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Financing of social security contributions by employers

Melanie Imper Senior Associate Treuhand/Corporate Support Services Switzerland, PwC Switzerland 21 Apr 2020

On 20 March 2020, the Federal Council introduced an interest-free deferral of social security contributions. Five days later, the «COVID-19 Ordinance on Occupational Pensions» was published. On 2 April 2020, the Federal Social Insurance Office issued a directive.

In this article, we unravel these regulatory requirements for employers.

Social security contributions

Companies facing liquidity problems as a direct result of the COVID-19 crisis can now be granted a deferral of payment of social security contributions (AHV/IV/EO/ALV) from the AHV social security office. This is what the «Ordinance on Measures for Short-Time Work and Settlement of Social Security Contributions in Connection with the Coronavirus (COVID-19)» (in German) issued by the Federal Council on 20 March 2020 states. Payments can be deferred interest-free for six months, but this can be extended depending on the individual AHV social security office, which can also allow employers to submit one application to defer payments for several periods – for outstanding payments before 21 March 2020 and up to 30 September 2020.

Certain prerequisites need to be fulfilled

The contributor has to meet certain requirements. First of all, it must demonstrate that it is facing liquidity problems and agree to regularly pay instalments, with the first instalment due immediately. There must also be reasonable grounds for believing that the contributor is willing and able to pay the further instalment as well as the ongoing contributions by the deadlines. If a company doesn’t satisfy these conditions, the social security office can refuse the interest-free deferral of payment. The amount of relief offered to the contributor is equivalent to the amount of default interest, which generally is 5% per year.

Applying for an adjustment of the regular instalments

Companies and self-employed people can also apply to adjust the amount of their regular contributions if the wage bill has decreased considerably respectively the turnover has slumped. Contributors must submit the application to the relevant AHV social security office, which is responsible for assessing the payment deferral and for adjusting the payment instalments.

Deferral of reminders and suspension of debt enforcement

A deferral of reminders was also introduced on 21 March 2020. This is specified in the «Directive on Measures for AHV/IV/EO Contributions, Organisation and Insurance Liability in Connection with the Coronavirus (COVID-19)», which the Federal Social Insurance Office issued to the social security offices on 21 March 2020 with retroactive effect. According to the directive, employers will not receive any reminders for late contribution payments. This doesn’t include reminders for breaches of duty regarding accounting, notifications or obligations to provide information, regulatory and control provisions as well as reminder fees and fines. This measure will last for a maximum of six months and may be detailed in a further directive. No debt enforcement proceedings will be initiated between 19 March 2020 and 20 April 2020 and a temporary standstill will apply to any that are ongoing. After this period, proceedings can then be duly reintroduced where applicable under certain conditions. Otherwise this will happen after the deferral of reminders has been lifted and a reminder has been sent.

Occupational pension provision

On 25 March 2020, the Federal Council published the «Ordinance on the Use of Employer Contribution Reserves for Payment of the Employer Contributions to the Occupational Pension in Connection with the Coronavirus» (in German), which was valid until 25 September 2020 and was re-enacted on 12 November 2020. This states that employers may temporarily use their accumulated employer contribution reserves to pay employee contributions to the pension fund. This is aimed at helping companies bridge liquidity bottlenecks. There are no consequences for employees. The employer will continue to deduct the usual contributions from the employee’s wage and transfer the total contributions to the pension fund.

Contact us

Melanie Imper

Melanie Imper

Senior Associate Treuhand/Corporate Support Services Switzerland, PwC Switzerland

Tel: +41 58 792 28 32