Everything you need to know about your thirteenth salary

What's the difference with an end-of-year bonus? Is it a privilege enjoyed by all workers in Switzerland and Europe? In this article, we untangle the truth from the false about this sum which, in December, adds a pleasant boost to our bank accounts.

The thirteenth salary is compulsory by law.

False: Although it is widespread and required by many collective labour agreements - the MEM agreement, for example - it is not enshrined in the Labour Act. In practice, it is paid at the discretion of the employer. Some companies justify its absence by paying a higher monthly salary than the industry norm; others replace it with an end-of-year bonus, paid on merit. On the other hand, unlike these bonuses, the right to the thirteenth salary cannot be withdrawn in the event of dissatisfaction on the part of the employer or financial difficulties: its payment is included in the initial employment contract and cannot be called into question.

The thirteenth salary is paid in December.

Not always. Some employees∙e∙s receive it in two instalments, in June and December, or at the end of November in anticipation of end-of-year bills. In the event of resignation or termination of the employment contract, the thirteenth part is included in the last salary received, at any time during the year. In this case, the amount is calculated on a pro-rata basis according to the number of months worked in the company since January. This pro-rata calculation also applies to people who join a company during the year.

The thirteenth salary is a Swiss privilege.

False. If we compare Europe as a whole, it's in southern Europe that the right to a thirteenth salary (or ‘Christmas bonus’) is most often legislated and therefore compulsory for everyone. Portugal, Greece and Italy have written it into their labour laws. In Spain, Austria and Germany, it is not compulsory, but is regarded as standard in most sectors. On the other hand, it is less common in France, the Scandinavian countries and the United Kingdom, where the Anglo-Saxon tradition places greater value on a bonus based on individual performance.

The thirteenth salary also applies to temporary or hourly-paid contracts.

True. People employed on a temporary basis are also entitled to a thirteenth salary if it is stipulated in the company contract or collective agreement. If the salary is variable, it will again be calculated pro rata to the hours worked over the year. In some cases, employers will include it in the basic hourly rate. This is then indicated on the payslip: the hourly wage is increased by an additional percentage representing the thirteenth (often around 8.33%, or 1/12 of the annual wage).

The thirteenth salary is a contemporary innovation.

False: although it has never been as widespread as it is today, journalistic archives show that even during the Industrial Revolution, bosses used to pay their employees∙e∙s a Christmas bonus. The Historical Dictionary of Switzerland (DHS) tells us that this bonus became commonplace in the 1960s, gradually becoming part of all sectors. This corresponds to the time when the monthly salary, paid into a bank account, gradually replaced an hourly payment, collected fortnightly from the workplace. Some cantonal administrations legislated the thirteenth salary in the 1980s as a means of retaining their employees∙e∙s loyalty.

And finally, how do you invest it?

While it's always welcome for Christmas shopping, the thirteenth can sometimes be used to pay tax or LAMal premiums for the year in one go. In some companies, it is possible to give up all or part of it in exchange for extra days' holiday. Note that the sum is taxable and subject to social security contributions. So, to optimise your occupational pension provision or reduce your tax bill, you can invest it in a pillar 3a. From next January, the maximum tax-deductible amounts in a 3a contract will be increased, with the option of making retroactive buy-ins, as with compulsory occupational pension provision. If you are a member of Angestellte Schweiz, our partner at Cler Bank will be happy to advise you on the contract options available.