Severance pay
Severance pay
With the pandemic dragging on, the pressure on employment continues to increase. And with it an ever-increasing risk of layoffs. In such a case, some workers may benefit from severance pay which will be added to the salary paid during the notice period.
Severance pay is not without effects at the tax level and in terms of rights to social insurance, unemployment in particular.
What are the main points to remember?
In terms of rights towards social insurance, it should generally be remembered that:
- With regard to unemployment, only compensation exceeding CHF 148,200.- will affect your rights.
- With regard to the LPP, it will be appropriate to look at the solutions that exist on the market in terms of free passage, working as a recipient of acquired retirement assets.
- Regarding accident coverage, the latter ends 31 days after the end of the employment relationship. An extension is possible on an optional basis for a maximum period of 180 days. This can be interesting for useful coverage during months without salaried activity. And this approach is generally less expensive than integrating accident risks into health insurance benefits.
In terms of taxes,
- In principle, severance pay is considered income and as such is subject to social security contributions and income tax, without any reduction.
- It is however possible, under certain very specific conditions, to consider it as a pension benefit and to be taxed as such, at a much more attractive tax scale. This particularly concerns people who have reached the age of 55 or over at the time the compensation is granted.
- For workers who have not reached the age of 55 at the time of payment, there are also some avenues for reflection to exempt them from all taxation.
In view of the above and beyond the shock that dismissal can cause, it is important not to delay in focusing on these aspects, because the impact of decisions taken at such a time can have significant repercussions
Do not hesitate to contact us if necessary!
