Net wage normally corresponds to the disbursed salary and is often called cash wage. This equals the gross wage after the deduction of the social security contributions. The employee’s social security contributions consist of the contributions to AHV, IV and EO, the contributions to the unemployment insurance (ALV), the non-occupational accident insurance (NBU) as well as the pension fund (BVG).
If the employee is subject to withholding tax, there is an additional difference between «Net wage» and «Disbursed salary». In this case, the disbursed salary equals the net wage after the deduction of the withholding tax or the amount that effectively stays in the domestic help’s pocket after tax.
We generally recommend you fix the gross wage in the contract of employment, as it will be used as the basis for the calculation of taxes and social security contributions. As an employer you will benefit from the stipulation of a gross wage since changes in the social security contribution or the withholding tax rates will not only impact your employment costs but evenly affect both employer and employee.
The employer may also conclude a net wage agreement with his employees. In this way, the employer undertakes to pay the employee a wage free of deductions by paying the employee’s AHV/IV/EO/ALV contributions in addition to hoi or her own. If, in addition to the full AHV/IV/EO/ALV contributions, the employer also pays the employee’s BVG contribution and/or taxes, the corresponding amounts must be added before the net wage is calculated.
For a detailed calculation of the employment costs of your domestic help we recommend our Wage calculator.
You will find more information on wage contributions in our glossary under the keywords «Gross wage», «AHV contributions», «Withholding tax», «Accident insurance (UVG)» as well as «Pension fund (BVG)».