Switzerland – Changes to Social Insurance Rates for 2016

Switzerland – Changes to Social Insurance Rates

This GMS Flash Alert reports on recent social insurance developments in Switzerland, including an increase to the income cap for accident and unemployment insurance and a decrease in the contribution rate for income compensation insurance.

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In this GMS Flash Alert we report on recent social insurance developments in Switzerland, including an increase to the income cap for accident and unemployment insurance and a decrease in the contribution rate for income compensation insurance.

WHY THIS MATTERS

The modifications to Swiss law affecting the rates and income basis for social insurance mean that companies with international assignees subject to Swiss social insurance may see changes in their international assignment-related (and their employment-related) costs change – the fiscal impact will depend on each person’s particular situation. 

Cost projections and budgeting for assignments to Switzerland, and for assignees outside Switzerland still subject to Swiss social insurance, should reflect these changes.  Where appropriate, adjustments by payroll administrators to withholdings will also have to be made.

Increase of Income Threshold for Accident and Unemployment Insurance

The income cap for the mandatory accident insurance contribution is determined in a way that covers the total employment income of approximately 95 percent of all insured persons.  The cap, or threshold, of CHF 126,000 had been valid since 1 January 2008.  Income above this cap is not subject to the contribution.  However, the Swiss federal council deemed an increase of the threshold necessary due to wage developments in Switzerland since 2008.1  As such, the income cap is being increased from CHF 126,000 to CHF 148,200, effective from 1 January 2016.

Unemployment and disability insurances reflect the same thresholds as accident insurance. Consequently, unemployment insurance will apply the same income cap from 1 January 2016, CHF 148,200.  It should be noted that the solidarity contribution for unemployment insurance II will be levied on income exceeding CHF 148,200, going forward. 

The following contribution rates remain unchanged but are now calculated on income up to CHF 148,200 as from 1 January 2016, as shown in the table below.

  Rate Insurable Income
Contribution rate Employer / employee portion  
Accident insurance Rate dependent on factors such as employer, contract, industry, etc On income up to CHF 148,200
Unemployment insurance I 2.2% 1.1% On income up to CHF 148,200
Unemployment insurance II 1% 0.5% On income over CHF 148,200

Reduction of Contribution Rate for Income Compensation Insurance

The contribution rate for income compensation insurance (EO – Erwerbsersatzordnung) was increased to 0.5 percent in January 2011 (for related coverage, see Flash International Executive Alert 2010-174, 29 October 2010).  However, as the reserves in the fund for income compensation insurance meet the minimum legal requirements, the Swiss federal council decided to reduce the contribution rate from 0.5 percent to 0.45 percent as of 1 January 2016.2  The new contribution rate is valid for five years and will be reviewed again in 2020.  The employee and employer each pay half of this contribution and the total insurance premiums of mandatory occupational insurance (1st Pillar) will change as follows as from 1 January 2016 (compared to the current rates):

Insurances covered by the 1st Pillar Up until 31 December 2015 As of 1 January 2016
Contribution rate Employer / employee portion Contribution rate Employer / employee portion
Old age and survivors insurance 8.4% 4.2% 8.4% 4.2%
Disability insurance 1.4% 0.7% 1.4% 0.7%
Income compensation insurance 0.5% 0.25% 0.45% 0.225%
Total contribution 10.3% 5.15% 10.25% 5.125%

FOOTNOTES

1  See (in Swiss-German) the related government news release: “Unfallversicherung: Neue Obergrenze für den versicherten Verdienst.“ 

2  See (in Swiss-German) the related government news release: “Erwerbsersatzordnung: Der Beitragssatz sinkt von 0,5 auf 0,45 Prozent.“

CONTACTS

For more information or assistance, please contact your usual GMS or People Services professional or one of the professionals noted below with the KPMG International member firm in Switzerland:

Judith Mitchell

tel. +41 58 249 46 34

e-mail: jmitchell1@kpmg.com 

 

Lennaert Galesloot

tel. +41 58 249 36 40

e-mail: lgalesloot@kpmg.com 

 

Raphael Lang

tel. +41 58 249 49 86

e-mail: raphaellang@kpmg.com 

 

Simon Koch

tel. +41 58 249 53 69

e-mail: skoch@kpmg.com 

The information contained in this newsletter was submitted by the KPMG International member firm in Switzerland. 

© 2016 KPMG Holding AG is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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