Sabbaticals, traveling, studying, learning a language, spending time with family or just having a chance to do the things we have always dreamed of doing. For reasons as different as the individuals that take unpaid leave, vacationing without pay is very popular in Switzerland. Many employers are quite accommodating when it comes to giving employees unpaid leave in addition to their paid vacation entitlements.
But before you take off for a 6-month stay in some far-flung country, a university dorm or an unplugged alpine chalet, there are several practicalities you should be aware of. Here, we list the most important financial points to consider ahead of taking unpaid vacations.
1. Social security contributions
In Switzerland, your old age and survivors’ insurance (OASI) contributions are paid through your employer based on the salary you earn. When you take unpaid leave, you are not earning a salary, so no social security contributions are made. This creates gaps in your social security contributions which can lead to your receiving only part of your full old-age insurance pension or disability insurance benefits.
You can avoid gaps by making voluntary OASI contributions to fill in for the absence of contributions during your unpaid leave. Voluntary contributions can be made up to 5 years from the time at which the gaps occurred. A good first step is to contact your local social security office, explain your situation and request the necessary forms.
Note that old-age and disability pensions are not only based on the regularity of contributions, but also on their size. If you want to maintain your current contributions in order to avoid receiving a lower pension, you will have to continue making the same contributions during your leave. If you are employed, this will need to be transacted through your employer with their agreement. Unless your employer is exceptionally generous, you will have to cover both yours and your employer’s share of contributions because they are not obligated to match your contributions when you are not receiving a salary.
2. Occupational pension fund contributions (pillar 2a)
Contributions into your occupational pension fund (pillar 2a) are also based on the salary you earn. An extended, unpaid leave will put a gap in your occupational pension fund plan. If you want to continue making contributions on schedule, you will need to work this out with your employer ahead of time. Not all pension funds allow you to make voluntary contributions when you are not receiving a salary. Some allow this for up to 6 months, while a few allow it for up to 2 years. As with OASI contributions, you will have to transact pension fund contributions through your employer and pay the entire contributions yourself (unless your employer voluntarily continues to contribute their share).
The disability insurance and survivors’ insurance coverage which you get from your occupational pension fund is put on hold 30 days after you stop receiving your salary. If your pension fund lets you voluntarily contribute during your unpaid leave, you will also keep this coverage. Some pension funds let you keep this coverage even if you do not contribute to your pension fund. In this case you only pay the portion of contributions which covers disability and survivors’ insurance premiums. If your pension fund does not allow you to do keep your disability coverage, consider taking out stand-alone disability insurance coverage for your unpaid leave.
3. Accident insurance
If your unpaid vacation will involve any amount of risk (international travel, outdoor activities), having accident insurance is a good idea. Because you receive accident insurance through your employer, taking unpaid vacations directly affects your coverage. Your employer’s accident insurance provider covers you for up to 30 days after you receive your last paycheck. You can remain insured against accidents by taking the accident insurance coverage of your compulsory health insurance policy off hold. Some travel insurance and supplemental health insurance policies include accident coverage.
4. Unemployment insurance
It is worth noting that unemployment insurance coverage ends 12 months after you stop earning a salary or receiving compensation for paid leave (maternity, sick leave). If your unpaid leave lasts longer than a year, you will not be covered by unemployment insurance after the first 12 months. That could be problematic if, for instance, your long absence convinces your employer that the business doesn’t really need you.
5. Paid holidays
Because your employment is put on hold during an unpaid vacation, the time which you spend on leave does not count towards paid vacation entitlements. For example, if you take a 6-month unpaid vacation and work during the remaining 6 months of the year, you will only be entitled to 2 weeks of paid vacation rather than the full annual entitlement of 4 weeks.
6. Paid sick leave entitlements
If your employer takes out paid sick leave insurance which compensates you when you take sick leave, you should know that the insurance coverage does not apply during unpaid leave. If you want to receive financial compensation when you get sick during your unpaid leave, you should look into getting private insurance covering loss-of-income due to illness. A number of insurance providers offer this coverage to private individuals.
7. Health insurance
Your health insurance policies remain in force as long as you reside in Switzerland, and are not dependent on your employer in any way (unless your employer covers premiums as a benefit). If you travel internationally during your leave, you can keep your basic Swiss health insurance coverage as long as you do not settle in one country for more than 120 days. If you will reside in another country during your leave, an international health insurance policy can provide similar coverage to what you receive from your Swiss health insurance policies.
8. Thirteenth-month salaries
If you receive a thirteenth monthly salary and rely on it (to pay your taxes, for example), then it is important that you understand that your thirteenth-month salary is based on a percentage of your regular monthly salary. During the months that you spend taking unpaid leave, the money which is usually set aside towards your thirteenth salary will not normally be credited. For example, if you take a 6-month unpaid leave one year, you may only receive half of your thirteenth salary that year because you only put in 6 months of paid work.
9. Child benefits
When you take an unpaid vacation, you continue to receive Swiss child benefits during the month in which your leave begins and over the 3 following months. After that, you will no longer receive child benefits until you begin receiving a salary again. That will not be a problem if you only take short unpaid leaves. But if you count on child benefits to cover part of your budget, having these subsidies cut off 3-4 months into an unpaid leave can be problematic.
Conclusion
Unpaid leaves are often the only way to take long sabbaticals. However, it is important to count the cost and make sure your financial bases remain covered during your leave. It is worth noting that in Switzerland, paid vacation entitlements can be rolled over year on year for up to 5 years. This gives you the chance to save annual entitlements towards a long, paid vacation. If you don’t mind foregoing some or all of your paid vacations every year, you can avoid many of the hassles and added costs which come with taking unpaid vacations.
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