Example

Peter Chagal is French and is employed by Drinks AG in France. He wants to move to Switzerland with his family and continue working for the French Drinks AG. Drinks AG does not have a branch or subsidiary in Switzerland. He can perform his job as social media officer from anywhere.

The employer must now check the employment, authorisation, social security, and tax law aspects as well as the payroll implementation for this. After the check, the employer confirms that Mr Chagal can move to Switzerland.

For the implementation in practice, a number of legal and administrative aspects have to be considered.

Labour law

If a person is gainfully employed in Switzerland, the legal provisions of Swiss labour law must be applied in the employment contract.

As a rule, such employment contracts will incorporate both the labour law of the employer's country of domicile and the mandatory and necessary provisions from the labour law in Switzerland. These include, among others, provisions for: 

• Employee protection
• working hours
• rest periods
• Public holidays and holidays
• safety regulations in the workplace
• Regulations for the protection of groups of workers requiring special protection, such as children, young people, and women
• Minimum wage and wage protection regulations, overtime pay, holiday pay
• Protection against dismissal
• Post-contractual non-competition clause

The employment contract should therefore always be brought into line with Swiss law.

Permit

"Remote working" or "digital nomad" visas do not exist in Switzerland. It is currently not expected that there will be such a type of visa in Switzerland in the near future.

For this reason, a foreign employer can currently only grant "remote" working in Switzerland to a Swiss or EU/EFTA national.

An EU or EFTA national only has to register in Switzerland with the foreign employment contract at the competent municipality of residence and will thereby receive a work and residence permit B for 5 years.

The requirements for the foreign employment contract are compliance with the mandatory minimum requirements under labour law and a minimum workload of 30%.

For non-EU or EFTA nationals who are already resident in Switzerland, it may also be possible to work for a foreign employer and carry out the activity in Switzerland. In such cases, however, the exact permit situation must be examined in detail.

Social security

If a person is gainfully employed in Switzerland, this generally leads to a social security obligation in Switzerland. It does not matter whether the employer is abroad or not.

The Swiss social insurance system has the "ANobAG" status (employee without an employer liable to pay contributions). The employee must be registered and registered with a compensation fund. In addition, accident insurance and a pension fund must be taken out for the employee.

Swiss employers usually also take out daily sickness benefit insurance to cover the continued payment of wages in the event of illness. Since this insurance is not compulsory, every foreign employer is free to decide whether to take out daily sickness benefits insurance.

It should be noted that Swiss insurance policies and regulations apply to the continued payment of wages in the event of accident or illness. It is therefore advisable to also take out daily sickness benefits insurance for the obligation to continue to pay wages in the event of illness.

The insurance contributions are divided between the employer and the employee according to the legal regulations. As a rule, this means that the contributions are split 50/50.

Taxes

The withholding of a withholding tax by the foreign employer is not provided for by law. A withholding tax only has to be withheld from the salary in Switzerland if there is an employer in Switzerland.
In these cases, the earned income is taxed when the tax return is filed in Switzerland. The amount of the tax burden is calculated on the basis of the employee's canton and municipality of residence and therefore varies depending on the personal situation.

Permanent establishment

In Switzerland, too, an examination of the permanent establishment risk should be carried out when employing workers, so that one is protected from consequences at the company level.

As a rule, it also applies in Switzerland that "auxiliary activities" do not lead to the establishment of a permanent establishment in Switzerland.

Payroll

In principle, there is no legal requirement to keep a payroll for remote workers in Switzerland, provided that no salary is paid in Switzerland. However, it is advisable to keep a payroll in Switzerland due to the social security obligation. This ensures that the correct contributions are calculated.

Accordingly, in such situations one would keep payroll accounting abroad (country of domicile of the employer) as well as in Switzerland. In Switzerland, this is merely a shadow payroll for the deduction of Swiss social security contributions. This information is then passed on to the "main" payroll abroad so that it is taken into account accordingly in the payroll on a monthly basis. 

Conclusion

The employment of workers with a foreign employer is possible in Switzerland with some restrictions. If the employer remains abroad, it is essential to consider the aspects described here in order to avoid risks when employing workers in Switzerland.
In the event that one wishes to employ several workers in such a manner, it is also important to introduce processes for this so that administration is optimised and all aspects described above are taken into account in a legally compliant manner.