Net salary transactions

Net salary management consists of recording in the accounting only the amounts actually paid. It is a simple and practical method, but it provides a less detailed view compared to gross salary management.

Net management is generally based on the time of payment (cash basis principle), since transactions are recorded when the amounts are paid. 

What is recorded

Unlike gross management, the following are recorded in the accounting:

• Net salaries paid to employees
• Advance payments of AVS/AI/IPG/AD social contributions
• Insurance and pension premiums
• Year-end adjustments

This method is the simplest and is often used in small businesses or when payroll is managed with separate payroll software.

What is not recorded:

• The gross salary
• Employee withholdings
• Liabilities to social institutions at the end of the period

When to use net management

Net management is ideal for simple, payment-oriented accounting. Gross management, on the other hand, is more suitable when a complete and detailed view of personnel costs is required.

In particular, it is recommended when:

• Accounting is mainly used to record payments and receipts
• Payroll calculations are managed separately
• It is not necessary to record in the accounting the details of salary deductions

Accounts normally used

To manage net salaries, only a few accounts are normally sufficient.

Expense accounts

• 5000 Salaries
• 5700 AVS/AI/IPG/AD 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
• Other Cash account.

Employer’s share of social security and insurance contributions

Unlike gross management, in net management the distinction between the employer’s share and the employee’s share is not immediately visible in the account cards.

In this approach:

• the net salary paid to the employee is recorded directly,
• social security and insurance contributions are recorded as expenses and as payments to the institutions.

Payments to institutions (AVS, pension fund, insurance companies) often include both the employee’s and the employer’s share.

Consequently, the account cards mainly show total amounts, without an explicit distinction between the two shares.

The employer’s share therefore results:

• from the dedicated expense accounts,
• or from the payroll statements,
• but not directly from the individual accounting transaction.

In summary, labour costs are correctly recorded, but their breakdown is less immediate compared to gross management.

Payment of net salaries 

When paying the employee’s salary, the net salary paid is recorded.

In the Transactions table, the following are recorded monthly:

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

Periodic payment of social contributions

When social contributions are paid, we record:

• Date: the date of payment of the social contributions
• Description: description of the payment
• Debit: account 5700 AVS/AI/IPG/AD Contributions
• Credit: the Bank account

Annual payment of insurance premiums

When insurance contributions are paid, for example accident insurance (LAINF) or supplementary accident insurance, the payment to the insurance institution is recorded.

• Date: the date of the annual payment of insurance premiums
• Description: description of the payment
• Debit: account 5730 Occupational accident insurance premiums
• Credit: the Bank account

Payment of the annual pension fund premium

When paying the annual premium for the pension fund (LPP):

• Date: the date of payment of the annual pension fund premium
• Description: description of the payment
• Debit: account 5720 Mandatory occupational pension contributions
• Credit: the Bank account

Payment of health insurance premium

When paying the annual health insurance premium:

• Date: the date of payment of the health insurance premium
• Description: description of the payment
• Debit: account 5740 Daily sickness allowance insurance
• Credit: the Bank account

Expense reimbursement included in net salaries paid

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

Example:

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

In the transaction, the two amounts must be separated, therefore it must be recorded on three rows:

In the Transactions table:

• First row – total payment by bank
  • Date: the transaction date
  • Description: monthly salary payment
  • Debit: must remain empty
  • Credit: the Bank account
  • Amount: the total amount paid CHF 4'200
     
• Second row – monthly net salary
  • Date: transaction date 
  • Description: monthly salary payment
  • Debit: account 5000 Salaries
  • Credit: must remain empty
  • Amount: the net salary paid CHF 4'000
     
• Third row – expense reimbursement
  • Date: the transaction date
  • Description: expense reimbursement
  • Debit: the Expense reimbursement account (e.g. travel expenses)
  • Credit: must remain empty
  • Amount: the expense reimbursement amount CHF 200

Payment of withholding tax

When withholding tax is paid at the end of the quarter:

• Date: the date of payment of the withholding tax
• Description: description of the payment
• Debit: account 5790 Withholding tax
• Credit: the Bank account

Control and verification

It is important to periodically verify the consistency between:

• accounting
• payroll calculations
• salary certificates
• statements from social institutions

During the year, social contributions and some insurance premiums are often paid as advances. Only with the final statements or year-end adjustments is the actual amount due determined.

For this reason, in net management it is particularly important to carry out regular checks and a careful year-end verification.

Advantages of net management

• Simple transactions
• Few accounts to manage
• Faster accounting

Limitations of net management

• The gross salary does not appear in the accounting
• The details of employees’ salary deductions are not visible
• Employee and employer contributions are not distinguished.

In summary

Net management is ideal for simple, payment-oriented accounting, while gross management is more suitable when a complete and detailed view of personnel costs is required.