Understanding payroll in Switzerland - free guide by Adm In ME

As Switzerland has four official languages, sometimes it becomes difficult to find the information you need about Swiss payroll, taxes, social security. Here is a guide containing the most important definitions from A to Z.

AC – Assurance-chômage this is the unemployment insurance which provides benefits in cases when employees lose their jobs or have reduced working hours.

AG – Aktiengesellschaft – this is a corporation with a legal entity whose liabilities are covered exclusively by its own assets. Minimum capital needed to open an AG is CHF 100,000.

AHV – Alters-und Hinterlassenenversicherung – this is the first pillar of security insurance in Switzerland which offers cover for retired individuals and surviving dependents.

ALV – Arbeitslosenversicherung – unemployment insurance (ALV) provides reasonable compensation for loss of income. ALV provides benefits in the event of unemployment, weather-induced losses of working hours, short-time work and the inability of an employer to pay its employees.

AMaI – Assurance-maladie –  health insurance system is compulsory for everyone who live in  Switzerland or is subject to the Swiss social security system. Foreigners who are in Switzerland for longer than 3 months are obliged to take out health insurance cover within a period of 3 months.

ANOBAG – Arbeitnehmer ohne beitragspflichtigen Arbeitgeber – this specific legal entity allows foreign non-resident employers not to pay taxes for Swiss social security contributions for employees located in Switzerland under certain circumstances. In fewer words, this is the case when an employee works without having an employer in Switzerland.

AVS – is the abbreviation of Assurance pour vieillesse et survivants (Fr.) or the abbreviation ofAssicurazione vecchiaia e superstiti (It.) of the first pillar of social security in Switzerland.

BVG – the second pillar of the Swiss pension system. This is workplace-based and mandatory for all employees. Employers who hire persons subject to compulsory insurance must be affiliated to a specialized institution in the register for the occupational benefit plan.

BU – Berufsunfall-Versicherung– this is the insurance for work related accidents. There are three situations in which employees have the right to be insured: work accidents, non- work accidents and occupational diseases.

CO – Swiss Code of obligations

CROSS-BORDER COMMUTER – cross-border commuters are nationals of EU/EFTA member states who have residence in an EU/EFTA member state and work in Switzerland (either in an employed or self-employed capacity). Cross-border commuters must return to their main place of residence abroad at least once a week.

DI – the Disability Insurance, part of the first pension pillar, covers a basic living for disabled people. The DI is compulsory in the same way as old-age and survivors’ insurance (OASI) and health insurance.

EFTA – the European Free Trade Association is an intergovernmental organization which aim is to maintain market competiveness in Europe. The EFTA member states are Switzerland, Liechtenstein, Iceland and Norway.

FinMA – Swiss Financial Market Supervisory Authority is the institution that supervises and regulates financial institutions, insurance providers and distributors. FINMA’s main aim is to ensure that Switzerland’s financial markets function effectively.

FOPH – Federal Office of Public Health (FOPH) is responsible for the national health policy and – along with the cantons – for the health of the Swiss population. As the national body the FOPH also represents Switzerland in health policy matters in international organizations and towards other countries.

GAAP – these are Accounting and Reporting Recommendations including specific regulations for different types of institutions such as pension funds, insurance companies, health insurance providers and real estate. These Swiss accounting standards provide an objective view of the financial position, the cash flows and the results of operations.

GAV – Gesamtarbeitsvertrag –The Collective Labor Agreement (CLA) is a contract whereby employers or employers’ associations and trade unions set up common rules and regulations regarding the content, the conclusion and the notice of each individual employment contract, agreed by both parts.

GMBH – Gesellschaft mit beschränkter Haftung is a Swiss Limited Liability Company, equivalent to Ltd. in UK or LLC in US. The minimum share capital requirement for a Swiss Limited Liability Company is CHF 20,000.

LFAIE – the Federal law for the acquisition of freehold property by non-residents, commonly known as “Lex Furgler-Koller-Friedrich” stipulates sales to foreigners on the basis of annual quotas per tourist region.

LOB – the LOB Guarantee Fund Foundation is a national occupational benefits establishment which main task is to guarantee the second pillar insurance in the event of insolvency of the benefit schemes or of the group of insured for all employees.

Lump sum taxation or ‘forfait’ – is a special tax regime of lump-sum taxation for non-Swiss nationals who reside in Switzerland, but do not carry out a gainful activity in this country. This kind of tax uses the taxpayer’s lifestyle as a base for taxes.

NBU – Nichtberufsunfallversicherung– Insurance that is not related to work accidents

 OASI – In Switzerland, individuals receive OASI (Old Age and Survivor’s Insurance) state pension from the age of 64 (women) and from the age of 65 (men). The OASI is the main pillar of social insurance in Switzerland. Its aim is to replace, at least partly, the reduction in or loss of income due to retirement or death.

Permit B – B permit is valid for 12 months, but it can be renewed depending on the employment contract. There are a limited number of these permits, which may be subject to work quotas and also some limitations on which canton the employee could work or live.

Permit C – this permit allows immigrants have the same rights as Swiss people. If employees from third states work in Switzerland for ten uninterrupted years, they obtain a C permit. Exceptions are made for citizens from Canada and USA who could obtain a C permit after five years of work or residence.

Permit G – this is a special permit for cross borders. The condition is that all cross-border commuters must return to their residence abroad at least once a week.

PP – Prevoyance Professionnelle – this is the French version of the second pillar of Swiss pension system.

SUVA – Schweizerische Unfallversicherungsanstal – The Swiss Accident Insurance Fund is the largest provider of insurance both compulsory and voluntary.

Temporary posting – this is an exception to the rules of social security. In cases when an agreement has been concluded, employees who are posted to another country may remain subjects, under certain conditions to the Swiss social security system.

UI – Unemployment insurance

UVG – Federal Accident Insurance Act (UVG) / Federal law on accident and occupational disease insurance

Zweigniederlassung – This is a legal entity equivalent to branch, a dependent part of the company. There is no share capital requirement for setting up a branch in Switzerland.

Are you planning to set up a business in Switzerland? Check out our Swiss page for all the information you need or contact us directly.