Social security contributions
Swiss workers are protected by a number of social insurance schemes. Unemployment insurance protects them against the economic consequences of losing their jobs. Disability insurance covers employees when they are partially or totally unable to earn an income due to their disability. The loss of earnings insurance completes the coverage during military service, maternity leave, paternity leave or in case of serious illness or accident of a minor child.
The purpose of the old-age and survivors' insurance (AVS) as well as the Vested Benefits Act (LPP) is to ensure an income for the employee when he/she reaches retirement age.
In view of the amount of benefits they provide, these insurances must be financed in such a way as to guarantee their sustainability. As a rule, both employer and employee pay social security contributions. These are deducted directly from the employee's salary.
The employment contract does not automatically end when the employee reaches retirement age. The employer and employee can agree to continue the employment contract.
In principle, as long as the employee receives a salary, he or she is still obliged to pay social security contributions. However, reaching retirement age has an impact on these contributions and on the amount of the AVS or LPP (second pillar) pension.
Except in special circumstances, the intern must receive a salary for the work he/she performs. This remuneration will in principle be subject to social security contributions. However, the trainee will not be insured by certain social insurances if he/she does not work a certain number of hours per week, if he/she has not reached a minimum age or if his/her annual income is below a certain amount.
In search of freedom, an employee may want to become self-employed. Not all social insurance schemes are compulsory for self-employed people. If they wish and if they meet the conditions of each social insurance, the self-employed can join.
But be careful! The social insurances take into account many criteria to determine if the person is self-employed or employed and in particular if he/she is economically dependent on a company. There are many borderline cases.
If the social insurance company considers that the person is in fact dependent on a single client, the insurance company will be able to classify him or her as an employee. The client in question will be considered an employer and will have to pay the employee's social security contributions retroactively.
Many international companies send one of their employees abroad to work for a period of time. The country to which the employee is seconded or expatriated does not always offer optimal social security coverage. Under certain conditions and for a limited period of time, both employer and employee can decide to continue paying social security contributions in Switzerland.
Some people willingly provide free services to associations or relatives. These people are called volunteers. In principle, they are not entitled to any remuneration and do not pay social security contributions.
If an employer classifies an employment contract as voluntary work in order to save on salary and social security contributions, this may be an abuse of rights. A judge may order the employer to pay social security contributions retroactively.
Sometimes, to save time-consuming commuting, a cross-border employee may telecommute with the consent of his or her employer. The agreement on free movement (AFMP) provides for a number of rules concerning the payment of social security contributions.
In principle, the employee must pay social security contributions in the country where he/she works. When he/she works from home, this situation can be problematic since he/she works in two countries, including his or her country of residence. If the employer is not careful and the telework exceeds a certain number of days per week, the employer will have to pay the employee's social security contributions in his/her place of residence.
Trading of helping hands
A cleaning lady offers to clean her gardener neighbor's apartment or do his ironing. In exchange, her neighbor trims her hedges. When these exchanges become more regular, it can become a real work contract. Both parties will have to pay social security contributions on their salary, even if it is in kind.
Sometimes private individuals or families hire employees without declaring them and do not deduct social contributions. Housekeepers, nannies and gardeners are the most affected by this phenomenon.
In case of undeclared work, both employee and employer risk having to pay all missed social security contributions retroactively and being fined. In view of the complexity of the procedures, administrative simplifications have been put in place.
During an unpaid leave, the employee does not receive his or her salary. Since social security contributions are usually deducted directly from the employee's salary, this is a delicate situation.
If the employee does not take the necessary steps prior to his or her departure, he or she will no longer pay social security contributions and may no longer be covered by the various social insurance schemes during the sabbatical leave. This can be particularly problematic if the employee suffers an accident or becomes ill during the unpaid leave.
In addition, the employee risks being penalized by the AVS and LPP and receiving a lower pension at retirement because of this period of non-contribution. If he/she loses his/her job, he/she may no longer qualify for unemployment benefits.