Overview of the most important changes in the guidelines on the decisive wage in AHV, IV and EO (WML)

Introductory remarks

Social security is an important institution in the Swiss legal and social order. The social security system is subdivided into five areas and social services: old-age, survivors' and disability benefits (three pillars), protection against the consequences of illness and accident, compensation for service and maternity benefits, unemployment insurance, and family allowances. The benefits of each social security branch are financed in advance by equal contributions from employees and employers.01

The following comments deal with the contributions to the Old Age and Survivors' Insurance (AHV), the Disability Insurance (IV) and the Income Compensation Scheme (EO). In particular, the guidelines on the relevant salary in the AHV, IV and EO, which were completely revised as of 1 January 2019, must be taken into account. Special attention is paid to the changes that have occurred compared to the previous year's version (Guide to the relevant salary in the AHV, IV and EO in the version of 1 January 2018).

The AHV, IV and EO together with unemployment insurance (ALV) under the so-called first pillar constitute a national insurance scheme that offers protection in old age and for survivors as well as in the event of invalidity, unemployment, military service and maternity. It is traditionally the central pillar of social security in Switzerland and pursues the purpose of at least partially compensating insured persons for the loss or reduction of earnings due to the insured risks in order to safeguard their basic needs in the sense of a minimum subsistence level.

The compensation offices or, for unemployment insurance, the unemployment insurance fund are responsible for receiving contributions and paying AHV benefits. Contributions to the first pillar are levied on employed, self-employed and inactive persons.

Definitive wage

The wage on which contributions must be paid is referred to as the relevant wage. In the case of an employed activity, this includes any remuneration paid for work performed (Art. 5 para. 2 of the Federal Law on Old Age and Survivors' Insurance of 20 December 1946; SR 831.10; AHVG). Work is defined as an activity aimed at gainful employment, regardless of whether it is illegal (e.g. undeclared work) or immoral.

In employment, those who do not have a specific entrepreneurial risk and are dependent on an employer from an economic or work organizational point of view are generally employed. Characteristics of the existence of business risk include, in particular, making significant investments, transferring losses, acting in their name and for their account, obtaining contracts, or employing staff. A right of instruction or a subordinate relationship are characteristics that speak for a relationship of dependency. In any case, an assessment of the individual case must be made, taking into account all the circumstances. There is, therefore, no presumption for employment or self-employment. Irrelevant is the legal nature of the contractual relationship between the parties.

The remuneration consists primarily of cash or non-cash benefits. The concept of the relevant salary is determined exclusively by AHV law. This therefore goes further than the civil law concept of wages. After all, the salary under employment contract law always represents the decisive salary in terms of AHV law (but not vice versa).02 If, exceptionally, an insured person does not receive remuneration for work performed in a dependent position, no fictitious income may be used as a basis. In this case no contributions are payable.

The definitive salary includes, in particular, hourly, daily, weekly, and monthly wages, gratuities, length of service gifts, risk and reward premiums, benefits in kind from employee participation, gratuities, regular benefits such as meals and accommodation, holiday and holiday allowances, continued pay as a result of an accident or illness (except insurance benefits), salary and compensation for service and maternity benefits, unemployment benefits (ALV), IV daily allowances, military insurance daily allowances, or employers' compensation for normal travel expenses for normal commuting costs.03 The salary does not include the military salary and pay to civil defense workers, accident insurance, sickness or disability benefits, social security benefits, family allowances, natural gifts that are less than 500 CHF.- in the year, or allowances for education and training, provided that they are closely related to the professional activity.04

What has been treated as a definitive wage in practice has been recorded for over 20 years in a guideline published by the Federal Social Insurance Office (BSV) - the WML. It is updated annually and was completely revised as of January 1, 2019. In particular, the WML reflects the (steadily growing) judicial and administrative practice. In individual cases, it is initially a valuable orientation aid in the application. However, it can not be ruled out that, in a concrete, practical case, even more extensive considerations may be included in the final assessment by the practitioner and/or the compensation funds.

Selection of the most important innovations in the WML 2019

Compared with the Guidelines on the applicable salary in the AHV, IV and EO in the version of 1 January 2018 (WML 2018), the Guidelines on the applicable salary in the AHV, IV and EO in the version of 1 January 2019 (WML 2019) have undergone two fundamental changes:

• On the one hand, this concerns the types of fees and their treatment for contributions to the law, especially here. The contribution of the remuneration of the workers at the end of the employment relationship as well as the contribution treatment of benefits and contributions related to occupational pension provision must be addressed.
• On the other hand, the regulations on the contribution-related treatment of certain activities were revised.

It is worth noting that the WML 2019 has been restructured and numbered, and finally a concordance table was added at the end of WML 2019 for easy orientation and transitional support to WML 2018.

Contribution law treatment of employers' pay at the termination of employment

With regard to the fees of the workers at the end of the employment relationship, the WML 2019 provides for – the content of – that in the case of the complete termination of the employment relationship, the fees of the workers are part of the relevant wage, insofar as they not expressly exempt. Such exceptions are made, for example, in

• Art. 8bis of the Ordinance on Old-Age and Survivors' Insurance (SR 831.101, AHVV): Social benefits in the event of insufficient occupational benefits, or
• Art. 8th AHVV: Social benefits in case of layoffs for operational reasons.

In new terms, WML 2019 provides that the same principles apply if the consideration in question is not paid by the employer itself but by third parties, such as a parent company or a fund, as long as it is based on the former employment relationship. An example is a bridging pension paid by a patronal fund.05 This eliminates ambiguity or portrays an economic reality that has occasionally given rise to questions in practice.

Contribution law treatment of regulatory benefits of occupational pension schemes

The chapter on benefits and contributions in connection with occupational pensions was restructured in WML 2019 and expanded to a large extent. As in the past, it has been provided that statutory benefits paid by occupational pension funds do not constitute a definitive wage if the beneficiary can personally claim the benefits in the event of a pension event or the partial or complete dissolution of the pension scheme.

The WML 2019 gives a new example of the following criteria that must be fulfilled for a contribution exemption from regulatory benefits:

• The insured person must have a legally binding right to the benefit, which is why a "can" rule is not enough.
• The regulatory provision must already exist before the insured risk occurs.
• It must be possible to determine the entitlement to benefits; in particular, the assessment basis must be sufficiently determinable.
• The regulatory benefit must be of a professional nature.
• The regulatory performance must have its basis in a regulation.06

In particular, benefits under the Pension Fund Regulations (including the pension plan), the Articles of Incorporation, or the Memorandum and Articles of Incorporation of the pension plan, the partial liquidation regulations or the distribution plan for total liquidation are deemed to be regulated. These documents must be issued by a joint body and approved by the supervisory authority. For bodies governed by public law, the provisions issued by the public corporation are considered to be regulatory.07

The WML 2018 already mentioned use cases of regulatory services such as

• benefits of pension funds within the meaning of Art. 48 of the Federal Law on Occupational Old-Age, Survivors' and Disability Pension Plans (SR 831.40, BVG) 08 and Art. 80 BVG09;
• the transfer of statutory retirement savings when an employment relationship is terminated to the pension scheme of the new employer or a vested benefits institution within the meaning of Art. 4 of the Federal Act on the Free Movement of Persons in Occupational Old-Age, Survivors' and Disability Pension Plans (SR 831.42; FZG) (in the form of a vested benefits account or a vested benefits policy pursuant to Art. 10 of the Ordinance on the Free Movement of Persons in Occupational Old-Age, Survivors', and Disability Pension Plans [SR 831.425; FZV]);
• the transfer of statutory retirement savings when an employment relationship is terminated to the pension scheme of the new employer or a vested benefits institution within the meaning of Art. 4 FZG (in the form of a vested benefits account or a vested benefits policy pursuant to Art. 10 FZV); such as
• services provided as part of a partial liquidation pursuant to the partial liquidation regulations. The same applies mutatis mutandis to welfare funds without partial liquidation regulations, provided that the principles of equal treatment and appropriateness are complied with (see Art. 89a Section 8 para. 3 of the Swiss Civil Code [SR 210; Civil Code]).10

The WML 2019 has been supplemented with the following example:

Benefits provided as part of the overall liquidation of a pension fund under the distribution plan approved by the supervisory authority (as well as for discretionary welfare funds).11

This seems coherent, especially since the benefits, in this case, are not paid by the employer and do not directly represent compensation for an activity.

Post-employment treatment of regulatory contributions to occupational pension funds

According to WML 2019, regulatory contributions of the employers to occupational pension funds, which meet the requirements of the tax exemption in accordance with Art. 56 item e of the Federal Law on Direct Federal Tax (SR 642.11; DBG), not added to the definitive wage.

As a rule, contributions are:

• mandatory in a regulation (here again a "can" rule is not enough);
• defined in the regulations before the insured risks occur and must be paid at the latest in the event of an insured event;
• the scope of which is fixed (it is envisaged, for example, that the employers take part in the purchasing of employees, but not to what extent, there are no compulsory contributions to the pension scheme); such as
• whose applicable normative basis is in principle withdrawn from the employer, at least not ad hoc in an individual case changeable.12

Post-employment treatment of employee contributions to occupational benefits

As in the past, contributions to the occupational pension scheme, which the employees themselves bear, are the decisive salary.13

The WML 2019 now states that voluntary contributions to occupational pension schemes which are voluntarily assumed by employers beyond their regulatory portion also belong to the determining salary. An example is a case in which the employer voluntarily finances the employee's contribution in addition to the regulatory portion of 50%.14 However, this does not apply to cases in which the regulations already provide for the employer to take over more than 50% of the total contributions.

Examples of gainfully employed persons and the contribution of their remuneration

The fourth part of WML 2019 - like the fourth part of WML 2018 - deals with examples of employees and the treatment of their remuneration in terms of contributions.

• The WML 2019 now includes a definition of people in charge of housekeeping and similar tasks. In-house maintenance includes, in particular, activities in multi-family dwellings outside the dwellings and in commercially used properties, which are not covered by the term "home service" (Art. 34d AHVV). However, nothing changes in the assessment that caretakers are generally considered employees of the homeowner or property manager.15
• Journalists and press photographers are now grouped together as persons working for the media. Their remuneration continues to be part of the standard wage. Fixed and variable compensation for radio and television employees is also part of the relevant salary. It is further stated that royalties (understood as compensation for the creation or performance of one's own works) are income from self-employment (welcome clarification!). Remuneration as an influencer or for the publication of contributions (of a journalistic or commercial nature) on a blog, on your own website or under your own name on other Internet platforms (e.g. YouTube or Instagram) usually represents income from self-employment.16
• In WML, doctors, dentists and veterinarians are now assigned to the extended group of health care professions. This category also includes persons working in alternative medicine, maternity care, physiotherapy or psychotherapy. In principle, the general rules on the distinction between self-employment and employment apply, although contractual agreements may provide important guidance. It should be noted at this point that the legal nature of the contractual relationship between the parties does not appear to be as irrelevant as WML 2019 states at the beginning.17 The WML 2019 now clearly distinguishes between persons belonging to this professional group in dependent and self-employed activities. The relevant wage includes the income earned by a person in a dependent position. It is irrelevant whether the activity is carried out full-time or part-time. Also irrelevant is the type of remuneration (fixed salary or tariff). Income from self-employment includes the income of the persons concerned from their own independent practice. This also includes fees paid by a public authority or private individuals for the examination or treatment of persons assigned to them (this is the case, for example, when a company has its staff vaccinated against influenza by a doctor).18
• In WML 2019, patent holders are treated on an equal footing with inventors. However, their treatment under income law remains essentially unchanged.19

Appreciation

The WML 2019 still represents an important source of knowledge when it comes to the question of which income components are part of the relevant wage. The comments make it clear that the new WML 2019 has led to greater clarity, particularly in the area of occupational pensions. The comments regarding the examples of employed persons and the contribution-based treatment of their wages and salaries have also been adapted to the present day by adding new occupational groups (e.g. influencers) and removing older occupational groups (e.g. bankers).

Accordingly, the WML 2019 appears somewhat slimmer than the WML 2018 (reduction of six pages). Viewed as a whole, the new structure and the additions made in the interests of clarity and transparency can be described as welcome. In practice, however, delimitation cases will still lead to questions which will ultimately have to be clarified with the compensation fund or through the courts.