The global context, local skills shortages and employees’ work-life-balance expectations are just some of the challenges that Swiss employers are facing today. At the same time, the digital world is making it easier than ever to have work carried out remotely. Simple or not, we’ll show you what you need to bear in mind.
Place of work in Switzerland and cross-border commuters – Attention especially for part-time employees and those working from home
Your company is located close to the Swiss border and you have employees who are resident in neighbouring countries. At first glance, nothing is easier than this, as the place of employment in Switzerland basically means social security status (AHV, pension fund, accident insurance, etc.) in Switzerland. And yet there can be stumbling blocks, for example if there is international competition for family allowances or if the daily sickness benefits insurer makes a place of residence in Switzerland a condition in its general terms and conditions. Attention must also be paid to taxes, as you must generally levy withholding taxes for employees who work in Switzerland and live abroad. A salary processing programme can usually be used to calculate the correct rates. In special cases, a telephone call to the cantonal tax authorities often helps. Employees without a Swiss passport must apply for a cross-border commuter permit.
The situation becomes more complex if your employees work from home temporarily (teleworking). Up to 25% teleworking is permitted throughout the EU/EFTA without implication for the social security status. If your employees work from home for more than 25% of their workload, you need to be careful. Numerous countries have adapted the 25% rule and allow up to 49.9% to be worked from home on request. You can find out which countries allow this here. Unfortunately, there is no absolute congruence between social security status and tax status. If your employees work from home for longer periods, the tax situation has to be clarified.
And things can get really difficult if your employees have other jobs. In the case of multiple international employment, it is necessary to determine in which country the social security contributions are due. As an employer, you may be obliged to pay social security contributions in the other country, which can lead to unexpectedly high non-wage labour costs.
If employees live and work outside Switzerland: Utilise the scope for structuring, pay attention to country-specific differences and beware of the tax consequences
Your employees work for you somewhere in the world. There are various scenarios and stumbling blocks here. At least in the EU/EFTA area, it is quite common to use local contracts based on the law of your employee’s country of residence. As mentioned above, in such a scenario you are faced with the challenge of paying the local social security contributions for your employees in their country of residence. There are specialised companies that can take care of this or you can delegate the payment to your employees. But beware: you are liable for ensuring that the social security contributions are actually paid correctly!
Another option is secondment with an Expat contract, especially for Swiss nationals or EU/EFTA nationals. With a posting, your employees remain in the Swiss social security system for the duration of the posting. This means that employees and you as the employer continue to pay into the OASI (AHV) and pension fund. Accident insurance and possibly even daily sickness benefits insurance remain valid. Even family allowances (in some cases adjusted for purchasing power) continue and employees can remain in the Swiss health insurance scheme. But be careful: The posting is limited in time and does not exempt you from local social insurance coverage in every country. This means that if your employee’s place of residence is outside the EU/EFTA and not in a country with which Switzerland has concluded a social security agreement, the worst-case scenario could be double social security contributions. Furthermore, a posting must always be applied for within a fixed period and approved by the OASI. You can apply for a posting with your OASI compensation fund or via the ALPS application. In the case of a posting to a non-contracting state, Swiss social insurance may only be maintained if your employees have been affiliated to the OASI for the last five years.
Sending employees abroad on a secondment is a good thing in principle, but this only covers the social insurance. There is a lot more to think about, first and foremost taxes.
As a rule, your employees are liable for tax in their country of residence, at least if they live abroad for more than six months and work from there. If they work partly in Switzerland, Swiss taxes are generally due for these days. However, you as an employer may also generate a tax liability for your company under certain circumstances, namely if you establish a permanent establishment.
The international double taxation agreements generally define a permanent establishment as a fixed place of business where the company’s activities are carried out in whole or in part. In addition, it is usually specified that the place of management, a branch office or even construction or assembly work lasting longer than twelve months can also be considered a permanent establishment. If a permanent establishment is created, your company must also pay tax there on the portion of the profits that can be attributed to this permanent establishment. If your employee is touring Asia in a camper van, the permanent establishment risk is considered to be rather low – other questions arise for globetrotters. If, on the other hand, he or she works from the finca in Mallorca, perhaps even receives customers on site, conducts contract negotiations or similar, then the risk must be classified as very high. The tax rules and effects of a permanent establishment vary from country to country. It is advisable to check the local rules in advance, especially if managers or employees with significant operational tasks regularly work from a home office abroad or from an office rented (by the employee).
With regard to social security and taxes, it is worth clarifying the situation thoroughly. Simply allowing the Swiss contract to continue can be expensive and unpleasant, for example if OASI checks are carried out, social security contributions have to be paid later in another country or there are disputes regarding taxation. As an employer, you are always responsible in such cases, but the consequences also affect your employees. We also advise against simulated self-employment, also if the person is domiciled abroad, especially in the EU/EFTA.
Visa, information flow and data protection
You should also pay attention to your employees’ work permits. Without a proper work permit, working abroad can very quickly have unpleasant consequences for your employees – and pose a reputational risk for you. A tourist visa does not normally authorise work. The conditions of employment and the drafting of contracts must also be observed. Local law must be complied with. An employment contract in accordance with the Swiss Code of Obligations or even a CLA can be quite different from the labour law conditions abroad. There may be minimum wages or the maximum working hours may be significantly lower than in Switzerland. You may have to adapt the contractual conditions and this should definitely be clarified in advance.
Last but not least: confidentiality, data protection and the flow of information are extremely important aspects. Can you as an employer, but also your employee, ensure that the Swiss and local data protection laws can be complied with? You must ensure that your employee has access to company information. How secure is your company data in your globetrotting employee’s campervan? Are employees allowed to access sensitive customer data from Latin America, for example? Perhaps precautions need to be taken on the IT side or adjustments made to employment contracts, perhaps you even need to make local clarifications. You should certainly clarify and ensure the information flow requirements in advance and, if necessary, include them in the employment contract. Even if this sounds obvious, it is often not so easy to implement in practice.
Good planning is essential when deploying employees abroad. We will be happy to help you with this. Do not hesitate to contact us.