One of the common elements an employee may notice on their payslip is allowances. These are advance payments meant to cover work-related expenses that an employee will incur. For example, if an employee uses their personal phone or laptop for work-related tasks, the company can pay an allowance to cover part of these costs.
In the instance below, the employee receives a monthly allowance of 50 CHF each for their phone and laptop. 📱💻💰
The question that arises then is, how does a company decide the allowance amount? It's a proportion of the actual cost borne by the employee. If an employee is paying 100 CHF each month for their phone service, the company might assume that half of the usage is work-related. Hence, they provide an allowance of 50 CHF to cover this cost. The same principle is applied to other allowances, such as those for laptops.
An important aspect to consider is whether allowances are taxed as income. As illustrated in the example payslip below, the employee's gross salary is 10,000 CHF, but the tax (AHV, ALV) is calculated on an amount of 10,100 CHF, including the phone allowance.
This implies that certain allowances are taxable. Here, the phone allowance is taxable while the laptop allowance is not. However, it is possible for a company to have these allowances approved as non-taxable by the cantonal tax office.
The cantonal tax office reviews each case individually. They determine whether all or part of the allowance should be non-taxable. Their decision is based on their set standards for evaluating each unique scenario.
If you receive an allowance, it's crucial to check whether it's taxable. If it is, you can suggest your company apply for a tax exemption for this allowance with the local cantonal tax office. It's a viable way to avoid paying taxes on something that should be viewed as an expense. 💡🛡️
At Earny, we strive to simplify payroll complexities. In the context of allowances, we can assist in several ways:
By choosing Earny, you are opting for clarity, efficiency, and simplicity in payroll processing. We are here to make your payroll experience smooth and transparent! 🎯💡📈