Gross or net wage agreement?- MKY Group
Gross or net wage agreement?
Why net wage agreements are more complex for accountants
The net wage agreement is more cumbersome for accountants for a number of reasons, particularly in Swiss jurisdiction. Here are a few key aspects that explain this complexity:
1. Complexity of calculating non-wage labor costs
- With a net wage agreement, the employer must not only pay the agreed net wage, but also correctly calculate the total non-wage costs (AHV/IV/EO, ALV, BVG, UVG, withholding tax, etc.).
- Since the net wage agreement is calculated backwards, accountants must calculate contributions and deductions precisely, which can be complex depending on individual factors (e.g. BVG rate, deductions, tax progression).
2. Withholding tax and tax progression
- The calculation of withholding tax depends on income, marital status, the number of children and the canton of residence.
- In the case of a net wage agreement, the progression effect means that the employer's gross burden increases disproportionately in the event of higher net wages. Calculating this requires detailed knowledge and precise tools.
3. Special requirements for expatriates
- Expatriates or cross-border workers are often subject to other tax regulations, such as special withholding tax rates or social security agreements.
- Net wage agreements with these persons must also take into account international regulations and double taxation agreements.
4. Regular changes in legislation
- In Switzerland, social security contributions and tax regulations change frequently. Accountants must be constantly informed about new developments in order to be able to correctly calculate the net salary.
5. Increased administrative costs
- For accountants, calculating gross to net pay backwards means increased administrative costs, particularly for employees with variable income components (e.g. bonuses, commissions).
- Expenses increase even more when an employee's personal circumstances change (e.g. marriage, birth of a child), as the net salary calculation must be adjusted.
6. Risk of miscalculations
- Errors in the calculation can have significant consequences, as the employer must bear the difference if, for example, too few social security contributions have been paid.
- Such errors can cumulate over a longer period of time and lead to subsequent demands.
conclusion
The net wage agreement requires accountants in Switzerland to have precise and well-founded knowledge of tax and social security regulations. The effort and responsibility are significantly higher than with a gross wage agreement, as the employer bears the entire risk of deductions and changes. Automated tools and software solutions can make work easier, but they cannot completely replace the necessary expertise.
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Disclaimer: The content of this blog post is for informational purposes only and does not constitute professional advice.
Each individual case should be reviewed individually and we recommend that you seek professional advice for specific questions.
