EO (Loss of Earnings Compensation)
EO (Erwerbsausfallentschädigung) is mandatory social insurance that replaces lost wages when an employee is absent for military service, civil service, or jury duty. Employers contribute to cantonal or multi-cantonal EO funds. The compensation rate is typically 80% of regular earnings up to a ceiling, paid by the EO fund—not by you directly.
EO stands for loss of earnings compensation (Erwerbsausfallentschädigung in German). It reimburses employees whose income drops because they're absent for military service, civilian service, or jury duty—obligations that take precedence over work.
In Switzerland, EO is a mandatory social insurance system. As an employer, you contribute to your canton's EO fund (or a registered multi-cantonal fund), typically as a small percentage of payroll. When your employee is called away, the EO fund covers most of their lost salary—you do not pay the compensation directly.
When EO applies and what you must do
An employee informs you they're absent for military service (RS), civilian service (Zivildienst), or jury duty (Geschworenendienst). You verify the notice and record the absence. Your legal obligation is to accept the absence without penalty and to deduct the EO compensation (not your own payment) from their salary, then forward the employee's contribution to your cantonal EO fund.
Contributions vary by canton and are deducted from employee wages (employee portion) and employer payroll (employer portion). Rates range roughly 0.2–0.5% of insured earnings. Verify your specific canton's rate with your cantonal Social Insurance Office (Ausgleichskasse).
- Employee provides official notice (Einberufungsbefehl or court summons); you must accept it
- EO typically covers 80% of daily earnings, capped by a statutory ceiling
- Compensation is paid by the EO fund, not out of your budget
- You remain the employer; the employee retains all employment rights
- Deduct both employee and employer EO contributions from payroll
- Contributions are mandatory; non-payment carries penalties under the ArG (Labour Act)
Employer obligations and canton-specific rules
Register with your cantonal Ausgleichskasse (compensation office) and verify whether your canton runs its own EO fund or you must join a multi-cantonal fund. Some cantons (e.g. Zurich, Bern) operate independent schemes; others pool resources. Your Ausgleichskasse will confirm your contribution rate and provide payroll deduction tables.
When an employee is absent for an EO-qualifying reason, you report the absence and the EO compensation amount to your insurer. The employee receives the EO payment separately from their salary. Do not reduce their regular wage; the EO fund makes up the difference to the statutory compensation level.
- Contact your canton's Ausgleichskasse or RAV/ORP/URC office to register
- Obtain current contribution rates—they vary by canton and change annually
- Maintain clear records of EO absences and compensation paid
- Do not dock the employee's salary; EO is a benefit, not a deduction
- For multi-site companies, contributions may differ by employee location
- If you have a GAV (collective labour agreement), check if it sets higher EO rates
The most common mistake
Many employers wrongly assume they must pay the employee's full salary during an EO absence and then recover it from the fund. In fact, the employee receives their normal salary plus the EO compensation from the insurance fund—you do not front the money. Trying to recoup from EO later creates overpayment disputes and cash-flow confusion.
A second frequent error is failing to register with the cantonal EO scheme or forgetting to deduct contributions from payroll. This exposes you to back-payment demands, penalties, and late-payment interest under ArG rules. Confirm registration and deduction rates with your Ausgleichskasse at least once a year.
- Do not pay the employee's full salary expecting reimbursement from EO
- Do not skip EO registration or contribution deductions—they are mandatory
- Do not withhold the employee's benefits or demote them after EO absence
- Do not mix EO absences with holiday or sick leave (they are separate)
- Document the official notice and the EO compensation amount for audit trail
- Clarify your canton's rules; Zurich, Bern, and smaller cantons have different schemes
Frequently asked questions
- Do I have to pay my employee's full salary while they are on military service?
- No. The EO insurance fund pays the employee 80% of their regular earnings (up to the statutory ceiling). You continue to deduct your regular payroll deductions (taxes, AHV, etc.) as usual, but you do not pay additional compensation. The employee's net income is maintained by the combination of their base salary deduction and the EO benefit.
- What is the difference between my contribution and my employee's contribution to EO?
- Both are mandatory. The employer contribution (typically 0.2–0.5% of payroll) is a business cost. The employee contribution is deducted from their wage. Your canton's Ausgleichskasse publishes the split rate each year. Multi-site employers may face different rates by canton of employment.
- Can I refuse to release an employee for military service or jury duty?
- No. These obligations are protected by law. Refusing to release an employee or penalizing them for absence violates the ArG and federal law. The employee has the right to the absence, and you must accept it without salary reduction or disciplinary action.
General information for Swiss employers, not legal advice. Have a lawyer confirm anything with legal consequences.