13th-month pay and bonus: differences and rights

In Switzerland the 13th-month salary and the bonus are often used as synonyms, but from a legal standpoint they are two different things, with different regimes. Confusing them creates the wrong expectations in employees and disputes for the employer. Anyone drafting an employment contract must know exactly what they are promising.

The 13th salary: a wage, not a reward

The 13th month is, in substance, a part of the salary spread over thirteen instalments instead of twelve. It is not a reward tied to results: it is remuneration. From this follow precise consequences.

• If the 13th salary is agreed (in the contract, in a collective bargaining agreement or through established company practice), it is due, and the employer cannot unilaterally decide not to pay it.
• In the event of leaving during the year, the employee is generally entitled to the pro rata share accrued up to the end of the employment relationship.
• It forms part of the salary subject to social security contributions and, where applicable, to withholding tax.

The 13th salary is not required by law in the absence of a collective agreement: it arises from the contract or from practice. But once provided for, it behaves like salary in every respect.

The bonus: in principle discretionary

The bonus (gratuity, premium) is governed by the Code of Obligations as a special benefit that the employer pays in addition to the salary, often on the occasion of an event (year-end) or as a function of results. Its defining feature is that it is discretionary: in principle it depends, at least in part, on the employer’s will.

The concrete regime, however, depends on how it is worded and on how it has been paid over time. Practice distinguishes:

• a genuine bonus: an amount left to the employer’s discretion, expressly reserved as discretionary. It creates no entitlement for future years.
• a bonus that becomes due: if an amount is paid regularly (typically over several consecutive years) without any reservation of discretion, it can turn into a salary element on which the employee builds a protected expectation.
• a disguised salary element: if the “bonus” is in reality a fixed and predetermined part of the remuneration, the courts treat it as salary, not as a bonus.

The reservation of discretion: the clause that makes the difference

The turning point for a bonus is the reservation. To keep the discretionary character, the employer must state clearly and repeatedly that the payment is discretionary and creates no entitlement for the future. A reservation written into the contract and repeated at each payment significantly reduces the risk that the bonus “consolidates” into salary.

Watch out for the amount: case law also tends to assess the proportion between bonus and base salary. A bonus that is very high relative to the fixed pay is more easily treated as a salary component.

Why the distinction really matters

The practical consequences are not theoretical:

• Entitlement in the event of termination: on salary (including the 13th) a pro rata share accrues; on a genuinely discretionary bonus, generally not.
• Calculation of allowances and insurance: elements qualified as salary enter the calculation base.
• Social security contributions: both the 13th salary and the bonus are generally subject to contributions when they constitute employment income.
• Expectations and internal climate: promising a “guaranteed bonus” is a contradiction that sooner or later is paid for in negotiation or in court.

How to set them up correctly

Some practical rules for those drafting contracts:

1. if you want remuneration over 13 months, call it a 13th salary and treat it as salary, pro rata included.
2. if you want a flexible instrument tied to results, call it a bonus and include a clear reservation of discretion.
3. avoid ambiguous wordings (“bonus usually equal to…”) that look fixed but you would like to be discretionary.
4. keep consistency between what you write and what you do over the years: it is the actual conduct that judges look at.

How we help you

The People division of SIH ONE sets up coherent remuneration policies: the structure of 13th salary and bonus, reservation clauses and contractual wordings that really say what you mean. Talk to the People division.