How to read a payslip?

A Swiss payslip can be a little tough to understand especially when it contains only acronyms like AHV, ALV or NBU. Not too mention these acronyms are different depending on whether you're living the French, German or Italian part of Switzerland. An unreadable payslip just makes an employee not care about how much they pay in taxes or contribute to their pension. But really they should, this is their money. So what if an employee could understand their payslip? Would that enable them to save more? Spend differently? Plan their finances better?

Below is an example of a basic payslip in German that most employees will receive monthly. We'll go through the basic elements.

AHV - Old Age & Survivor's Insurance, Disability Insurance & Loss of Earnings

Acronym Translation

• AHV - Acronym used on a German Payslip
• AVS - Acronym used on a French & Italian Payslip

Rate

• Employee pays 5.300% from their monthly salary
• Company pays 5.300% from the employee's monthly salary

Example

• Monthly Salary - 10,000 CHF
• Employees pays 530 CHF (5.3% x 10,000 CHF)
• Company pays 530 CHF (5.3% x 10,000 CHF)

Criteria

All employed persons must pay contributions to the AHV from 1 January following their 17th birthday. Persons who are not employed must pay contributions from 1 January following their 20th birthday.

ALV - Unemployment Insurance

Acronym Translation

• ALV - Acronym used on a German Payslip
• AC - Acronym used on a French Payslip
• AD - Acronym used on an Italian Payslip

Rate

• Employee pays 1.100% from their monthly salary
• Company pays 1.100% from the employee's monthly salary

Example

• Monthly Salary - 10,000 CHF
• Employees pays 110 CHF (1.1% x 10,000 CHF)
• Company pays 110 CHF (1.1% x 10,000 CHF)

Criteria

Unemployment insurance applies only to salaries that are below 148,200 CHF per year. If an employee makes more than 148,200 then another rate applies.

ALVZ - Additional Unemployment Insurance

Acronym Translation

• ALVZ - Acronym used on a German Payslip
• Compl. AC - Acronym used on a French Payslip
• Compl. AD - Acronym used on an Italian Payslip

Rate

• Employee pays 0.500% from their monthly salary
• Company pays 0.500% from the employee's monthly salary

Example

• Monthly Salary - 15,000 CHF
• ALV Salary - 12,350 CHF (148,200 CHF / 12 months)
• ALVZ Taxable Salary - 2,650 CHF (15,000 CHF - 12,350 CHF)
• Employees pays 13.25 CHF (0.5% x 2,650 CHF)
• Company pays 13.25 CHF (0.5% x 2,650 CHF)

Criteria

Additional unemployment insurance applies only to salaries that are above 148,200 CHF per year.

NBUV - Accident Insurance (Occupational & Non Occupational Rates)

Acronym Translation

• NBUV - Acronym used on a German Payslip
• AANP - Acronym used on a French Payslip
• AINP - Acronym used on an Italian Payslip

Rate

• Occupational Accident Rate - 0.081% (Covered 100% by Company)
• Non Occupational Accident Rate - 1.168% (Company can choose to share the cost with employee. )

Example

• Monthly Salary - 10,000 CHF
• Company makes employee pay 50% of non occupational rate
• Company pays 0.665% (Occupational Accident Rate - 0.081%) & (Non Occupational Accident Rate - 0.584)
• Employee pays 0.584% (Non Occupational Accident Rate - 0.584%)
• Employees pays 58.40 CHF (0.584% x 10,000 CHF)
• Company pays 66.50 CHF (0.665% x 10,000 CHF)

Criteria

Accident insurances will typically cover 80%-100% of the employee's salary. Many company's choose to pay the full 100% salary of the employee's salary. The insurance will typically cover a maximum yearly salary up to 148,200 CHF and so if the company wants to cover a salary above this maximum they will have to open up their wallet.

KTG - Daily Sickness Insurance

Acronym Translation

• KTG - Acronym used on a German Payslip
• IJM - Acronym used on a French Payslip
• IGM - Acronym used on an Italian Payslip

Rate

• Daily Sickness Rate - 1.14% (Covered 100% by Company but Company can assign a share to it's employee up to 50%)

Example

• Monthly Salary - 10,000 CHF
• Company makes employee pay 50% of Daily Sickness. Company cannot make employee pay more than 50% of Daily Sickness Rate.
• Company pays 0.57% - (1.14% / 2)
• Employee pays 0.57% - (1.14% / 2)
• Employees pays 57.00 CHF (0.57% x 10,000 CHF)
• Company pays 57.00 CHF (0.57% x 10,000 CHF)

Criteria

Daily sickness insurance covers 80% of an employee's salary should the employee get sick so the SME doesn't have to cover salary without the employee working. The insurance company will only pay 80% of the employee's salary after the agreed upon waiting period which can be anywhere between 14-180 days. Daily sickness insurance will start paying on the 3rd day of the employee's sickness and may continue to pay for a maximum of 720 days of illness (usually 730 days, or two full years, in practice).

For daily sickness insurance, women typically have a higher maximum coverage then men. For example, women may have a max coverage of 400,000 CHF meanwhile men could have 280,000 CHF. When entering this daily sickness insurance into your payroll software, it's important to separate the rates and max coverage based on men and women. The above are examples of standard cases however each SME may negotiate different terms with their insurance company to get a package that fits for their business and their employees.

BVG - Pension

Acronym Translation

• BVG - Acronym used on a German Payslip
• LPP - Acronym used on a French Payslip
• LPP - Acronym used on an Italian Payslip

Rate

• Pension - 597.50 (Paid 50% by Company and 50% by employee. Company can pay up to 100% of employee pension if they wish).

Example

• Monthly Salary - 10,000 CHF
• Age - 39
• Company pays 597.50 CHF
• Employee pays 597.50 CHF

Criteria

An SME has to provide pension for each employee and to do so they choose a pension provider and a pension fund. The pension contracts are not given in % but rather in a fixed monthly amount that is deducted from the employee's salary. This pension amount is dependent on the employee's age and salary. Older employees are getting closer to retirement and therefore need to contribute more. Employees who get paid more contribute more to ensure when they retire, they can maintain their upscale standard of living.

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An employee's pension contribution can change every year if the employee enters an older age group or he/she gets a salary increase. This is revised and reviewed every year by the pension provider and you could find yourself paying more without even knowing it.

Withholding Tax or "Tax at Source"

Criteria

If an employee is not a Swiss Citizen or holds a C Permit, an immigration status that is typically given to residents who have spent at least 5 years in Switzerland, then the employee is required to pay "Tax at Source" or "Withholding Tax". For the ease of the article, we will refer to this as Withholding Tax.

Withholding tax requires an employee to pay their local & Cantonal taxes on a monthly basis. Meanwhile Swiss citizens and C permit holders, pay this tax at the end of the year when they receive their salary certificate & file a tax declaration. For employees which paid withholding tax each month and earned less than 120,000 CHF throughout the entire year, they do not need to file a tax declaration.

You will see above in the payslip, the rate is quite high at 9.300%. This rate is calculated using a Withholding tax code. The withholding tax in the payslip above is ZHC1N. For a breakdown of this withholding tax code, please see below:

• ZH - Canton the employee lives in.
• C - is applied for married taxpayers in a dual-earner household with or without dependents (Married Both earning, spouse working). If for example, the employee was single, divorced, separated or windowed then his letter would be A. More details in an upcoming article.
• 1 - Number of children the employee has
• N - Does the employee want to pay a Christian tax? If yes, then Y. If No, then N. Please note an employee can be Christian but choose not to pay a Christian tax. It is optional.

Using this ZHC1N code and your monthly salary, an employee can find their tax rate by going to the Kanton and searching through the tax table. You can find a list of all tax tables by clicking here. In our case above, the tax code ZHC1N and monthly salary of 10,833.35 in the Canton of Zurich would translate to a rate of 9.300%. Meaning the employee would pay 1,077.50 CHF per month (10,833.35 x 9.300%) to cover their Cantonal and local taxes.

To Close

There are many more use cases that we have not covered that could appear on an employee's payslip. At Earny, we try to provide payslips that more easily readable and therefore more easily understood.

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