Swiss social security charges
Definition
In the majority of European countries the social security costs of a company are shared between the employer and the employee. They usually cover old age and disability, unemployment and illness. In Switzerland, although illness insurance is mandatory, the cost is paid entirely by the employee and therefore is not included in the pure definition of social security.
Non-professional illness insurance
This insurance for individuals is mandatory and at the expense of the employer. The coverage is guaranteed by private companies in Switzerland which usually offer different service programs depending on what is required and can vary widely in price.
The three pillars of retirement
- Old age insurance fund, 1st pillar
This mandatory insurance is based on the principle of distribution for all persons domiciled in Switzerland or who work there. Its goal is to guarantee a minimal subsistence to the aging population (over 64 or 65 years of age) or to relatives of the deceased (rent for the widow or orphans). The rate of contributions paid in part by the employer and in part by the employee and is currently 8.4%. The employer also pays the administration fee which ranges between 0.8% and 3% of the sum of the contributions.
- Occupational coverage, 2nd pillar
Occupational coverage, mandatory for all workers based on the principle of capitalization, is governed by federal law but run by independent pension funds. The goal is to enable retired people to maintain the standard of living which they enjoyed before retirement (about 60% of their most recent salary). The rate of contribution which is applied on a salary depends on several variables such as the age of the worker, with the older employees requiring a larger contribution. The employer must at least contribute a minimum of the same rate as the employee. The rate of contribution (employer and employee) varies between 6 and 20% of the gross pay.
- Individual coverage, 3rd pillar
Individual coverage is the responsibility of the employee. It is either purchased in the form of an insurance policy or a savings account. People usually subscribe to this 3rd pillar for tax purposes, because the contributions are fully deductible from their taxable income.
Other mandatory contributions
- Disability insurance
This insurance is currently at 1.4% and is paid partially by the employer and partially by the employee. It is collected at the same time as the pension contribution.
- Loss of earning capacity insurance
This joint insurance is currently at 0.3% and covers the loss of earning capacity linked with military or civilian service. It also covers losses of revenue related to maternity leave.
- Unemployment insurance
This insurance has currently reached 2% of the salary shared equally between employer and employee, covering either total or partial unemployment. Please note that independent workers cannot insure themselves against unemployment.
- Child benefit funds
Since January 1, 2009, child benefits are subject to federal law but are handled by the cantons (states). Now, all employers are required to join a canton compensation fund except in the canton of Valais. Employers are the sole contributors to child benefit funds. Depending on the canton, the contributions may be 0.1% or 4.2% of the total salary.
In conclusion, the social security contributions related to payroll vary depending on the canton where the corporate headquarters is located and the employee's age, for example. It is very difficult to make meaningful comparisons with other European countries, especially because health insurance is not the responsibility of the employer. It can be conclude that the Swiss social security costs vary between 20 and 40% of the gross salary according to the cantons and the age of the employee.