HR update – Changes 2020/2021

Taxes

Withholding tax revision 2021

The revised version of the Ordinance on Withholding Tax (QStV)¹ was published on 11 April 2018, «Kreisschreiben 45»² followed on 12 June 2019. Both of which will enter into force on 1 January 2021 together with the law already passed in December 2016. In the following we have summarised the most important changes for you:

• As an employer you must settle accounts with each individual canton (provided that employees subject to withholding tax live in the canton in question).
• There are new tariff codes and their contents have been standardised. On the other hand, code D for employers, for example, is no longer applicable.
• Part-time working hours are to be added up to determine the rate if the employee has several gainful occupations or replacement income.
• Extrapolations are to be carried out in the monthly model as before for entries and exits during the month, but with a uniform consideration of the days.
• There are different provisions for the taxation of the 13th month's salary in both the monthly and the annual model. No matter whether you work with or without the Electronic Wage Reporting System ELM 5.0 Standard.
• Payments made after leaving Switzerland or before moving to Switzerland will be standardised and their calculation will be more precise.
• There are uniform rules on the sourcing of working days abroad if the employee resides there.
• Changed criteria apply to various procedures on the part of employers and employees such as subsequent ordinary tax assessment or correction calculation.

With the standardisation a wide variety of adjustments in the payroll software are necessary. You as an employer must obtain further information from your employees. In order to be able to calculate everything correctly for the first payroll run 2021 you must have completed the preparatory work beforehand.

Businesses are well advised to define an action plan as soon as possible. You can find the latest news and practical information in our fiduciary blog, on our website or in a suitable seminar (you can reach out to us for more details).

Instructions for filling in the wage statement

Unfortunately, the updated guidelines for filling in the wage statement are not yet available. An adaptation of the form for wage statements 2021 is to be expected. Otherwise, only minor adjustments are planned.

Compensation for short-time work

Due to the summarised procedure the short-time work compensation (KAE) cannot be allocated to individual employees. As a result, companies do not always process compensation through their payroll accounting departments. Although it is desired that KAE be reflected in item 7 of the salary statement this is not always possible without additional workload. As a pragmatic solution, we recommend that the following note be placed under item 15 «Remarks» - together with the period if necessary: «Employee was affected by short-time working in 2020». If your payroll accounting reports the KAE we recommend that the compensation be shown in item 7 (and in item 1 as a minus position in the sense of a reduction in salary).

COVID-19

Home office cross-border workers and certification of the duration of the measures

In principle, the taxation of cross-border commuters will not change due to COVID 19-related home offices. Switzerland has signed corresponding agreements with Germany, France, the Principality of Liechtenstein and Italy. However, you must note that these agreements explicitly exclude contractually agreed home office days.

For you as an employer further obligations have arisen. In particular, the agreements with the Principality of Liechtenstein and Germany require confirmation of the period during which measures to combat COVID-19 (in particular ordered home office) were taken. In this certificate you must declare the days listed below (not exhaustive). You are therefore well advised to prepare for this today.

• Working days in the home office due to an employment contract
• Working days or days at home with continued pay due to COVID 19 measures
• Days on which employees remained in Switzerland as a result of COVID 19 measures (without returning to their home country)

Deductions of professional expenses/fieldwork days

The regulations on professional costs in connection with COVID-19 vary greatly from canton to canton. In the canton of Zurich, it is expected that dependent employees will be able to claim their professional expenses in their 2020 tax return in the same way as they would have been incurred without COVID-19. These costs will not be reduced either. A deduction of home office costs is excluded. The pandemic-related home office days have no effect on the certification of field service days for employees with company cars in the canton of Zurich; however, they do in other cantons. Since the salary statement is a document with nationwide validity we recommend for the sake of simplicity that COVID 19-related home office days should also be taken into account as such and that the field service share should be calculated and shown on the salary statement in accordance with the notification «Changes in the issuing of salary statements as of 1 January 2016: Declaration of the field service share for employees with company cars» issued by the Federal Tax Administration FTA. Unless you confirm a lump sum.

¹ «Ordinance of the FDF on withholding tax in the case of direct federal taxation»

² «Withholding tax on the income of employed persons»

Social security

Partial revision of the Family Allowances Act

On 19 September 2019 the Parliament adopted the amendment to the Family Allowances Act (FamZG) was adopted. It became legally effective on 1 August 2020. The revision concerns three points:

• Training allowances for young people are paid from the age of 15 (previously 16) provided they are in post-compulsory training.
• Unemployed mothers receiving maternity allowance are entitled to family allowances during this period provided that there is no entitlement to a daily allowance from unemployment insurance.
• A legal basis has been created for the granting of financial aid to family organisations.

Paternity leave

The Swiss electorate clearly approved the proposal for a paid two-week paternity leave on 27 September 2020. This will result in various adjustments in various federal laws that will come into force on 1 January 2021. For information on eligibility requirements, compensation and financing please see our topic blog.

As an employer you should think about the concrete implementation. Adjustments may concern the following areas:

• The new wage percentage (AHV/IV/EO deduction of 5.30% from 1 January 2021) as well as the continued payment of wages during paternity leave You must enter these correctly in your payroll accounting and in your peripheral systems.
• Check your regulations and employment contracts if you have been granted shorter or no paternity leave so far.
• Your time recording system requires a new or adapted paid absence type.

Social security support for COVID-19 measures

In principle, the measures to combat COVID-19 do not change the level of social security contributions. However, there is also no Europe-wide deadline for the flexible application of the subordination rules.

If you employ cross-border workers from Germany, France, Italy, Austria and Liechtenstein there is currently no need for action. Because the agreement is valid until 30 June 2021. Nevertheless, you should keep an eye on the group of staff concerned and, if necessary, deal with changes to the guidelines on home office if you are considering extending home office to the period after COVID-19. We will be happy to support you in this. After all, in addition to tax and social security law issues, you will have to consider legal areas such as mandatory labour law in the country of residence and others.

Support for caring relatives

The new federal law on the support of care-giving relatives comes into force in two stages on 1 January 2021 and 1 July 2021.

The first stage regulates short-term absences when your employees are looking after sick or injured relatives. According to the Swiss Code of Obligations (OR) a maximum of three days' paid leave per case is available for this purpose - limited to a maximum of ten days per year. If you have not already done so you must open a corresponding absence type in your time recording.

The second stage includes 14 weeks' paid leave for the care of seriously ill children or children who have suffered an accident. This leave can be taken on a daily basis or in one go over a period of 18 months. Here too, you should check your time recording and ensure that it is correctly processed in payroll accounting.

You can find further information on AHV care credits, the helplessness allowance, the intensive care supplement and the correction of supplementary benefits in our topic blog.  

Amendments to the Ordinance on Occupational Pension Plans

In the area of occupational pensions some ordinances were adapted in specific areas and came into force on 1 October 2020. The main changes concern:

• The adjustment of the technical interest rate. This was set too high.
• The reduction or denial of benefits to beneficiaries who deliberately cause the death of an insured person.
• Adjustments to the pension compensation for divorce at retirement age.
• The tax deduction entitlement for contributions to recognised forms of pension provision.

You can find out more about these changes in our thematic blogs (Part I and Part II).

Furthermore, the new limits have been published which must be taken into account from 1 January 2021:

• Minimum AHV/IV Pension: 1195 CHF
• Maximum pension (with full contribution period): 2390 CHF
• Minimum contributions for self-employed/non-employed persons: 503 CHF
• Voluntary AHV/IV: 958 CHF
• Entrance threshold: 21'510 CHF
• Minimum coordinated wage: 3585 CHF
• Coordination deduction (annual amount): 25’095 CHF
• Ceiling annual salary: 86’040 CHF

Working hours and rest periods

On 18 September 2020 the Federal Council decided to amend the Ordinance to the Labour Code (ArGV 1). This entered into force on 1 November 2020. For example, the working time to be taken into account for outward and return journeys on business trips or the definition of the working week are now more precise. In addition, there are new provisions on working on Sundays and public holidays and on mandatory medical examinations for night work. You can read the details in the relevant topic blog.

We recommend that you check to what extent these changes will affect your everyday business and whether you may need to adapt your time recording system, employment contracts or regulations.

Pension fund regulations

On 29 January 2020 the Federal Council decided to put the reform of supplementary benefits (EL reform) into force on 1 January 2021. In addition, the new regulations on bridging benefits for older unemployed people (ÜLV) should come into force on 1 July 2021. You should therefore consider adjustments to your pension fund regulations.

Other provisions that come into force next year could have an impact on your personnel solutions such as the adaptation of the Family Allowance Act with regard to equalisation of burdens. We follow these changes in detail and keep you informed about them on our fiduciary blog.

On our own behalf

Outsourcing of payroll services

For our outsourcing of payroll services, we can present the ISAE 3402, Type II certificate of the «International Standard for Assurance Engagements» audit standard. It is valid for the calendar year 2020 and is available in July of the following year.

With this certificate we give you, as the person responsible and decision maker, the assurance that our payroll outsourcing services have an adequate internal control system and monitor all relevant business processes. The Type II report confirms that we have established all necessary controls and implemented them over a defined period of time.

The best way is to send your auditors our ISAE certificate. This can support the planning and positively influence the costs of the audit. This is because the audit procedures can be reduced in connection with outsourced payroll accounting. We will be happy to send you the document on request and answer your questions.

On-site support

If you need support with payroll processing in the event of short or long-term absences such as maternity leave, illness, accident or fluctuation we will be happy to assist you on site. Depending on the job profile we will offer someone from our specialist teams. This person handles payroll processing within the scope of a personnel hire or supports your payroll managers on site.

Abacus wage software

If you work with the Abacus Business Software in payroll accounting, we will show you on request how to make your payroll processing more efficient. For example, with appropriate wage types, tables and automation or with interfaces to the surrounding system.

Our experts will be happy to provide you with personal assistance on all the above-mentioned topics. We look forward to hearing from you.