Personal Finance Basics for Self-Employed People in Switzerland

Whether to build on a long-held dream, make more money, or simply to be their own boss, many people choose to become self-employed. In this guide, moneyland.ch lists important financial aspects to understand before becoming self-employed in Switzerland.

If you are interested in becoming your own boss, take a moment to review these key points to find out how becoming self-employed in Switzerland affects your financial life.

• Accident insurance

When you are employed, your employer has to get you occupational accident insurance (OAI/NOAI) with loss-of-income benefits. But when you become self-employed, you have to get your own accident insurance. 

If you only want to insure medical expenses, you can activate the accident insurance cover that comes with mandatory health insurance. But unlike occupational accident insurance, the accident cover from mandatory health insurance does not cover loss of income.

If you also want loss-of-income insurance, survivor’s pensions, and disability pensions similar to what employees get from occupational accident insurance, you have to voluntarily take out private insurance. Many Swiss insurance companies offer OAI/NOAI-equivalent insurance for self-employed individuals.

The downside: Depending on your job description and lifestyle, private accident insurance can be very expensive. It can be worth getting several insurance quotes and comparing the insurance premiums.

• Pension funds and retirement saving

As a self-employed person you are not required to join an occupational pension fund. If you want to continue using occupational pension funds to build your pension benefits and claim tax deductions, you have a number of options:

• Many Swiss industry associations run voluntary occupational pension funds for their self-employed members. Two examples are the pension fund offered by the Swiss Bar Association (SAV/FSA), and the Pensionskasse Musik und Bildung, which partners with many associations for private tutors.
• You can use a pension fund plan from the Substitute Occupational Benefit Institution.
• If your business has employees, the pension fund that covers your employees may allow you to enroll as well. Each pension fund has its own rules governing whether or not company owners can participate.

Alternatively, you can make use of the pillar 3a to save for retirement on a tax-deductible basis.

If you are self-employed but do not have an occupational pension fund, you can contribute as much as 20 percent of your income to the pillar 3a (up to an annual limit). If you have a pension fund, you can still make tax-deductible contributions up to the lower limit applicable to employees.

Available pillar 3a solutions include pillar 3a savings accounts, pillar 3a retirement funds, and pillar 3a asset management services.

• Social security

When you become self-employed, you have to register as such at a social security compensation office. In order to do this, you have to show that you are working at your own risk and for your own gain. You also normally need to have several customers, as working for just one or even two companies could be construed as employment.

As a self-employed person, you pay your full social security bill yourself.

• Disability insurance

If you are able to join an occupational pension fund that has good disability insurance, then you may be adequately protected from income-loss if you become disabled due to illness.

If not, you could consider getting private disability insurance to close the gaps in your disability insurance coverage. But, like private disability insurance for accidents, the premiums you pay can be very high.

• Unemployment insurance

Being able to rely on getting an income if you become unemployed provides a lot of peace of mind. Unfortunately, you do not benefit from unemployment insurance as a self-employed individual.

That means you will want to keep enough savings aside to cover your living expenses for a time in case your business goes under.

• Paid sick leave

Unlike employees, who are entitled to paid sick leave, self-employed individuals have to prepare themselves for the possibility of not being able to earn income due to illness.

Very long-term illness (invalidity) is covered by the mandatory DI, and by your occupational pension fund and/or private disability insurance, if you have those. But having an emergency fund to cover loss of income during shorter-term illnesses is recommended.

• Parental and military leave

As a self-employed person, you have to contribute to the employment leave scheme (EO). You pay the contributions as part of your social security bill.

If you have a baby, you can claim maternity or paternity leave benefits based on your annual income. You can also get benefits to replace your income if you have to perform mandatory military service.

• Liability

When you work for an employer, they bear liability for your professional actions as long as you perform due diligence with regards to your work. As a self-employed person, all liability falls on you.

In terms of company types, self-employment encompasses sole-proprietorships, simple partnerships that have a profit-driven business, general partnerships, and limited partnerships. With all of these, the founder or primary partner is personally liable for the company’s financial obligations.

Getting commercial general liability insurance for your business helps protect you from the financial consequences of injury or loss to third parties (customers, for example).

For certain professions, having professional liability insurance is obligatory. For example, medical professionals are required to have occupational liability insurance in order to practice in Switzerland. Cantons may have their own liability insurance requirements for specific occupations.

More on this topic:
Compare Swiss business bank accounts now
Compare Swiss business loans now
Compare Swiss business credit cards now
Guide to choosing a bank for your startup
Tips for choosing the right business loan
Criteria for business loans in Switzerland
Choosing the right mobile plans for your business
Small-business money saving tips