BVG Coordination Deduction
The BVG coordination deduction (Koordinationsabzug) is a statutory amount that Swiss employers deduct from an employee's salary before calculating occupational pension (BVG) contributions. It exists to avoid doubling-up pension benefits from the first pillar (AHV/IV) and second pillar (occupational pension). The deduction is set annually by law and varies by canton and age.
When you employ someone in Switzerland earning above a threshold, you must enroll them in an occupational pension scheme under the Federal Law on Occupational Old-Age, Survivors' and Disability Insurance (BVG/LPP). Before you calculate how much both you and the employee contribute, Swiss law lets you subtract a coordination deduction from their gross salary.
This deduction prevents the two-pillar system from over-insuring low and middle earners. Without it, someone earning CHF 25,000 annually would pay pension contributions on income already protected by AHV/IV.
When the coordination deduction applies
You apply the coordination deduction once an employee's annual salary exceeds the BVG entry threshold (usually around CHF 22,050 in 2024, though your occupational pension fund may set its own higher threshold). You subtract the deduction once per year from gross salary, then calculate employee and employer contribution percentages on what remains.
The deduction amount is set by federal law and indexed annually. Most cantons publish updated figures in January. Your occupational pension fund's regulations will specify which year's deduction to use and whether you apply it per payday or once annually.
- Apply deduction only if salary exceeds the BVG entry threshold
- Deduction is recalculated annually; check your fund's published rates
- Applies to all insured employees, not just full-time staff
- Part-time employees (30% Pensum) are still subject to deduction if they meet threshold
- Deduction reduces the salary base for contribution calculation, not gross pay
Your obligation as an employer
Your occupational pension fund sends you the current coordination deduction amount each year. You must apply it consistently to all eligible employees. If you use payroll software, ensure it reflects the correct year's deduction—many systems default to outdated figures.
If your fund uses a collective or group policy, verify whether contributions are calculated with or without the deduction; some funds handle it internally. Confirm this in writing when you enroll. Document your methodology so that audits or employee queries can be answered clearly.
- Check your occupational pension fund's annual deduction notice
- Update payroll system or manual calculations each January
- Confirm with your fund whether they apply deduction or you do
- Keep records of deduction amounts used each year
- Coordinate with your accountant if you outsource payroll
- Inform employees of deduction in writing if requested
The most common mistake
Many employers use last year's deduction amount instead of the current year's. This is easy to overlook when you renew your occupational pension policy in December, because fund administrators often bury the updated deduction in an annual report or separate notice, not the contract itself.
A second widespread error: applying the deduction twice—once by the fund and once in your payroll system. Always ask your fund explicitly: 'Do you deduct this from my contribution calculation, or do I?' Duplicate deduction is illegal and will trigger corrections.
- Update deduction amount in January; don't carry over prior year's figure
- Ask your occupational pension fund in writing if they apply deduction
- Review payroll software settings annually to catch outdated amounts
- If contribution statement shows unexpectedly low deductions, verify with fund
Frequently asked questions
- Can I apply a lower coordination deduction to pay less into the occupational pension?
- No. The deduction is set by federal law (BVG article 13c) and is mandatory. You cannot legally reduce it. However, your occupational pension fund may permit a higher deduction, which would lower contributions. Check your fund's rules.
- Does the coordination deduction apply to executives or board members?
- Generally yes, unless the occupational pension fund's regulations exempt certain groups. Verify with your fund or insurance broker. Senior staff are often covered by a different scheme; clarify at enrollment.
- If an employee works 40% Pensum, is the coordination deduction pro-rated?
- No. The deduction is applied to the employee's actual salary, not reduced by Pensum percentage. An employee working 40% of full-time at CHF 18,000 per year still has the full deduction applied before contribution calculation.
General information for Swiss employers, not legal advice. Have a lawyer confirm anything with legal consequences.