When an employee falls ill and can no longer work, the company has several things to handle at once: the absence itself, keeping their pay running, and the treatment of social security contributions. In Switzerland, salary does not simply stop when someone goes on sick leave, but the rules that apply depend on how long the employment relationship has lasted and on whether the company has taken out daily sickness benefits insurance (IJM).
Swiss law requires employers to keep paying salary in certain situations. Many companies nonetheless take out IJM cover to absorb the loss of income that comes with a long absence.
Understanding both mechanisms is what keeps employers compliant, payslips accurate and errors out of the social security declarations. Sound payroll management in Switzerland makes sick leave easier to process and keeps the declarations in line.
Does the employer have to keep paying salary during sick leave?
In Switzerland, an employee prevented from working by illness through no fault of their own has statutory protection for their pay. The employer has to keep paying them for a limited time, under the rules of the Code of Obligations.
The point is to stop an employee from losing their income the moment illness stops them working. It does not mean salary continues for the whole absence: the law sets out both the conditions and the duration precisely.
The conditions for statutory salary continuation
Salary continuation during sick leave does not apply from the first day of employment in every situation. Under art. 324a of the Code of Obligations, the employer owes salary where the employment relationship has lasted more than three months or was concluded for more than three months.
That condition separates very short working relationships, where the statutory obligation does not necessarily apply, from engagements meant to last.
Several elements have to come together for the protection to apply:
- the employee must be prevented from working by illness;
- the incapacity must not result from the employee's own fault;
- the conditions on the length of the employment relationship must be met.
Where they are, the employer keeps paying salary for a limited period. The law puts a figure on it: during the first year of service, the employer pays three weeks' salary. After that first year, art. 324a para. 2 CO requires a longer period, fixed equitably in light of how long the employment has lasted and the particular circumstances.
What "fixed equitably" means in practice is settled by three scales developed by the courts, known as the Bern, Zurich and Basel scales. Each sets out how many weeks or months of salary are owed for a given number of years of service, and which one applies depends on the region. An employer therefore needs to know which scale their canton follows before working out how long they owe pay.
Employers also need to tell sick leave apart from other kinds of absence, such as an accident or maternity leave in Switzerland, which follows its own rules on compensation and payroll treatment. Each situation answers to its own rules of Swiss employment law for employers, particularly on salary continuation and employee protection.
In practice, checking which framework applies as soon as an employee reports an incapacity for work is what tells you who pays the benefits and how to handle the absence in the payroll system.
What the Code of Obligations actually requires
The Code of Obligations is the legal basis for salary continuation in case of illness. Art. 324a provides that the employer keeps paying the employee where they are prevented from working for a reason inherent to their person, such as illness, through no fault of their own.
The obligation applies only within the limits the law sets. Employers are not required to maintain salary without restriction for the whole of an incapacity.
For companies, this means planning ahead for long absences. Without additional cover, the employer carries the cost of salary continuation directly for the period the law provides.
That is one of the main reasons companies put daily sickness benefits insurance in place. It shifts part of the financial risk of long absences while guaranteeing the employee replacement income.
IJM cover does not automatically cancel the employer's obligations. It has to meet certain conditions before it can replace the statutory salary continuation set out in the Code of Obligations.
How does daily sickness benefits insurance (IJM) work?
Daily sickness benefits insurance lets a company put an alternative in place instead of paying salary directly. It is widely used in Switzerland to cover the financial consequences of absence through illness.
Unlike some mandatory social insurance schemes, IJM is not a federal insurance imposed on every company. It can nevertheless become mandatory where a collective labor agreement (CLA) or an applicable standard employment contract provides for it.
When IJM can replace salary continuation by the employer
Where a company takes out daily sickness benefits insurance, the insurer can take over paying part of the employee's income during their incapacity.
Two different legal regimes are often confused here, and the distinction matters. The four-fifths rule of art. 324b CO, under which the employer owes nothing once insurance benefits cover at least 80 percent of salary, applies to insurance that is mandatory under a statutory provision, typically LAA accident insurance. A voluntary IJM policy is not that.
A voluntary IJM falls under art. 324a para. 4 CO instead. A written agreement, a standard employment contract or a collective labor agreement may depart from the statutory rules, but only on condition that the employee receives benefits that are at least equivalent. Equivalence is judged on the package as a whole, not on the percentage alone. In practice it requires:
- benefits covering 80 percent of salary;
- paid for 720 days within a 900-day window;
- a limited waiting period, during which the employer pays;
- premiums funded at least half by the employer.
This is where employers get caught out. A policy paying 80 percent for sixty days does not release the employer from art. 324a: the statutory obligation remains, and the employer has to top up the difference. Checking the whole package rather than the headline percentage is what settles who owes what.
Beyond that, how it works day to day depends on the policy: how long benefits run, the waiting period before they start, the procedure for reporting an incapacity, and the documents required.
Knowing the terms of your own IJM policy is therefore what lets you apply the right salary treatment from the first day of a sick leave.
How IJM premiums are split between employer and employee
Taking out daily sickness benefits insurance costs the company money, since it rests on paying premiums. In Switzerland, where the employer puts IJM cover in place, they have to bear at least half of the premium.
The rest can be borne by the employee and deducted from their salary under the terms agreed. The split shares the funding of the protection offered in case of a long sick leave.
One condition is easy to miss on the payroll side. The employer's share of the premium only stays outside determining salary, and therefore free of AVS contributions, where it is paid directly to the insurer and where all employees are treated in the same way. Reimburse an employee for their premium instead, or cover only some of your staff, and the amount becomes salary subject to contributions.
Employers should also keep this apart from an ordinary social security deduction. An IJM premium is not a mandatory contribution like the AVS, the AI or the APG. It depends on the policy the company has chosen and on the rules that apply in its sector.
Companies with IJM cover also need to inform their staff properly about it. Employees should know what compensation applies during an incapacity and what steps they need to take when they go on sick leave.
Handling the insurance clearly avoids misunderstandings at the moment an employee has to rely on it, and makes the administrative side of payroll easier.
What does sick leave change for social security contributions?
How contributions are handled during sick leave depends on how the income is maintained. It is not the same where the employer keeps paying salary as where an insurer pays daily benefits.
The distinction is what makes payslips and declarations come out right.
Where the employer keeps paying salary directly
Where the company keeps paying the employee's salary during sick leave, the amounts paid remain part of determining salary for social insurance purposes.
They are therefore subject to the usual contributions, in particular:
- old-age and survivors' insurance (AVS);
- invalidity insurance (AI);
- loss of earnings allowances (APG);
- unemployment insurance (AC), where the conditions are met.
In practice, the employer treats these amounts as ordinary remuneration in payroll. The usual social security deductions keep applying and the amounts have to appear in the salary declarations.
This deserves attention when tracking absences, because the company has to separate periods actually worked from periods where salary is being maintained because of an incapacity.
Mishandling a sick leave leads to discrepancies in the annual declarations to the compensation fund, so precise tracking of absences and amounts paid matters.
Where the IJM insurer pays the benefits
Where daily benefits are paid directly by an insurance company or a health insurer, the social security treatment is different.
Those benefits are not part of determining salary for the AVS. They are therefore not subject to AVS, AI or APG contributions.
For the employer, that means keeping these benefits out of the salary subject to contributions where the insurer pays them directly.
The same distinction has to hold in the administrative documents, particularly when preparing the salary certificate. The employee's share of the IJM premium cannot be deducted from the total gross salary, which appears in box 8 of the salary certificate. Box 9 is reserved for AVS, AI, APG, AC and non-occupational accident insurance contributions, so the IJM premium has no place there either.
Handling these elements correctly avoids confusion between:
- salary maintained by the employer;
- benefits paid by an insurer;
- the contributions that apply in each case.
For companies with IJM cover, good coordination between HR, accounting and payroll is what keeps the treatment of sickness absence compliant.
How do you handle sick leave in Swiss payroll?
Sick leave involves more administrative work than simply recording an absence. The company has to identify which income continuation mechanism applies, carry the information correctly into payroll, and make sure the social security declarations match the amounts actually paid.
Identify who pays during the absence
The first step is establishing whether the company is applying:
- statutory salary continuation under the Code of Obligations;
- or cover through daily sickness benefits insurance.
That distinction drives the payslip treatment directly.
Where the employer maintains salary, the amounts follow the usual treatment of remuneration subject to contributions. Where the insurer takes over, the benefits have to be handled separately so they are not wrongly folded into determining salary.
The company also has to track the details of the absence, in particular:
- the date the incapacity started;
- how long the absence is expected to last;
- the documents needed to report it to the IJM insurer, where there is one.
Clear organization limits errors and keeps the employee's income running without interruption.
Keep salary data consistent
Tracking sick leave takes rigorous handling of payroll data. Absence records have to line up with the amounts declared to the social insurance bodies and with the documents given to the employee.
Employers should check that:
- absence periods are recorded correctly;
- the amounts paid match the applicable mechanism;
- contributions are calculated on the right base;
- the payroll documents reflect the employee's actual situation.
This gets complicated for companies with several employees, with different insurance policies in place, or dealing with long absences.
A payroll solution built for it centralizes the information, secures the calculations and makes exchanges with the various bodies easier. It also keeps payroll reliable across the whole employment relationship, including during periods of incapacity.
Handle sick leave with payroll expertise built for Switzerland
Managing sick leave in Switzerland means meeting several obligations at once: identifying which salary continuation mechanism applies, handling the benefits paid correctly, and keeping the social security declarations compliant.
For companies, this gets complicated when absences stretch out, when several employees are affected, or when the organization holds daily sickness benefits insurance (IJM). A mistake leads to administrative corrections, discrepancies in the declarations, or trouble when the salary certificates are drawn up.
At Numeriq Payroll, we support Swiss companies, SMEs and foreign companies employing staff in Switzerland with their payroll obligations. Our team helps you handle sickness absence in a structured way, in line with the rules of the Swiss social security system.
What we cover includes:
- carrying sickness absence correctly into payroll management;
- separating salary maintained by the employer from benefits paid by an IJM insurer;
- treating social security contributions according to the situation that applies;
- preparing salary declarations and administrative documents;
- tracking the variable elements that affect remuneration.
By outsourcing payroll, you get specialist support to secure your processes and cut the administrative load that comes with being an employer in Switzerland.
Our multilingual team based in Switzerland already supports more than 100 companies and 1,000 contractors with payroll management, payroll outsourcing and administrative obligations. With over 50 years of combined experience, support available 24/7 and a payroll accuracy rate of 99.9 percent, we help you keep salary handling reliable and compliant.
That lets you concentrate on your business while working with a partner who can handle the specifics of Swiss payroll, including situations like sick leave.
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