Social insurance
In private households, all paid work performed by individuals is subject to social insurance contributions from 1 January after the employee turns 17 years of age! Employers and employees are required to pay social insurance contributions (old-age and survivors' insurance (AHV), disability insurance (IV), income replacement insurance (EO) and unemployment insurance (ALV)) from the first franc paid as remuneration. Registration with the compensation fund office must take place within 30 days of the commencement of employment.
An exemption amount for AHV, IV and EO applies for women aged over 64 and men aged over 65. This amounts to CHF 1,400 per month or CHF 16,800 per year. Only the part of the wage which exceeds the exemption amount is subject to social insurance contributions. Irrespective of their wage, these individuals are exempt from ALV contributions.
Ask for your household helper's insurance certificate upon them starting work. If your household helper does not have an insurance certificate, you can order one from any compensation fund office in your canton of residence or download one directly here.
An overview of all cantonal compensation fund offices can be found here
Simplified procedure
For lower wage amounts, it is possible to use the simplified procedure for the payment of social insurance contributions. This procedure is intended to reduce the workload of employers and is voluntary. Small wage amounts can also be settled using the standard procedure.
Requirements
The following requirements must be met to ensure that the simplified procedure can be applied:
- The gross wage of the employee is no more than CHF 22,050 per year (for a shorter period of employment: no. of months times CHF 1,837.50).
- If you employ several employees, the total wage amount may not exceed CHF 58,800.
- The wages of all your staff are settled using the simplified procedure.
- The employee is not a cross-border commuter from the Principality of Liechtenstein (due to the double taxation agreement between Switzerland and the Principality of Liechtenstein, the simplified payment procedure cannot be applied in this case)
- There is no employment relationship between an employer domiciled in the canton of Basel-Landschaft, Basel-Stadt, Berne, Neuchâtel, Solothurn, Vaud or Valais and a cross-border commuter resident in France who works in one of the mentioned cantons (due to the double taxation agreement between Switzerland and France, the simplified payment procedure cannot be applied in this case).
Benefits
Benefits of the simplified payment procedure: you have less work and your employees generally benefit from a more favourable tax rate!
You only pay the social insurance contributions once a year
With the simplified payment procedure, you pay the respective social insurance contributions once a year, while the standard payment procedure requires that you make monthly or quarterly payments on account depending on the wage level.
No wage statement
The employer is not required to issue a wage statement and thus has a smaller workload.
Payment of social insurance contributions and taxation of income in one
Using the simplified payment procedure, the employee's income is taxed at the same time that the social insurance contributions are settled.
Generally a lower tax rate
The employee benefits from a uniform tax rate of 5% which is in many cases more favourable than ordinary taxation. This rate includes both the direct federal tax and the cantonal tax. As this income is not considered for ordinary taxation, it is also not taken into account for tax progression purposes.
Standard payment procedure
Requirements
The standard payment procedure can always be used. If the requirements for the simplified procedure are met, we recommend that you choose this.
Differences compared to the simplified procedure
Monthly or quarterly invoicing
In contrast to the simplified procedure, the social insurance contributions are not billed annually, but rather on a monthly or quarterly basis.
Social insurance and income are handled separately
Using the simplified payment procedure, the employee's income is taxed at the same time that the social insurance contributions are settled. With the standard procedure, only the social insurance contributions are settled with the compensation fund office. The employee is responsible for the taxation of his or her income.
Issuance of a wage statement
At the end of the year, the employer is required to issue a wage statement in order to enable the employee to declare the wage as income in his or her tax return.
Generally a higher tax rate
With the simplified procedure, the employee benefits from a uniform tax rate of 5% which is in many cases more favourable than ordinary taxation. With the standard procedure, the income is taxed according to the official tax rates and both the direct federal tax and cantonal tax must be settled. The income is also taken into account for tax progression purposes and can have additional negative effects for the employee.
Further information on the topic of "no illegal work" can also be found here.
