Swiss annual pay review 2027: what employers are budgeting and how to set your own figure

In mid-August 2026 the KOF Swiss Economic Institute at ETH Zurich published its annual wage survey. Around 3'500 private-sector firms reported what they intend to pay in 2027: an average increase of 1.2 percent. Within days the figure was everywhere, and over the coming weeks it will serve as the anchor in a great many management meetings.

This is also the moment when most Swiss small businesses start their budget cycle. Set the salary budget in September and you have November for the conversations and December for the letters. This article puts the numbers in context and walks through how a company with 10 to 50 employees runs its own annual pay review, from budget to allocation to communication. If you run a Swiss subsidiary from abroad, the same steps apply, with a few Swiss habits worth knowing.

The August 2026 figures

KOF reports a planned nominal increase of 1.2 percent for 2027. For the same year it forecasts inflation of about 0.5 percent, so employees keep a real gain of roughly 0.7 percent. For perspective, real wages grew by an average of 0.2 percent a year between 2014 and 2023. The firms themselves expect inflation to come in higher than KOF does, at 1.1 percent.

The spread between sectors is wide. Construction plans the largest increase at 2.0 percent (up from 1.6 the year before), carried by full order books and a persistent shortage of skilled trades. Banking plans the smallest at 0.8 percent (down from 1.4), where the integration of Credit Suisse into UBS, the use of AI and pressure from online providers all weigh on pay.

Employee organizations have set out their positions too. Travail Suisse, the umbrella body for several unions, is asking for a general increase of 2 percent in 2027. Angestellte Schweiz, the white-collar association, wants 1.5 percent plus binding investment in training and working conditions. Negotiations under the large collective labor agreements run into November.

For a small business outside a collective agreement, that gives three reference points: 1.2 percent as the average across firms, 1.5 to 2 percent as the associations' demand, and your own sector somewhere in between.

Three inputs decide your budget

The sector average is a guide. Your own budget comes from three inputs you know better than any survey does.

Inflation. It decides whether a raise reaches employees at all. At 0.5 percent inflation, a 0.5 percent increase preserves purchasing power. Anything above that is a real gain. Swiss law imposes no duty to compensate for inflation; it becomes binding only where a collective agreement, a regulation or the contract provides for it.

Results. What the company earned in 2026 and expects for 2027 sets the frame. A manufacturer answering US tariffs with short-time work will decide differently from a firm with a full order book. Both are legitimate, and both can be explained.

The labor market for your roles. The Swiss job market has calmed overall: the Adecco Job Index counted 2.4 percent fewer open positions in the second quarter of 2026 than in the quarter before. Demand is still rising in health professions, skilled trades, office roles and IT. If you employ or hire in those fields, you feel more pressure than the average suggests. A salary benchmark for the two or three critical functions is money well spent.

Two floors apply regardless of budget: the minimum wages of any collective agreement, and municipal minimum wages. In May 2026 the Swiss Federal Supreme Court upheld the minimum wages adopted by the cities of Zurich (CHF 23.90 an hour) and Winterthur (CHF 23.00). The start date is still open while both cities resume implementation. If you pay hourly rates below those figures in either city, plan the adjustment now rather than under time pressure later.

General or individual?

An across-the-board raise is simple, fair and easy to forget: everyone gets the same, and nobody feels seen. A purely individual allocation is effective and demanding: it needs criteria, conversations and the nerve to differentiate.

In practice a combination works best for small businesses:

• A general floor at the level of inflation, around 0.5 percent, for everyone. It protects purchasing power and takes one sentence to explain.
• An individual pool of roughly 0.5 to 1.0 percent of payroll, distributed on criteria fixed in advance: new responsibility, demonstrated performance, the market value of the role, and the correction of historical gaps.

That last point covers equal pay. Swiss employers with 100 or more employees must run an equal pay analysis under the Gender Equality Act. Smaller companies have no such duty but face the same question: do women and men in equivalent roles earn the same? The annual pay review is the cheapest moment to close a gap you have found, because the budget is being distributed anyway.

Worked example: 20 employees

A company with 20 employees, an average monthly salary of CHF 6'500 and 13 monthly salaries a year. Total payroll: CHF 1'690'000.

Item	Amount
Pay raise of 1.2 percent	CHF 20'280
Employer share AHV/IV/EO (5.3 percent)	CHF 1'075
Employer share ALV (1.1 percent up to CHF 148'200 a year)	CHF 223
Subtotal	CHF 21'578

On top of that come the employer contributions to the occupational pension fund, occupational accident insurance and the family allowance fund. They depend on the pension plan, the sector and the canton, so they can only be quantified per company. As a planning rule, assume noticeably more than the nominal amount and ask your payroll provider for the effective figure before you fix the budget.

The same table shows how much 0.3 percentage points weigh: the gap between 1.2 and 1.5 percent is about CHF 5'400 a year for this company, before the add-on costs.

Communication: before the letter, not after

Most of the disappointment in an annual pay review comes from sequence. The letter arrives in December, the explanation follows on request in January. The other way around works better:

1. In October management tells the team how the budget came about: inflation, results, labor market. The order of magnitude is known before individual numbers circulate.
2. In November managers hold the conversations. Anyone receiving an individual increase learns the criterion. Anyone not receiving one learns that too, together with what could change by the next round.
3. In December the salary letters go out. They confirm what was discussed. A change in salary is a change to the employment contract and belongs in writing, with the effective date.
4. In January the first payroll run uses the new figures. If payroll is outsourced, report the changes by mid-December so that the annual salary statement, the social insurance declarations and withholding tax are right from the first month.

One sentence helps in every conversation: "This is how the budget came about, this is how we distributed it, and this is your share of it." Employees accept a modest raise when they understand the logic. A generous raise without an explanation mostly raises questions.

The process in four steps

When	Step
September	Derive the budget: inflation, 2026 results, 2027 outlook, benchmark the critical roles
October	Fix the criteria for the individual pool, brief the team on the order of magnitude, check minimum wages
November	Hold the conversations, finalize the allocation, cross-check equal pay
December	Send the salary letters, report the changes to payroll

Kept to this sequence, the whole annual pay review for 20 employees takes about two workdays of management time. Most of it goes into the conversations, and that is time well spent.

The bottom line

1.2 percent is the average of 3'500 companies. Your figure will be above or below it, depending on inflation, results and the labor market for your roles. What matters is the sequence: budget in September, criteria in October, conversations in November, letters in December. Then the annual pay review arrives in January as a payroll run rather than a surprise.

If you would rather hand off the salary letters, the contract addenda and the January payroll run, our HR administration and payroll services cover exactly those steps at published fees. Our guide to outsourcing payroll in Switzerland shows how that works month to month, and if you are setting up a Swiss entity, start with hiring in Switzerland. A first conversation about your annual pay review takes 30 minutes: book an intro call.