Payslips explained

Would you like to understand your payslip properly? In this article, you’ll learn which amounts are deducted from your gross salary and how your net pay is calculated. You’ll also find practical tips for checking that your payslip is correct.

Key points at a glance

A payslip contains important information such as gross salary, net pay and various deductions, all essential for a clear picture of your finances.
There are mandatory and voluntary social insurance contributions. They provide financial security and have a significant effect on your net pay.
Employees have the right to a transparent, error-free payslip, and employers are obliged to issue one regularly and correctly.

What a payslip contains

A payslip is more than a sheet of paper with numbers on it. It contains all the key information about your pay, including:

Gross salary: the total amount you receive before deductions
Net pay: the amount paid out after deductions
Deductions: all amounts taken off your gross salary
Supplements: additional payments you may receive

This information must be shown clearly on the payslip, so that you can understand how your earnings are made up.

Gross and net: what’s what?

Gross salary is the total income you receive from your employer before any deductions are made. The main difference between gross and net is that gross salary is calculated before deductions and net pay after them.

Net pay is what remains after tax, social insurance contributions and other deductions. It is the amount that ends up in your bank account. Understanding this difference gives you a clear idea of how much money you actually have available.

Social insurance contributions make up a large part of the deductions on your payslip. They fund the social safety net that protects all of us in case of illness, unemployment or disability. The deductions you’ll see most often on a Swiss payslip are AHV/IV/EO (old-age and survivors’ insurance, disability insurance and income compensation), ALV (unemployment insurance), NBU (non-occupational accident insurance), BVG (occupational pension) and KTG (daily sickness allowance insurance).

Additional deductions

Besides social insurance contributions, you may find other deductions on your payslip. For example, some employers have taken out supplementary accident insurance, or they are bound by a GAV (collective labour agreement) that provides for enforcement cost contributions.

Deductions don’t only concern social insurance either. Benefits in kind, such as a company car or a parking space, are also deducted. They are subject to social insurance, so they are part of your gross salary, but they are deducted from it again because you have already received them in kind.

For foreign employees who aren’t taxed through the ordinary procedure, tax is also settled directly through the payslip. Employers are then obliged to pass this amount on to the relevant Quellensteuer (withholding tax) office.

Allowances and supplements

Besides the base salary, employers have other important ways to shape pay. These must of course also be shown transparently on the payslip. They include premiums, bonuses and gratuities, as well as company cars and GA travelcards.

The law allows wide latitude here. But allowances and supplements are also subject to some legal limits.

Family allowances

Parents are entitled to family allowances under certain conditions, and these are regulated by the cantons. The most common are child, education and differential allowances. Some cantons also grant birth and/or adoption allowances.

Employers apply for family allowances at the relevant compensation fund. The compensation fund rules on the allowance and pays it to the employer each month. Employers are legally obliged to pass the allowances on to their employees. Note that family allowances granted by the compensation funds are exempt from social insurance contributions. If an employer pays child allowances on top, however, these count as salary subject to social insurance.

Supplements

Swiss law provides for several supplements in payroll, some of them mandatory. For example, a 25% overtime supplement is due unless it has been excluded by contract or is regulated differently by a GAV. Supplements for work on public holidays and Sundays must also be reflected on the payslip, and night and shift work can trigger supplements too.

Common pitfalls

Mistakes on payslips are not rare and can have various causes. A lack of know-how, wrong assumptions or incomplete information are just some of them. Here are a few examples of pitfalls that still come up often in practice.

Salary components can affect social insurance deductions and tax liability. This can differ from person to person and from company to company. A component that is subject to tax and social insurance in one case may be treated completely differently in the next. That’s why it’s important to know which basis was used to calculate the social insurance deductions and any Quellensteuer deduction. These bases should be shown explicitly on the payslip for every deduction. If they’re missing or you can’t follow them, don’t hesitate to ask your HR team.

It gets quite complicated when employers take on social insurance contributions that employees would otherwise pay. Again, there is no blanket answer, because each social insurance has its own rules. AHV/IV/EO and ALV are the most clearly regulated: by law, employees bear half of these contributions. If the employer wants to take them on, this counts as a salary component that has to be calculated iteratively and included in gross salary. For the other premiums, the policies and regulations decide. Care must also be taken to avoid discrimination within the company (e.g. only women or only men) or preferential treatment (e.g. of one particular person).

HR received incomplete or incorrect information

Unfortunately, HR doesn’t always receive all the information it needs. There are many reasons for this. The result, however, is often an incorrect payslip, which in the worst case can lead to large back payments. That’s why it’s vital for HR to ask the right questions, and for employees to answer them openly and fully. Only then can all factors be taken into account correctly.

Obligations around payslips

Under Art. 323b para. 1 of the Swiss Code of Obligations (CO), employers must give employees a written payslip with every salary payment. It must clearly show all relevant information, such as gross and net salary and deductions, calculated correctly.

In practice, it’s still common for employees to receive a payslip in January and after that only when something differs from the previous month. The principle here is “where there’s no plaintiff, there’s no judge”. Even so, if employees want a monthly payslip when nothing has changed, it’s advisable to provide one.

Summary

A payslip is more than a piece of paper: it holds important information about your pay and the deductions made from it. It’s essential to understand the difference between gross salary and net pay and to know what social insurance contributions are for.

By checking your payslip regularly, you can make sure all the details are correct and spot possible mistakes early. A transparent, error-free payslip is your right as an employee and helps you keep track of your finances.