Net salary transactions

Net salary accounting consists of recording in the accounting only the amounts actually paid to employees. It is a simple and practical method, particularly suitable when payroll processing is carried out using dedicated payroll software or outsourced to a fiduciary firm.

Compared with gross salary accounting, it provides a less detailed view of personnel costs, as it does not separately show the employer's social security contributions and the contributions withheld from employees.

For this reason, the calculation of gross salaries, deductions, and social security contributions is performed by the payroll software or by a fiduciary firm, which submits the required declarations to the relevant authorities. The annual declaration to the AHV Compensation Office is based on the gross payroll, which must be determined from the payroll statements.

What is recorded

With net salary accounting, the following items are normally recorded in the accounting:

• net salaries paid to employees
• advance payments of social security contributions (AHV/IV/EO/ALV), paid monthly or quarterly
• insurance and pension premiums, paid at the beginning of the year or every six months.
• any year-end adjustments.

What is not recorded:

• Gross salary
• Employee deductions
• Liabilities towards social security institutions at the end of the period.

Advantages of net salary accounting

• Simple transactions
• Few accounts to manage
• Faster accounting.

Limitations of net salary accounting

• The gross salary does not appear in the accounting.
• The details of employee salary deductions are not visible.
• Employer and employee contributions are not shown separately.

When to use net salary accounting

Recording salaries on a net basis is recommended when payroll management is handled by payroll software or by a fiduciary firm, and the main purpose of the accounting is to record payments and accounting transactions.

It is particularly suitable when:

• the details of salaries, deductions, and social security contributions are managed outside the accounting
• there is no need to analyse personnel costs separately in the accounting
• you want to keep the accounting simpler and reduce the number of transactions.

Accounts normally used

Only a few accounts are normally required to manage net salaries.

Expense accounts

• 5000 Salaries
• 5700 AHV/IV/EO/ALV Contributions
• 5710 Family allowance fund contributions
• 5720 Mandatory occupational pension contributions
• 5730 Occupational accident insurance premiums
• 5740 Daily sickness allowance insurance
• 5790 Withholding tax

Payment accounts

• 1020 Bank
• Another cash account.

Distinction between the employer's share and the employee's share

With net salary accounting, the accounting records do not directly show the allocation of social security contributions between the employer's share and the share withheld from employees.

Payments made to social security institutions (AHV, occupational pension fund, insurance companies, and other institutions) generally include both shares and are recorded as total amounts. Consequently, it is not possible to identify the employer's share directly from the accounting entries alone.

To determine it, you need to refer to:

• the expense accounts dedicated to social security contributions
• the payroll statements generated by the payroll software.

The accounting correctly records the total personnel cost, while the detailed allocation of contributions is provided by the payroll statements.

Payment of net salaries

When paying employees, the net salary paid is recorded.

In the Transactions table, record the following each month:

• Date: the salary payment date
• Description: the payment description
• Debit: account 5000 Salaries
• Credit: the Bank account

Periodic payment of social security contributions

When paying advance social security contributions, record:

• Date: the payment date of the social security contributions
• Description: the payment description
• Debit: account 5700 AHV/IV/EO/ALV Contributions
• Credit: the Bank account
• Amount: enter the amount of the social security contributions (shown on the advance invoice), including both the employer's share and the employee's share.

Annual payment of insurance premiums

When paying insurance premiums, for example Occupational Accident Insurance or supplementary Occupational Accident Insurance, record the payment to the insurance company.

• Date: the annual insurance premium payment date
• Description: the payment description
• Debit: account 5730 Occupational accident insurance premiums
• Credit: the Bank account
• Amount: enter the amount shown on the invoice. It includes both the employer's share and the employee's share.

Annual payment of the pension fund premium

When paying the annual occupational pension fund premium:

• Date: the annual pension fund premium payment date
• Description: the payment description
• Debit: account 5720 Mandatory occupational pension contributions
• Credit: the Bank account
• Amount: enter the amount shown on the invoice. It includes both the employer's share and the employee's share.

Payment of the daily sickness allowance insurance premium

When paying the annual daily sickness allowance insurance premium:

• Date: the payment date of the daily sickness allowance insurance premium
• Description: the payment description
• Debit: account 5740 Daily sickness allowance insurance
• Credit: the Bank account
• Amount: enter the amount shown on the invoice. It includes both the employer's share and the employee's share.

Expense reimbursement included in the net salary paid

When the net salary paid includes an expense reimbursement, it is advisable to separate the net salary from the expense reimbursement in the accounting records. This ensures that the salary account is not affected by amounts that do not actually represent salary.

Example:

• Net salary: CHF 4'000
• Expense reimbursement: CHF 200
• Total payment through the bank: CHF 4'200

In the accounting entry, the two amounts must be recorded separately. Therefore, the transaction should be entered using three rows:

In the Transactions table:

• First row – total payment through the bank
  • Date: the transaction date
  • Description: monthly salary payment
  • Debit: leave blank
  • Credit: the Bank account
  • Amount: the total amount paid CHF 4'200
     
• Second row – monthly net salary
  • Date: the transaction date 
  • Description: monthly salary payment
  • Debit: account 5000 Salaries
  • Credit: leave blank
  • Amount: the net salary paid CHF 4'000
     
• Third row – expense reimbursement
  • Date: the transaction date
  • Description: expense reimbursement
  • Debit: the Expense reimbursement account (for example, travel expenses)
  • Credit: leave blank
  • Amount: the expense reimbursement amount CHF 200

Payment of withholding tax

When paying withholding tax at the end of the quarter:

• Date: the withholding tax payment date
• Description: the payment description
• Debit: account 5790 Withholding tax
• Credit: the Bank account
• Amount: enter the amount calculated by the payroll software according to the requirements of the Withholding Tax Office.

Checks and verification

During the year, social security contributions and some insurance premiums are generally paid as advance payments. The actual amount due is determined only when the final statements or the year-end adjustments are issued.

For this reason, when using net salary accounting, it is essential to carry out regular checks and a thorough verification at the end of the financial year.

For more information, see the Net salary reconciliation.