How to manage payroll for part-time and cross-border employees? 

However, this flexibility brings specific payroll complexities that can be daunting for entrepreneurs, small business owners, and HR managers. Ensuring full legal and financial compliance is not just a matter of good practice—it is a legal necessity. 

This article serves as a clear and authoritative guide to demystify the specific payroll obligations and challenges associated with part-time and cross-border employees in Switzerland. We will navigate the key compliance areas and establish best practices to help your business thrive. 

Payroll handling for part-time workers in Switzerland: a practical guide 

Overseeing payroll for employees working part-time in Switzerland demands precise execution, particularly when it comes to adjusting salary components and statutory deductions in line with reduced work percentages. While Swiss employment law—namely, the Swiss Code of Obligations—does not draw a formal line between full-time and part-time roles, the financial figures must reflect each individual’s actual workload. 

Scaled compensation and extra pay elements 

When someone is employed on a part-time basis, their pay and associated perks must align with the proportion of hours they contribute compared to a full-time position. This proration applies across the board—from base pay to performance bonuses, holiday compensation, and even the widely used 13th salary (if specified in their agreement). For example, a person employed at 60% capacity would be entitled to 60% of what a full-time counterpart receives in holiday pay and supplementary salary. 

Mandatory social security contributions (AHV/AVS, IV/DI, EO) 

The foundational layer of Switzerland’s social contract is its compulsory “first pillar” social insurance system, a structure built on the principle of solidarity. This system is not an optional extra; it is an immediate and unbreakable obligation tied to earning a wage within the country. 

From the moment an individual over the age of 17 earns their first Swiss franc, contributions are mandated for three core national funds. These are the Old Age and Survivors’ Insurance (AHV/AVS), which forms the bedrock of the state pension; the Disability Insurance (IV/DI), providing support to those unable to work; and the Income Compensation scheme (EO), which covers loss of earnings during military service or maternity/paternity leave. 

The financial responsibility for funding this safety net is a perfect partnership between employer and employee. The total contribution, a set percentage of the gross salary, is split with mathematical precision down the middle. The employer acts as the designated agent in this process, meticulously calculating, withholding the employee’s half, and remitting the full amount to their designated cantonal Compensation Office (Ausgleichskasse/Caisse de compensation). This duty holds true regardless of the employment’s scale, applying just as rigorously to a part-time assistant working a few hours a month as it does to a full-time executive. 

Occupational pension scheme (BVG/LPP) and its nuances 

Switzerland’s occupational pension—referred to as BVG in German or LPP in French—is a legal requirement only when an employee’s annual earnings from a single employer surpass the statutory threshold. For 2025, this entry level stands at CHF 22,050. This is a crucial benchmark for part-time employees: if their gross yearly salary does not meet this amount with a single employer, no pension contributions are mandated under the law. 

A complication arises when a worker holds more than one part-time position. Even if their combined income exceeds CHF 22,050 annually, pension obligations don’t kick in unless one of their jobs individually surpasses the qualifying limit. This often results in pension coverage gaps for multi-job part-timers. Fortunately, some pension schemes offer opt-in solutions allowing both employers and employees to voluntarily insure income below the threshold, which can help close these financial gaps over time. 

For those part-time employees who do meet the income requirement, contributions are calculated on the “coordinated salary,” which is the portion of the salary between the BVG/LPP entry threshold and a defined upper limit. 

Accident insurance (UVG/LAA) and the 8-hour rule 

In Switzerland, the principle of protecting the workforce from the financial consequences of an accident is enshrined in the Federal Law on Accident Insurance (UVG/LAA). This legislation casts a mandatory protective net over every employee, covering not only injuries sustained on the job but also occupational illnesses that may develop over time. For many industries, this coverage is managed by the Swiss National Accident Insurance Fund (SUVA), a key institution in the country’s social security landscape. 

The system’s design, however, makes a crucial distinction that pivots on a single number: eight. The law uses an employee’s weekly hours with one employer as a bright-line test to determine the breadth of their insurance protection. 

• For individuals who work eight hours or more per week, the law unlocks a comprehensive, 24/7 level of protection. Their employer is obligated to provide a policy that covers accidents both at work and during their personal time. The financial responsibility for this complete shield is shared: the company entirely funds the premium for work-related risks, while the employee contributes a modest, pre-defined amount from their salary to secure coverage for their life outside of work. 

• For part-time employees who work less than eight hours each week, the employer’s responsibility for insurance is solely confined to incidents occurring at work or during their direct commute. This creates a significant gap. Any incidents that take place during personal time are not covered by the employer’s policy. Consequently, it becomes the employee’s duty to ensure their mandatory private health insurance encompasses protection for non-work-related accidents. Effective communication of this difference is a key characteristic of a conscientious employer. 

Managing payroll for cross-border employees (Grenzgänger) 

Cross-border employees, known as Grenzgänger in German, are individuals who work in Switzerland but reside in a neighbouring country (such as France, Germany, Italy, or Austria) and return to their main place of residence at least once a week. Their payroll management is governed by specific tax and social security rules, largely influenced by international agreements. 

The central role of withholding tax (Quellensteuer) 

For most foreign workers without a permanent residence permit (C Permit), income tax is levied at source. This is known as withholding tax (Quellensteuer in German or impôt à la source in French). Employers are responsible for calculating the correct amount of tax based on the employee’s salary, canton of employment, and personal circumstances (e.g., marital status, number of children), and remitting it directly to the cantonal tax authorities. For cross-border employees, the situation is further nuanced by Double Taxation Agreements (DTAs). 

Dependency on double taxation agreements (DTAs) 

Switzerland has DTAs with over 100 countries, including all its neighbours, to prevent individuals and businesses from being taxed on the same income in two different countries. The specifics of how a cross-border employee is taxed depend heavily on the DTA between Switzerland and their country of residence. 

Navigating the financial administration for cross-border commuters, or cross-border employees, requires a deep dive into the specific international treaties Switzerland maintains with its neighbours, as each agreement paints a different picture. 

• The Franco-Swiss tax agreement, for instance, establishes a default rule for most cantons where a French resident’s income is taxed in their home country, France, contingent upon them returning from their Swiss workplace each day. However, this is not a blanket rule; the canton of Geneva, for example, operates under a separate historical accord that mandates a different tax-sharing mechanism. 

• In stark contrast, the treaty with Germany obligates the Swiss employer to withhold a flat-rate tax (currently 4.5%) at the source. This payment in Switzerland is then credited against the employee’s final tax assessment in Germany, preventing double taxation but creating a distinct administrative process for the employer. 

A company’s payroll department must therefore move beyond general assumptions and master the precise clauses of the treaty relevant to each employee’s country of residence. 

Social security obligations for cross-border employees 

When it comes to social security, the guiding principle is clearer, dictated by the Agreement on the Free Movement of Persons between Switzerland and the EU. This agreement firmly establishes that an individual is subject to the social security legislation of the country where their work is physically performed. Consequently, a commuter from Germany, France, Italy, or Austria who works in Switzerland is fully integrated into the Swiss social security system. The Swiss employer is legally bound to manage the complete spectrum of contributions—deducting for Old Age and Survivors’ Insurance (AHV/AVS), Disability Insurance (IV/AI), and, where earnings thresholds are met, occupational pensions (BVG/LPP)—exactly as they would for a Swiss resident. 

Best practices for compliance and efficiency 

Navigating the payroll for part-time and cross-border employees can be complex, but adherence to best practices can significantly mitigate risks and enhance efficiency. 

Precise employment contracts 

The foundation of a compliant payroll is a meticulously drafted employment contract. This document should clearly outline: 

• The employee’s work percentage or weekly hours. 

• The gross salary and how it is calculated (e.g., hourly or a fixed monthly amount). 

• Entitlement to pro-rata benefits like the 13th-month salary and holiday pay. 

• For cross-border employees, an acknowledgement of their status and the applicable tax treatment based on the relevant DTA. 

• For part-time employees working less than 8 hours a week, a clause reminding them of their responsibility to secure non-occupational accident insurance is advisable. 

Utilising professional payroll solutions 

Given the nuances of Swiss payroll, especially with varied employment models, relying on manual calculations can be fraught with risk. 

• Payroll software: Modern payroll software tailored to the Swiss market can automate the calculation of salaries, social security contributions, and withholding taxes. These systems are regularly updated to reflect changes in legislation and cantonal tax rates, ensuring a high degree of accuracy. 

• Fiduciary services: For many small and medium-sized enterprises, outsourcing payroll to a professional fiduciary service, like LedgerPeek, is the most effective solution. A fiduciary offers expertise in navigating the complexities of different cantons, employee types, and international agreements. This not only ensures compliance but also frees up valuable internal resources to focus on core business activities. 

Conclusion: a matter of precision 

Flexible employment arrangements are essential for the growth and resilience of businesses in Switzerland. Nonetheless, overseeing payroll for part-time and cross-border employees requires accuracy and specialised knowledge. This includes calculating prorated salaries and pension contributions for part-time workers, as well as navigating the complex issues of withholding taxes and double taxation treaties for cross-border employees, where there is little room for mistakes. 

By fully grasping the specific legal and financial responsibilities and utilising appropriate tools and expert assistance, companies can effectively embrace these flexible job structures. Proficient payroll management is crucial to harnessing the full capabilities of a diverse workforce while ensuring adherence to legal and financial regulations within the intricate Swiss compliance framework.