Switzerland is one of the most attractive locations in the world for hiring skilled professionals, but its payroll system comes with some genuine complexity. Federal rules sit alongside cantonal rules, social insurance contributions are multi-layered, and the treatment of foreign employees differs from that of Swiss citizens. If you’re setting up payroll in Switzerland for the first time, this guide covers everything you need to know before you run your first pay cycle.
The basics: pay cycles, working hours, and currency
Switzerland runs on a monthly payroll cycle. Salaries are paid at the end of each month, and all compensation is denominated in CHF (Swiss franc). The tax year follows the calendar year, running from January through December.
Working hours
Swiss law sets statutory maximums for weekly working hours rather than a single national standard. Office and technical workers are subject to a 45-hour maximum, while workers in retail and service sectors can be required to work up to 50 hours per week. These are ceilings, not targets, and many collective bargaining agreements (CBAs) set lower limits in specific industries.
Overtime
There’s no statutory overtime multiplier under Swiss federal law. Overtime is typically compensated with equivalent time off or by separate agreement between employer and employee. That said, many CBAs specify overtime pay rates for covered industries, so you’ll want to check whether a CBA applies to your workforce before assuming the default rules govern.
The 13th month salary
Switzerland doesn’t legally require a 13th month salary, but the practice is so widespread that roughly 80% of employers include it in employment contracts. Once it’s written into a contract, it becomes legally binding. When budgeting for new hires, treat the 13th month as a near-certain cost rather than a discretionary bonus.
Minimum wages
Switzerland has no federal minimum wage. Instead, several cantons have introduced their own cantonal minimums:
- Geneva: CHF 24.32 per hour
- Neuchâtel: CHF 21.09 per hour
- Ticino: CHF 20.75 per hour
- Jura: CHF 20.60 per hour
Cantons without a statutory minimum may still have industry-level minimums set by CBAs. Always verify the applicable floor for the canton and sector where your employee is based.
Employer social contributions
Switzerland requires employers to contribute to several social insurance schemes. Each has its own rate and calculation basis.
Ahv/iv/eo (old-age, disability, and income replacement insurance)
Employers contribute 5.3% of gross salary to AHV/IV/EO. There’s no salary ceiling on this contribution, so it applies to the full gross wage regardless of how high the salary goes.
Alv (unemployment insurance)
The employer contribution to ALV is 1.1% on gross salary up to CHF 148,200 per year. For salaries between CHF 148,200 and CHF 315,000, an additional solidarity contribution of 0.5% applies on the amount in that band.
Bvg (occupational pension, second pillar)
BVG contributions depend on the employee’s age and are applied to the coordinated salary, which is the insured portion after deducting the coordination deduction of CHF 26,460. The BVG entry threshold is CHF 22,680 per year, and the maximum insured salary is CHF 90,720.
Total BVG contribution rates by age bracket:
| Age | Total contribution rate |
|---|---|
| 25–34 | 7% |
| 35–44 | 10% |
| 45–54 | 15% |
| 55–65 | 18% |
Employers must fund at least 50% of the total BVG contribution. Many employers cover more than 50%, but the legal minimum is an equal split.
Occupational accident insurance (uvg)
Occupational accident insurance is funded entirely by the employer. Rates vary by industry, typically falling between 0.2% and 1% of gross salary depending on the assessed risk level of the work.
Family allowances
Employers pay family allowances to the cantonal Familienausgleichskasse (FAK). Contribution rates range from 1% to 3% of gross salary depending on the canton. The funds are then distributed as allowances to eligible employees with dependent children.
Tax withholding: quellensteuer
Switzerland doesn’t have a PAYE system that applies universally. Swiss citizens and foreign nationals who hold a C permit (permanent residence) file their own annual tax returns, and employers don’t withhold income tax from their salaries.
Foreign employees without a C permit are subject to Quellensteuer, a withholding tax deducted at source. As the employer, you deduct the applicable Quellensteuer amount from the employee’s net salary each month and remit it directly to the cantonal tax authority. The rate depends on the canton, the employee’s gross income, and their family situation.
When you hire foreign nationals, you’ll need to confirm their permit status at the outset and review it as their status changes over time.
Probation periods
The default probation period under Swiss law is one month. This can be extended contractually up to a maximum of three months. During probation, either party can terminate employment with seven days’ notice. After probation ends, standard contractual notice periods apply.
Using an Employer of Record in switzerland
If you don’t have a registered legal entity in Switzerland, you can’t run payroll there directly. One route that foreign employers commonly take is working with an Employer of Record (EOR). An EOR employs your workers in Switzerland on your behalf, handling payroll, social contributions, Quellensteuer withholding, and compliance with cantonal rules, while you retain day-to-day management of the employee’s work.
This approach is particularly useful when you’re hiring in a single canton, want to move quickly without setting up a subsidiary, or need access to EOR services across multiple countries simultaneously.
FAQ
Does Switzerland require employers to pay a 13th month salary?
No, there’s no legal requirement. However, it’s included in approximately 80% of employment contracts and is considered standard practice. If you include it in a contract, it becomes a legally binding obligation, so treat it as a standard cost when budgeting for Swiss hires.
Which employees are subject to Quellensteuer?
Foreign employees who don’t hold a C permit (permanent residence) are subject to Quellensteuer. The employer deducts the tax monthly and remits it to the cantonal tax authority. Swiss citizens and C permit holders aren’t subject to withholding; they file their own annual tax returns.
What’s the minimum wage in Switzerland?
There’s no federal minimum wage. Several cantons have their own minimums: Geneva sets CHF 24.32 per hour, Neuchâtel CHF 21.09, Ticino CHF 20.75, and Jura CHF 20.60. In cantons without a statutory minimum, collective bargaining agreements may still set floor rates for specific industries.
Does the BVG contribution apply to the full salary?
No. BVG contributions are calculated on the coordinated salary, which is the employee’s salary after subtracting the coordination deduction of CHF 26,460. Employees earning below CHF 22,680 per year aren’t covered by the mandatory BVG scheme. The maximum insured salary is CHF 90,720.
