Anyone coming to work in Switzerland for the first time usually experiences the same moment of surprise when they receive their first payslip: the difference between the gross and net amounts is considerably greater than they expected. It’s not that the company is ripping you off. It’s just that in Switzerland there are a number of compulsory social security contributions that are deducted directly from your salary, and which go towards very specific purposes. What’s confusing is that a Swiss payslip may feature abbreviations that mean nothing to someone coming from Spain: AVS, AI, APG, AC, LPP, LAA, IJM. Here’s a proper explanation of each one.
AVS, AI and APG form the main pillar. The AVS (Assurance Vieillesse et Survivants) is the first-pillar pension scheme. The AI (Assurance Invalidité) provides cover if you become permanently disabled. The APG (Allocation pour perte de gain) provides benefits during military service, maternity or paternity leave. In total, you pay around 5.3% of your gross salary and your employer contributes the same amount. The AC is unemployment insurance: 1.1% which protects you if you lose your job. The LAA is accident insurance. Work-related accidents are paid for in full by your employer. Non-work-related accidents – such as those happening at the weekend whilst skiing or cycling – are paid for by you, usually included in your payslip as a small deduction. The LPP is the second pillar, the supplementary pension scheme, the contribution rate for which varies according to your age and salary. And the IJM, which not all companies offer, is insurance that covers your salary when you are on long-term sick leave.
In total, an employee’s deductions can amount to between 12% and 20% of their gross salary, depending on their salary, the company and the canton. This explains why gross pay in Switzerland is not as indicative as net pay, and why it is always a good idea to understand what is being deducted before signing a contract.