.

When employees leave, pay out all unused vacation at their current daily rate. This includes any carried-over days from the previous year.

Sick leave

You pay 100% salary for sick leave, but only for a limited time. The exact duration depends on how long they've worked for you:

• First year: 3 weeks paid sick leave
• After first year: Varies by canton (typically 4-25 weeks)

Insurance coverage

After your obligation ends, daily sickness insurance may cover 80% of salary. Many employers buy this insurance to limit their exposure.

Employees need a medical certificate after 3 consecutive days of illness. Some employers require it from day one - that's your choice.

Parental leave

Maternity leave

14 weeks at 80% pay, covered by social insurance up to CHF 220 per day (CHF 80,300 annually). You collect the payments from social insurance and pay the employee normally.

Many companies top up to 100% salary. If you do this, you'll pay the difference between insurance payments and full salary.

Paternity leave

2 weeks at 80% pay from social insurance, same daily maximum as maternity. Fathers can take this within 6 months of birth.

The process works the same - you advance the payments and get reimbursed by social insurance.

Public holidays 2026

Switzerland has 8-15 public holidays depending on the canton. Here are the national ones:

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Holiday pay rules

Work on public holidays? Pay double salary (100% premium). If the holiday falls on a weekend, most cantons don't give a replacement day.

Mandatory benefits affecting payroll

13th month salary

Not legally required, but standard practice. Most employment contracts include it. Pay it with December salary or split across the year.

Calculate it as 1/12 of annual salary. Include it in social insurance calculations.

Pension fund contributions

Employees contribute 4.2-25% of salary to occupational pensions (2nd pillar). You match their contribution as employer.

Deduct their portion from gross salary. Your matching contribution is an additional payroll cost, not deducted from their pay.

Accident insurance

You pay 0.7-14% of salary for accident insurance (higher rates for riskier jobs). This covers both occupational and non-occupational accidents.

Employees see this as a benefit, but it doesn't affect their take-home pay since you cover the full cost.

Switzerland requires you to keep payroll records for 10 years. Lose them and face CHF 10,000 fines plus potential criminal charges for tax evasion.

The Swiss take compliance seriously, with cantonal tax authorities conducting regular audits and the federal government tracking every franc. Miss a deadline or file incorrectly, and penalties add up fast.

Monthly filing requirements

You'll submit monthly social security contributions through the ELM portal (Elektronische Lohnmeldung) by the 25th of the following month. This covers AHV/IV/EO, unemployment insurance, and accident insurance contributions.

Late submissions trigger CHF 50 daily penalties, capping at CHF 5,000 per filing period. The system locks you out after three consecutive late filings, requiring manual processing that costs an additional CHF 200 per submission.

Monthly withholding tax (Quellensteuer) for foreign employees must be remitted by the 15th of the following month to cantonal authorities. Each canton has its own portal system and penalty structure.

VAT reporting for benefits

If you provide taxable benefits exceeding CHF 500 per employee monthly, you'll need separate VAT reporting through the Federal Tax Administration portal by the 25th of the following month.

Annual reporting

Year-end reconciliation deadlines vary by canton but typically fall between January 31 and February 28, 2027 for 2026 earnings. Submit through cantonal tax portals with detailed employee earnings statements.

Employee salary certificates (Lohnausweis) must be distributed by January 31, 2027. These replace traditional tax statements and employees use them for their personal tax returns.

The social security reconciliation with compensation offices happens by March 31, 2027. Discrepancies result in immediate payment demands plus 5% annual interest from the original due date.

Audit requirements

Cantonal authorities audit approximately 15% of employers annually, focusing on companies with foreign employees or significant benefit programs. They'll request complete payroll records, employment contracts, and benefit documentation with 10 working days' notice.

Employee documentation

Employment contracts must include specific salary details, working time arrangements, and social security information. Contracts in German, French, or Italian are legally required - English versions need certified translations.

Monthly payslips must show gross salary, all deductions with rates, net pay, and year-to-date totals. Missing elements trigger CHF 100 fines per payslip during audits.

Language requirements

All payroll documents must be in the local official language. German dominates in most cantons, French in western regions, and Italian in Ticino. Romansh is rarely required but check with Graubünden authorities for specific roles.

Penalties and violations

Underpaying social security contributions results in immediate payment demands plus 5% annual interest calculated from the original due date. The compensation offices can freeze company bank accounts for amounts exceeding CHF 50,000.

Regulatory bodies

Federal Social Insurance Office (BSV) oversees AHV/IV/EO contributions through cantonal compensation offices. Each canton operates independently with different systems and contact methods.

State Secretariat for Economic Affairs (SECO) handles unemployment insurance compliance. Their online portal at www.seco.admin.ch provides contribution rate updates and filing instructions.

Cantonal tax authorities manage withholding tax and employment compliance. Major cantons maintain English-language support:

• Zurich: www.zh.ch/steuern (English available)
• Geneva: www.ge.ch/impots (French/English)
• Basel-Stadt: www.steuerverwaltung.bs.ch (German/English)

The Federal Tax Administration (www.estv.admin.ch) handles VAT compliance for employee benefits and provides multilingual guidance documents updated quarterly.

Using 2025 tax brackets? You're withholding incorrectly. Here's what changed.

Switzerland updated several key payroll components for 2026, with most changes taking effect January 1st. The biggest impact hits federal tax withholding and pension contributions.

Federal tax withholding adjustments

Federal Income Tax Brackets - Effective January 1, 2026

Switzerland adjusted federal tax brackets upward by 2.1% to account for inflation. The changes affect all employees earning above CHF 31,600 annually.

Key bracket changes:

• Income from CHF 31,600 to CHF 41,400: Rate decreased from 0.77% to 0.75%
• Income from CHF 55,200 to CHF 72,500: Rate increased from 2.64% to 2.70%
• Top bracket (above CHF 843,000): Rate remains at 11.5%

Impact: Employees earning CHF 60,000 annually will see federal withholding increase by approximately CHF 36 per year.

AHV/IV/EO contribution rate increase

Old-Age and Survivors' Insurance (AHV) - Effective January 1, 2026

The AHV contribution rate increased from 8.7% to 8.8% of gross salary, split equally between employer and employee.

• Employee contribution: 4.4% (previously 4.35%)
• Employer contribution: 4.4% (previously 4.35%)
• Maximum contributory salary: CHF 148,200 (unchanged)

Cost impact: For an employee earning CHF 80,000, the additional cost is CHF 40 annually for both employee and employer.

Occupational pension changes

BVG Minimum Salary Threshold - Effective January 1, 2026

The mandatory occupational pension entry threshold increased to CHF 22,050 (from CHF 21,510 in 2025).

Coordination deduction also increased to CHF 25,725 (from CHF 25,095).

Impact: Employees earning between CHF 21,510 and CHF 22,050 are no longer subject to mandatory BVG contributions.

Upcoming changes for late 2026

Unemployment Insurance (ALV) rates will increase by 0.1% starting July 1, 2026, affecting employees earning above CHF 148,200 annually.

The federal government also announced plans to review cantonal tax harmonization rules, with potential changes taking effect in 2027.