Vaud - Salary increase led to lower net salary

Good morning.

Long story short: I got ~3k CHF yearly raise on my salary, and to my surprise, my monthly net is ~100 CHF lower than before.

I understand that the taxation in Switzerland is in progressive brackets and that the percentage of tax increases with the revenue, however, I assumed that that only the portion of salary above every threshold would have been taxed with the higher percentage (i.e. higher raw salary always means higher net salary, even if the increase is every time smaller)

I am on a B permit with taxation at the source.

Is that normal? Should I negotiate a lower salary ( ) with the employer to remain within the upper bound of the lower bracket?

Your assumption is right - you should not be worse off with a pay increase as the tax system is progressive. If you pay at source, make sure they have used the correct coding for your family situation, church situation, etc.

If you earn over 120k a year, you'll need to file a tax return and you should be "made right" for any over/undercharge that happened.

Indeed, do a QC on the tax rate based on family situation, etc.

Also, check if it's related to 2nd pillar retirement contributions. As we age, contributions go up yielding a lower net salary.

Ok so, if I understand correctly, if I make 10.000 and the tax is 5% up to 7.000 and 10% above, the right way to compute the taxation is

5% of 7000 + 10% of 3000 = 350 + 300 = 650 (which accounts for an overall tax percentage of 6.5%)

W/o knowing the numbers where the money went hard to say what happens. Sometimes in case of a salary increase there is a few months where extra money is put into pillar 2.

Have you asked your HR department? They're obliged by law to give you a detailed salary slip each month, reflecting all the deductions, and should also be able to produce the calculations upon which they (and any changes) are based.

Hello,

I have the payslip, and I am paying 2% extra "overall" taxes, which on the total raw with the increase results in a lower net than before.

The HR department explained me the voices in the Payslip but was not able to tell me exactly what happened and if it's correct that my net is lower

That's rather a poor show from them! The deductions aren't just random. They result from someone changing what they're entering, or the software working differently, or perhaps the law has changed. Okay, your salary is higher, but there must be an explanation of how that tips the deductions, and HR really should be able to answer that question. Have you tried asking your direct line manager?

Compare payslips before and after, should reflect the differences. Did your age brackets changed in the same month of salary hike then bvg contributions could be more?

Age BVG contribution

25 – 34 7 percent of insured salary

35 – 44 10 percent of insured salary

45 – 54 15 percent of insured salary

55 – 65 18 percent of insured salary

It's not just tax, it's the other deductions. And yes, it can lead to a lower net for a higher gross.

But 250 more per month gross resulting in 100 less net seems wrong.

No, it is 10% of 10,000 = 1'000

It is not uncommon for pay rises here to result in a lower net but not for larger increases like yours, for a proper answer we would need full details.

No, it isn’t according to the law, which states there are bands and you only pay more tax on the extra part:

Chapter 5:

https://www-fedlex-admin-ch.translat…x_tr_hist=true

In most cantons the local tax is just a multiple of that, to keep things easy.

https://swisstaxcalculator.estv.admi…data/tax-rates is useful for an overview.

A marginal taxation (semantics whether it's called a tax or other deduction) of over 100% ceteris paribus feels rather unbelievable could you share concrete examples rather than assertions please?

I'm sorry you find it unbelievable. I can't help you with that. It's just simple maths.

Generally speaking, it is entirely possible to earn more gross and receive less net. But it depends very much on the individual's circumstances and how the various deductions are set.

It used to be well known in the UK at one time (30 odd years ago) that if you went over the lower earnings limit for NI by a small amount, you would receive slightly less net pay than when you were just under. It may have been rectified by now - but it happened to my sister.

Edge cases can cause anomalies. I'm not saying they do in Switzerland, but it is generally possible.

In the OP's case however, the difference is way too large, so I suspect something else is going on.

Don’t be sorry, provide examples. Bonus points for a Swiss one. I’m entirely capable of doing the arithmetic if you provide the inputs.

Do you see? So, no, I can't give you a Swiss example. I don't know if it's possible. But generally with taxation systems of course it could be possible.

I can make one up if you want? It's obviously artificial so as to make it clear the kind of thing that can happen, and indeed does happen in some taxation systems. It's the method, not the numbers that matter.

Let's say up to 100,000 you pay 5% social. Above that you pay 7%. But income tax is a fixed percentage - it doesn't matter what - but let's say zero.

100,000 you pay 5,000 social. Net pay 95,000.

100,001 you pay 7,000 social. Net pay 93,001

This is why my sister ended up with less after a pay rise in the UK. Up to the lower NI limit the % is zero on the whole amount. Above that it was 10%.

It's very unlikely that the decrease is caused by tax at source. The scales generally increase per 50 CHF additional taxable income with very small steps.

Exactly. You have to factor in the other deductions which can vary by community!

I suggest your sister consults a tax specialist - NI payment are banded and afaik always have been, there is no threshold at which a higher rate applies to income below the threshold.

Current bands:

12% of your weekly earnings between £242 and £967

2% of your weekly earnings above £967

Tax at source is cantonal. All social contributions are a fixed percentage.