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Payroll Agency in Switzerland

Switzerland is a land full of talent and unique business opportunities. The country is known internationally for its favorable business taxes and liberal political standing, making it a desirable and popular choice among foreign companies. There are numerous approaches a company looking to hire Swiss talent can take. However, due to a complex taxation system, navigating it as a foreigner can be both intimidating and risky.

Swiss payroll agencies or companies are payroll specialists who provide payroll and other HR and accounting services to both local and foreign companies operating in Switzerland. In this article, we’ll take a look at what a payroll agency is, what they do, and how you can benefit from this specialized service.

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What is a Payroll Agency?

A Payroll Agency is a third-party firm that provides payroll and other HR administrative or consulting services. These agencies, more commonly known as payroll service providers, assume responsibility for the execution and management of most or all payroll activities on behalf of a company, recruiting agency, or in some cases an individual.

Payroll processing can be very time-consuming and laborious. However, a payroll agency focuses on streamlining this process while delivering timely payments and maintaining compliance. Furthermore, payroll agencies also ensure legal compliance.

This is particularly important for international firms, due to the highly complex legal nature of operating as a foreign company in Switzerland. Legal compliance isn’t something that should be taken lightly, therefore, payroll agencies play a critical role to ensure that payroll processing is simple and most importantly, compliant.

Foreign companies of any size may benefit from the services provided by a payroll agency, however, it provides the most benefit for mid- to large size companies.

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Benefits of a Payroll Agency

Outsourcing payroll processing to a Payroll agency or service provider can benefit your company on many different levels. Here are some of the prime benefits of a payroll agency:

 

  • Legally Compliant Processing: Swiss payroll processing has complex legal regulations. This labyrinth of laws makes it very difficult for foreigners to ensure compliance when attempting to process payroll on their own. However, with the expertise of a local payroll agency, all concerns related to legally compliant payroll processing vanish.
  • Time Savings: Payroll agencies not only save time for your company by executing the payroll process themselves, but also often provide digital tools to track time or automate certain processes.
  • Cost Savings: Outsourcing payroll processing can reduce the investment into a payroll team and other payroll-related tools or solutions. Many payroll service providers offer software tools that automate and simplify these processes; thereby further reducing payroll processing expenses.
  • Automation: Most payroll processes carried out by payroll agencies are augmented by the software tools they provide to automate various tasks, which increases accuracy and consistency while reducing or eliminating human error.
  • Reliability: The expertise and experience many payroll specialists bring to the table provides companies with a proven track record of reliability and confidence.

What is Payroll?

Payroll is an administrative process to track and manage an internal or external employee or contractor’s work status, working hours, wage, and tax contributions throughout their term of employment.

While many companies have their own payroll team within their HR or Accounting department, outsourcing payroll processing to payroll agencies or payroll service providers is also common to reduce costs and streamline the entire process.

Another point to consider is that payroll accounting is typically outsourced to ensure nobody has internal access to sensitive payroll data.

Here are some of the main tasks involved in payroll processing:

  1. Onboarding and Tax Calculations: The natural first step in the payroll process is to collect all required information, such as the agreed wage, completed tax forms, and
  2. Time Tracking: An employee’s working hours are tracked and recorded in a timesheet. Some payroll service providers offer tools such as punch-in/punch-out clocks through a mobile app or website to easily track and automatically update these working hours in the timesheet.
  3. Compensation: Compensation is the gross salary or wage an employee or contractor receives from the employer. Compensation is paid out to the employee on the dates specified by a pre-established payroll calendar and after taxes or garnishments have been withheld.
  4. Tax Filing: For each employment type or income bracket, there are certain tax documents an individual or company may need to fill for tax registration or reporting purposes.
  5. Income Reporting: Salaries must be reported to the relevant authorities and settled with the mandatory social insurance schemes. Withholding taxes should also be deducted and booked correctly.

Payroll Switzerland

Each country has its own unique payrolling system. The Swiss payrolling system regulations vary per canton. However, this multifaceted system involves three primary processes:

  • Determine employment status
  • Calculate income tax
  • Set up obligatory social securities

 

Determine Employment Status

Every process involved in the onboarding and employment of a Swiss resident naturally depends on the person’s employment status. There are different steps that must be taken and documentation that must be filed depending on the agreed employment type.

 

Calculate Income Tax

To calculate income tax, a payroll agency will generally require information such as:

  • Place of residence (income tax varies per canton)
  • Nationality or permit status (i.e., Swiss national, naturalized citizen, C-Permit holder)
  • Income and net worth
  • Marital status
  • Religion (for registered members)

Set up the Three Pillar Pension Plan

The Swiss Three Pillar Pension Plan is a regulatory contribution system that requires working persons to pay into the Swiss Social Security system or retirement and occupational injury/disability funds. The Three Pillars are:

  1. State Pension Plan: The State Pension Plan is a mandatory pension that pays into the Swiss Social Security system and is the responsibility of the government. The State Pension plan consists of insurance programs, such as Old Age/Survivor and Disability insurance.
  2. Occupational Pension Plan: The Occupational Pension Plan is also mandatory, however, it is the responsibility of the employer. With the Pension Plan, you can save your pension capital in order to receive a pension upon retirement. Likewise, the Pension Plan also provides disability and death benefits for surviving dependants.
  3. Private Pension Plan: The Private Pension Plan is an optional pension and is the responsibility of the individual. The Private Pension plan is like a retirement fund or savings account.

Swiss payroll companies provide services that cover each of these steps and ensure compliance with government entities. All in all, Swiss payroll services are designed to simplify and streamline the entire payroll process for both the company and its internal employees or external contractors. Companies outside Switzerland can also benefit from payroll agencies. The Swiss payroll system and taxation programs may seem confusing and difficult for a foreign company to navigate on their own, however, with the guidance of a payroll agency, you can hire remote Swiss talent and leave payroll processing to the trusted expertise of the payroll agency.

Payroll Agency & ANobAG

Payroll agencies provide valuable services to ensure that a company’s employees receive their payment on time and the correct taxes and contributions are paid out to the government. This system is ideal for cost-efficiency, time-savings, and legal security, as well as ensuring that tax and insurance payments are sent out in a timely manner, and any required documents are filed.
However, as an alternative to payrolling, foreign companies domiciled outside Switzerland can opt for the ANobAG employment model, which allows them to hire a Swiss resident without registering a legal entity in Switzerland. This significantly reduces costs and transfers the responsibility of payroll and tax/social security contributions to the employee.

What is ANobAG?

ANobAG (Arbeitnehmende ohne beitragspflichtigen Arbeitgeber) is an acronym that stands for “employee without a contributory employer”. ANobAG is a Swiss employment scheme designed to enable foreign companies to hire employees directly out of Switzerland without the need to establish an actual facility within the country.
However, ANobAG does require a specific registration process with the individual’s local canton to ensure that the ANobAG individual remains under the Swiss social system.
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Conclusion

Working with a payroll agency, such as dieVorsorge, is a strategic way for both domestic and international companies to reduce costs and leverage the expertise and tools that companies like ours provide. For international companies that wish to hire remote Swiss talent without the overhead costs of an entire facility, payroll agencies can assist in the onboarding process, as well as any other Swiss employment or tax obligations.

At dieVorsorge, we have a well-rounded team of payroll, insurance, and tax experts to guide and assist you and your company through each step of the Swiss payroll process.

Our experienced team offers a balance of services and expertise to ensure you have a frictionless payroll process, your Swiss employees or contractors get paid on time, and you stay compliant with all government regulations and applicable tax codes.

To learn more about our payroll services and get started, click HERE to get in touch with one of our experts.

FAQ

What is the payroll process for ANobAG?

ANobAG (Arbeitnehmende ohne beitragspflichtigen Arbeitgeber) has a similar payroll process to that of the standard Swiss employee. However, the primary difference is that the responsibility to pay the correct taxes and pensions is the responsibility of the employee instead of the employer. Payroll agencies can act as a guide and advisor throughout this process if needed.

What are the benefits of a payroll agency?

A payroll agency supports foreign companies by processing salaries in Switzerland in a legally compliant and advantageous manner. A local payroll agency guarantees services to ensure payroll accounting, HR administration, working with the authorities, and managing mandatory insurance.

Established payroll providers have a broad network of lawyers and authorities and offer access to tax-friendly regions. These benefits ensure maximum advantage in payroll processing, which is exactly what makes the services of a payroll agency so popular.

Is it cheaper to hire a payroll agency or an internal payroll team?

Internal payroll accounting systems are usually incompatible with Swiss legislation. In order to process wages in Switzerland, a compatible payroll accounting system is required. This stipulates foreign companies to fully familiarize themselves with Swiss law in order to coordinate payroll accounting in a legally compliant way and properly correspond with all necessary interfaces.

To manage this internally, the costs incurred will quickly skyrocket. As a result, the task of payroll accounting is usually handed over to a payroll provider, which is ultimately much more cost-effective. You can also enjoy the benefits of a local contact who can provide further support for other local issues.

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