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Old 04.04.2020, 17:50
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Social contributions pays by the employee ?!

Hello,

I received a proposition of contract-based employment in Zurich with a daily rate.
After the negotiation (but before moving forward), I find out that I would need to pay the employee + employer social contribution (AHV, etc) on the daily rate. With this method, it's easier to advertise a higher rate as the employer contribution isn't paid by the company.

I don't know the ZH market very well, but with another agency with an hourly rate salary. I would pay only the employee social contribution to the hourly rate. (which is also the case with permanent contract).

What is the standard method?
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Old 04.04.2020, 17:51
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Re: Social contributions pays by the employee ?!

Depends if you would be a contractor or an employee.
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Old 04.04.2020, 18:03
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Re: Social contributions pays by the employee ?!

The payroll company deduct their fee for themselves. Then every single other expense, including employer social contributions come out of the rest.

Taking made up figures:

The end client pays the agency e.g. 1200CHF. That leaves 1000CHF - the advertised rate. From the 1000CHF; the payroll company deducts 50CHF for their admin fee. Everything else comes out of the remaining 950CHF. Leaving you with, e.g. 500CHF.

If however your an employee, then the end client pays the agency 1200CHF. That leaves 1000CHF. The job is advertised at 600CHF, from which is deducted employee social contributions. Leaving you with 500CHF.

It's a bit misleading if you're not aware that this happens, but in the end, you get the same amount of pay. Always ask for a breakdown of pay (or a simulation payroll run) before signing the contract.
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Old 04.04.2020, 18:11
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Ok, maybe I got tricked on this point.
I always thought that a contractor would directly negotiate with the company he will work for and then bill the company.
Because as the contractor my protection is quite low (also the salary is higher to compensate)

However, with the second option, you're a better-protected against illness, end of the contract, pillar 2, ect
Thanks for the answer. It's find weird that the rates displayed on the job ads are not always calculated on the base, which is highly misleading

Last edited by 3Wishes; 04.04.2020 at 22:35. Reason: merging consecutive replies
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Old 04.04.2020, 18:45
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Re: Social contributions pays by the employee ?!

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Ok, maybe I got tricked on this point.
I always thought that a contractor would directly negotiate with the company he will work for and then bill the company.
Because as the contractor my protection is quite low (also the salary is higher to compensate)
You seldom negotiate directly with the company you will work for. Most clients work through agencies. The client pays the agency who pays you. You only bill agency the quoted rate if you're operating as a sole trader (generally not possible) or through your own GmbH.

With your own GmbH, you get (in my example) the 1000CHF. Any money you take out of the company is subject to - you got it - employers social, employees, 2nd pillar, insurance,.... At the end of that you might end with even less than going on payroll.
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Old 04.04.2020, 20:01
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Re: Social contributions pays by the employee ?!

Would it be possible that the fees of the payroll company are paid by the agency? Because it looks like it
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Old 04.04.2020, 21:54
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Re: Social contributions pays by the employee ?!

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Would it be possible that the fees of the payroll company are paid by the agency? Because it looks like it
It seems you have very limited experience of contracting, especially in Switzerland....

- You will become an employee of someone: either the agency (most often), a payroll company or your own GmbH

- If you are going through an agency then you will be an employee of the agency, unless you are Swiss based and are already operating via GmbH.

- If you have a direct contract with a company then you can either go with a payroll company or your own GmbH.

- If you are get a contract through an agency, then you do not get to negotiate with the client company and you can expect that the terms of the contract will include a clause to prevent you going direct to that client afterwards.

- Rates quoted to you by an agency for professional position are always all in rates. Meaning that when all the fancy bookkeeping is factored out, you pay both elements of the social security insurance, loss of income and accident insurance and pension contributions.

- The offer from the agencies are designed to put as much cash in your hands as they can, this means that the pension you will be enrolled in will not be great and you should ensure it is sufficient for your needs.

- On a few occasions, I have come across situations where you are not even an employee of the agency supplying the client with the services, but an employee of some sub agency, most often UK based.

- If you have your own GmbH and are going via an agency then you invoice them, including VAT and are responsible for all other expenses: social security, pension etc..

Now it 30 years here, I have not come across a single situation where it did not fall into the norms I have described above.

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Old 04.04.2020, 22:42
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Re: Social contributions pays by the employee ?!

Thanks for the info.
That's true, I am used to a permanent or temporary position
At least in the french part of Switzerland, most of the time a temporary position or permanent is created between the agency/consulting company and the employee. The employee works for the final client and is paid by the agency. The agency also pays the employer contributions.
But this is not contracting.

So when an agency advertised "long-term contract for 1 year", does that automatically mean it's a contracting position and you need to pay employee and employer social contributions?
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Old 04.04.2020, 22:54
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Re: Social contributions pays by the employee ?!

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So when an agency advertised "long-term contract for 1 year", does that automatically mean it's a contracting position and you need to pay employee and employer social contributions?
Yes it is a contract position.
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