When you hire an employee in Switzerland, your mandatory contributions cover AHV (old-age and survivors’ insurance), ALV (unemployment insurance), BVG (occupational pension), and accident insurance. Depending on the employee’s age bracket and the canton where they work, those contributions add roughly 14–17% on top of gross salary. This guide walks through every component, with the figures you need to model total employment costs before you make an offer.
Overview of switzerland’s employer contribution framework
Switzerland organises its social security system around three pillars. The first pillar is AHV, the state pension that provides basic retirement and survivors’ coverage for everyone. The second pillar is BVG, the mandatory occupational pension that supplements the first pillar with employer- and employee-funded savings. The third pillar is voluntary private savings, which sits entirely with the individual. As an employer, your mandatory obligations live in pillars one and two. You also fund accident insurance and family allowances on top of those two pillars, and in some cases you withhold income tax on behalf of foreign employees.
First pillar: ahv/iv/eo contributions
AHV/IV/EO covers old-age and survivors’ insurance (AHV), disability insurance (IV), and income compensation insurance (EO). The employer rate is 5.3% of gross salary, and the employee pays an identical 5.3%. There is no salary ceiling on these contributions. Whether an employee earns CHF 60,000 or CHF 600,000, both employer and employee pay 5.3% on the full amount. You deduct the employee’s share from their salary and remit both portions to the cantonal compensation office (Ausgleichskasse).
Second pillar: alv unemployment insurance
ALV contributions fund unemployment benefits. The employer pays 1.1% of gross salary up to CHF 148,200 per year, and the employee pays the same 1.1%. Above CHF 148,200 and up to CHF 315,000, a solidarity contribution of 0.5% applies to both employer and employee. This solidarity portion doesn’t generate any additional benefit entitlement for the employee. It is a levy with no corresponding insurance coverage. For most employees earning below the CHF 148,200 ceiling, the total combined ALV cost to you is 1.1%.
Bvg occupational pension
BVG is Switzerland’s second-pillar pension. It tops up the AHV state pension so that employees can maintain a reasonable standard of living in retirement. The framework involves an entry threshold, a coordination deduction that determines how much of the salary is insured, and contribution rates that rise with age.
How bvg works
Employees earning less than CHF 22,680 per year are not automatically subject to mandatory BVG coverage. For employees above that threshold, the law requires you to enrol them in a pension fund (Pensionskasse).
The insured salary under BVG isn’t the full gross salary. You start with the gross salary and subtract the coordination deduction of CHF 26,460. The result is the coordinated (insured) salary. The minimum coordinated salary is CHF 3,780 per year, and the maximum is CHF 64,260 per year. The maximum insured salary is CHF 90,720 (CHF 26,460 coordination deduction plus CHF 64,260 maximum coordinated salary).
For an employee earning CHF 100,000 per year, the insured BVG salary is CHF 100,000 minus CHF 26,460, which equals CHF 73,540. Because this exceeds the maximum coordinated salary of CHF 64,260, the mandatory insured salary is capped at CHF 64,260. Contributions above the mandatory maximum require a separate “supra-mandatory” arrangement with the pension fund.
The minimum interest rate on BVG savings balances is currently 1.25% per year.
Contribution rates by age
BVG contribution rates increase as employees age, reflecting the actuarial cost of funding retirement. The statutory minimums below are expressed as a percentage of the insured (coordinated) salary. You must cover at least 50% of the total contribution. In practice, many Swiss employers split contributions 50/50 with the employee, though some pay more than 50%.
| Age bracket | Total minimum contribution | Employer minimum (50%) | Employee minimum (50%) |
|---|---|---|---|
| 25–34 | 7% | 3.5% | 3.5% |
| 35–44 | 10% | 5% | 5% |
| 45–54 | 15% | 7.5% | 7.5% |
| 55–65 | 18% | 9% | 9% |
Note that BVG contributions only begin at age 25. Employees between age 17 and 24 pay into the BVG fund for risk coverage (death and disability) only, not savings accumulation.
Accident insurance (uvg)
Swiss law requires all employees to have accident insurance under the UVG. Accidents fall into two categories, and each is funded differently.
Occupational accident insurance covers incidents that happen at work or on the way to and from work. The employer pays this premium in full. Rates vary by industry and occupation risk, but typically run between 0.2% and 1% of gross salary. High-risk sectors such as construction pay at the upper end; office-based roles pay at the lower end.
Non-occupational accident insurance covers accidents outside of work. Employees who work at least eight hours per week must have this coverage, and the cost falls on the employee. Typical premiums run from 1% to 4% of gross salary, deducted from the employee’s pay. You handle the administration and remit both portions to the insurer (commonly SUVA, the national accident insurer, or an approved private carrier).
Family allowances
Switzerland requires employers to fund family allowances for employees with children. These allowances are paid directly to eligible employees and cover child allowances and education allowances set by federal law, with cantons permitted to set higher amounts.
The employer contribution rate varies by canton and typically falls between 1% and 3% of gross salary. You pay into the cantonal family allowance fund (Familienausgleichskasse), and the fund administers the actual payments to employees. You don’t keep any of these contributions. They flow straight to eligible parents.
Income tax and quellensteuer
Switzerland takes a different approach to income tax depending on the employee’s residency and permit status.
For Swiss citizens and foreign employees who hold a C permit (permanent residence), the employer doesn’t withhold income tax from salary. These employees file an annual tax return and pay income tax themselves. Your payroll obligation for them is limited to the social security contributions covered in the sections above.
For foreign employees who don’t hold a C permit and who aren’t Swiss residents, you must withhold Quellensteuer (source tax or withholding tax) from their salary each month and remit it to the cantonal tax authority. Quellensteuer is an advance on the employee’s total income tax liability. The effective income tax rate in Switzerland is progressive and ranges from around 22% to 45.5% in total (federal plus cantonal plus municipal), depending on the canton of residence and the employee’s income level. You apply the withholding tables provided by the relevant canton.
If you are a foreign company without a Swiss entity and you hire employees in Switzerland, Quellensteuer obligations still apply. This is one of the compliance complexities that makes using a local employer structure or an Employer of Record important for companies entering the market without their own Swiss legal presence.
Canton minimum wages
Switzerland has no federal minimum wage. Individual cantons are free to set their own floors, and several have done so. You must check the minimum wage in force in the canton where each employee physically works, not the canton where your company is registered.
The following cantons have set minimum wages:
| Canton | Minimum hourly wage (CHF) |
|---|---|
| Geneva | 24.32 |
| Neuchâtel | 21.09 |
| Ticino | 20.75 |
| Jura | 20.60 |
If the employee works in a canton without a statutory minimum wage, collective bargaining agreements (CBAs) for the relevant industry may set wage floors. You should verify whether a CBA applies to the role before setting a salary.
Total employer cost of employment
The table below illustrates the mandatory employer contributions for an employee earning CHF 100,000 per year in the 35–44 age bracket. It uses the statutory minimum rates and a mid-range estimate for accident and family allowance contributions.
| Contribution | Rate applied | Annual employer cost (CHF) |
|---|---|---|
| AHV/IV/EO | 5.3% of CHF 100,000 | 5,300 |
| ALV | 1.1% of CHF 100,000 (below ceiling) | 1,100 |
| BVG (2nd pillar) | 5% of CHF 64,260 (insured salary, age 35–44) | 3,213 |
| Occupational accident | 0.5% of CHF 100,000 (mid estimate) | 500 |
| Family allowances | 1.5% of CHF 100,000 (mid estimate) | 1,500 |
| Total employer cost above salary | 11,613 | |
| Total employer cost (salary + contributions) | 111,613 | |
| Effective employer on-cost rate | ~11.6% |
The actual BVG cost will depend on the employee’s age and the pension fund your company uses. Plans with more generous contribution rates or supra-mandatory coverage will push the total higher. Accident insurance rates also vary significantly by industry. The figures above are a working estimate, not a guaranteed total.
Hiring in switzerland without a local entity
If your company doesn’t have a Swiss legal entity, you can’t run a compliant Swiss payroll, register with a cantonal compensation office, or enrol employees in a pension fund directly. Most foreign companies in this position work with an Employer of Record (EOR) to hire in Switzerland.
An EOR acts as the legal employer on paper. It signs the employment contract, runs compliant payroll, handles AHV and ALV registration, manages BVG enrolment, remits Quellensteuer where applicable, and administers accident insurance. Your company directs the employee’s day-to-day work under a separate service agreement with the EOR. This lets you hire in Switzerland without incorporating there, without opening a bank account, and without navigating the cantonal registration process yourself.
When evaluating EOR services, check whether the provider handles all four contribution streams (AHV, BVG, UVG, family allowances) in-house or subcontracts parts of the administration. In-house handling generally means fewer moving parts and faster resolution when issues arise.
Frequently asked questions
Is there a salary ceiling on AHV contributions?
No. AHV contributions apply to the full gross salary with no upper limit. Both employer and employee pay 5.3% regardless of how high the salary goes. This is different from the ALV ceiling and the BVG maximum insured salary.
Does BVG apply to part-time employees?
It depends on the employee’s annual earnings. If a part-time employee earns at least CHF 22,680 per year (the BVG entry threshold), they must be enrolled in the mandatory pension scheme. Part-time employees earning below that threshold don’t have to be covered under mandatory BVG, though you may choose to include them on a voluntary basis. If the employee works multiple jobs, each employer applies the threshold independently.
When does a Swiss employer have to withhold Quellensteuer?
You withhold Quellensteuer for any employee who is a foreign national without a C permit and who isn’t a Swiss resident. Swiss citizens and C permit holders handle their own income tax via annual return. Foreign employees on B, L, or G permits (among others) are subject to Quellensteuer, and you remit the withheld amount to the cantonal tax authority each month.
Is the 13th month salary mandatory in Switzerland?
There is no federal law requiring a 13th month salary. However, it is standard practice in Switzerland and approximately 80% of employers include it in employment contracts. Once it appears in the contract, it becomes a legally binding obligation. You can’t remove it without the employee’s agreement. If you’re drafting a Swiss employment contract, be deliberate about whether you include it, because including it sets a permanent cost baseline.
Does the canton minimum wage vary, and which rate applies?
Yes. The minimum wage applies in the canton where the employee physically works, not where your company is based or incorporated. Geneva currently sets the highest cantonal minimum at CHF 24.32 per hour. If an employee works remotely from Geneva for a company based in Zurich (which has no cantonal minimum wage), the Geneva minimum applies. Always check the rate for the employee’s work location, not your company’s registered address.
