Why excess hours deserve accounting attention
In many Swiss SMEs, extra hours and overtime are an everyday operational lever: production peaks, urgent deliveries, sudden absences or staff shortages. However, from a legal and financial perspective they are not the same thing. Confusing the two categories can lead to incorrect compensation, employee disputes and underestimation of labour costs.
The Code of Obligations (CO, art. 321c) and the Labour Act (LTr, art. 9 et seq. and 12 et seq.) set precise rules on maximum working hours, wage supplements and compensation methods. For the employer, every excess hour carries a cost higher than the simple hourly wage: statutory supplement, employer social security contributions and, often, indirect costs linked to work organisation.
This guide explains how to classify hours correctly, calculate their full cost and account for them in a compliant manner, with numerical examples designed for business owners, HR managers and fiduciaries using accounting software such as Accountex.
Extra hours and overtime: two distinct regimes
The fundamental distinction concerns the relationship between contractual hours and the maximum legal working time (art. 9 et seq. LTr):
| Criterion | Extra hours (art. 321c CO) | Overtime (art. 12 and 13 LTr) |
|---|---|---|
| Definition | Hours worked beyond contractual hours, but within the weekly legal limit | Hours worked beyond the maximum legal working time |
| Weekly legal limit | Up to 45 h (office staff, technicians, industrial workers) or 50 h (other sectors), unless otherwise provided by CBA | Exceeding the legal limit — max 2 h/day and 170 h/year (45 h/week) or 140 h/year (50 h/week) |
| Minimum compensation | 125% of the hourly wage or, with the employee's consent, equivalent time off within an appropriate period | 125% of the hourly wage or, with the employee's consent, equivalent time off within an appropriate period (supplement from the 61st hour for office and technical staff) |
| Mandatory rest | Not required if paid in cash; in case of time off, duration at least equal to hours worked | Not provided separately: cash compensation or equivalent time off, unless more favourable CBA provisions apply |
| Contractual basis | Supplement adjustable by written contract or CBA; performance required if necessary and reasonably demandable | Permitted only in exceptional cases; the employee cannot refuse if justified |
| Typical impact in SMEs | Frequent: employee on 42 h contract working 44 h | Occasional: year-end closing, event, operational emergency beyond 45 h |
A collective labour agreement (CBA) or internal regulations may provide more favourable conditions for the employee — for example supplements of 150% — but never below the legal minimum. Always verify the applicable employment relationship before setting rules in payroll and accounting.
Full cost calculation for the employer
The real cost of an excess hour exceeds the wage supplement visible on the payslip. For a reliable full cost estimate, proceed in three steps:
1. Base hourly wage
For monthly employees: monthly salary ÷ contractual monthly hours. Example: CHF 6'500 ÷ 182 h = CHF 35.71/h. For hourly workers: use the agreed hourly rate.
2. LTr supplement
Apply the statutory or contractual multiplier. With a 25% supplement: CHF 35.71 × 1.25 = CHF 44.64/h gross. If you compensate with time off rather than cash, the productive opportunity cost of free time should be considered in the budget.
3. Employer social charges
Add employer contributions: OASI/IV/EO (approx. 5.3%), unemployment insurance, occupational accident insurance, occupational pension plan, any family allowances and withholding tax not relevant to company cost. An indicative coefficient for SMEs is 10–15% on gross salary, varying by canton and pension plan age class.
Numerical example: 8 extra hours per month
Supplemented gross pay: 8 h × CHF 44.64 = CHF 357.12
Employer contributions (13% indicative): CHF 357.12 × 13% = CHF 46.43
Direct full cost: CHF 403.55 — rounded CHF 404
Effective full hourly cost: CHF 404 ÷ 8 = CHF 50.50/h, i.e. 41% more than the regular hour at the same base salary.
If you compensate with time off rather than cash, the accounting cost of salary may be lower in the current month, but recovered time off reduces future productive hours: plan the absence in staffing to avoid a chain reaction of new excess hours.
Compensation methods and deadlines
Cash compensation (125% supplement)
Simplest solution for accounting: the supplement flows into the monthly balance and generates social security contributions on the full gross amount. Document in the time register the type (extra hours vs overtime), the date and the multiplier applied.
For overtime, the 25% supplement cannot be excluded by contract (unless equivalent compensatory time off is agreed with the employee). Check for any more favourable CBA rules.
Compensation with time off
For extra hours and overtime: 1 hour worked = 1 hour of paid time off of equal duration, with the employee's consent and within an appropriate period (for overtime, normally within 14 weeks, extendable up to 12 months by agreement). No wage supplement is due in case of time off.
It is advisable to keep an excess hours counter per employee — even in a simple digital register linked to HR software — to meet deadlines and calculate liabilities towards staff at period end.
Night, Sunday and public holiday work
If excess hours coincide with night work (art. 16 et seq. LTr) or Sunday/public holiday work (art. 18 et seq. LTr), additional supplements or sector-specific prohibitions may apply. Full cost increases and cost centre accounting becomes even more useful for analysing the profitability of operational peaks.
Compliant accounting in the Swiss chart of accounts
Under Swiss accounting standards (CO art. 957 et seq. and GAAP/FER framework), personnel costs fall under personnel expenses (class 5). Here is an operational framework for SMEs:
| Transaction | Typical account (SME) | Note |
|---|---|---|
| Wages and excess hour supplements | 5700 Wages / 5720 Employer social contributions | Recorded at monthly payroll settlement; allocated to cost centre if active |
| Accrual for time off not yet taken | Liability accrual / 2030 Amounts owed to employees | Useful at quarter end if accumulated compensatory time off exceeds an internal threshold |
| Time off taken (paid non-working day) | Accrual reversal / no new wage cost | Cost was already recognised when excess hours were recorded on accrual basis |
| Analysis by project or department | Cost centre / accounting object | Enables accurate valuation of quotes and margins on urgent projects |
Simplified monthly recording
If excess hours are few and always paid in cash, you can include base salary and supplements in a single entry on accounts 5700 and 5720, without a dedicated analytical account. What matters is that the payslip and accounting match.
Advanced analytical recording
For companies with multiple departments or projects, it is worth coding supplements on sub-accounts or cost centres (e.g. «5705 LTr supplements»). This facilitates budget vs actual comparison and management communication on the effect of workload peaks.
Payroll integration, documentation and controls
Correct accounting starts with reliable attendance recording. Every excess hour must be supported by a timesheet, time clock system or supervisor approval. Retain documentation for at least five years, in line with tax and social security obligations.
On the payslip, visually distinguish the items: «extra hours 125%» and «overtime 125%», with any indication of compensatory time off still to be taken. OASI and pension contributions are calculated on gross salary including supplements, without exclusions.
At year end, reconcile the time register with accounts 5700/5720 and verify that no compensatory time off has expired: this constitutes a compliance risk and, in case of dispute, may result in retroactive payments with interest.
- →Define in writing contractual hours, excess hours approval procedure and preferred compensation method.
- →Calculate full cost (not just the supplement) before accepting overtime on low-margin projects.
- →Use cost centres to isolate the impact of excess hours on individual projects or departments.
- →Monitor monthly total hours per employee against the annual limit of 170 h (45 h/week) or 140 h (50 h/week) for overtime.
- →Align accounting, payroll and attendance register with a single monthly personnel closing.
Managing excess hours methodically
Extra hours and overtime are legitimate tools for managing operational peaks, but their full cost is systematically underestimated if only the 25% supplement is considered. By integrating employer contributions, any compensatory time off and loss of future productivity, an SME obtains a realistic picture for pricing, budgeting and hiring decisions.
A digital workflow — from attendance tracking to payroll settlement and accounting entry in Accountex — reduces classification errors, facilitates period-end checks and ensures LTr compliance without surprises at financial year-end closing.