Higher payroll deductions, more job support: Switzerland’s disability insurance reform

Switzerland’s Federal Council wants to stabilise disability insurance through additional revenue, savings and stronger support for people entering or staying in work. The reform plans under discussion on 5 November would affect benefit recipients, employees and employers across the country. They include higher payroll contributions, stricter eligibility for a full disability pension and new support for young adults. Public consultation is now under way, with opposition already emerging to the proposed increase in deductions from earnings.

The federal government faces two linked challenges: helping people with health conditions establish themselves in employment or retain their jobs, while improving the insurance scheme’s finances. In its view, spending cuts alone will not suffice. The package therefore combines changes to benefits and administration with both permanent and temporary sources of additional income.

CHF 1,000 to help young adults into work

For people aged 18 to 24, the government proposes an integration benefit of CHF 1,000. It is intended to help them enter the labour market and avoid becoming dependent on a disability pension at an early age. Social Affairs Minister Elisabeth Baume-Schneider had already raised the question in her first year in office of how to prevent long-term pension dependency among young people with mental health problems.

Doris Bianchi, director of the Federal Social Insurance Office, stresses that the new benefit is not a pension: “It is financial support. Above all, however, it is an integration measure with tailored services to support people and their entry into the labour market.” The circumstances surrounding those receiving support would also be considered.

The government expects the measure to prevent around a third of new disability pensions in this age group. That remains a forecast, not a demonstrated outcome. Success will depend on whether young adults gain a genuine employment prospect and can remain in work.

Closer support is also planned for people older than 25. Particular attention would go to transitions, such as moving from training into employment. The intention is to provide help at precisely these points, shifting the emphasis beyond benefit payments towards the process of finding a lasting place in working life.

Higher contributions from wages and high earners

The largest quantified source of additional revenue is a proposed increase of 0.2 percentage points in payroll social insurance contributions. This would bring in almost CHF 1 billion in 2030. Employees and employers would both be affected, with more funding for disability insurance, known in Switzerland as IV, coming from earnings.

A share of the casino levy would also go to IV. The reform therefore does not rely exclusively on payroll contributions. Bianchi nevertheless argues that these have a central role because of the scheme’s purpose: “Ultimately, IV is insurance against loss of earnings. Accordingly, financing through wages is the usual approach.”

The government also proposes a temporary solidarity contribution on high salaries from around CHF 180,000. Set at 0.6 percentage points and shared equally between employees and employers, it is expected to raise around CHF 500 million a year. Unlike the general contribution increase, this measure specifically targets high earnings.

Another temporary funding measure would be linked to the income compensation scheme, known as EO. If its contribution rate falls, payroll contributions for IV would temporarily rise by 0.05 percentage points. This switch would not increase the combined deduction compared with its previous level: the reduction for one insurance scheme would instead help finance the other.

Savings on pensions, daily allowances and administration

On spending, the government wants disability insurance offices to organise their work more efficiently. It also proposes raising the threshold for a full disability pension and reducing certain daily allowances. The financial overhaul would therefore change not only administrative processes but also eligibility for benefits and the amounts paid.

For insured people, these proposals are particularly significant. While the integration benefit promises additional support, tighter pension requirements and lower daily allowances could restrict payments. The package combines more extensive assistance with cuts. The government nevertheless considers the planned savings insufficient to remove the need for additional revenue.

Employers challenge the extra payroll burden

The Swiss Employers’ Association initially welcomed the integration benefit. Its representative Barbara Zimmermann-Gerster, however, coupled that support with a demand for structural measures. The association rejects financing through additional payroll contributions, arguing that this would burden the labour market, employers and employees, and Switzerland as a business location. It wants greater attention paid to expenditure.

The funding approach is politically contentious too. During the summer, centre-right and right-wing parties had already criticised a possible increase in payroll contributions. Only the Social Democratic Party, or SP, had indicated openness to it. The debate is therefore likely to centre on how much of the financial repair should come from additional contributions and how much from spending restraint.

For residents working in Switzerland, that distinction matters directly: the proposals concern both deductions from earnings and the support available when health problems affect employment. None of the proposed contribution or benefit changes has yet been adopted.

Interested parties have until early February to comment through the consultation, Switzerland’s formal process for gathering views on proposed reforms. Those responses will show which elements attract support and where the Federal Council still needs to build political majorities to stabilise IV’s finances.