Working internationally from Switzerland – What you need to know about cross-border social security contributions
In our last blog we presented an overview of what you need to know as Swiss employer regarding taxation when your employees are not permanently based in Switzerland. Depending if and what kind of double taxation agreement is in place between Switzerland and the employee’s country of residence, correct wage taxation can be a challenge. However, while the 183-days rule is familiar to many people, some tend to forget that this rule only applies to taxes, but not to social security contributions.
Social security contributions for employees working in Switzerland
According to the Swiss federal law on old-age and survivors’ insurance (OASI/DI), every person who is working in Switzerland, or has a residence there, is subject to social security contributions. Within the EU/EFTA including Switzerland, this law is especially crucial for those who do not live and work in the same country. Generally speaking, the country where the employer is based, is obliged to pay social security contributions, regardless of where the employees reside.
Social security contributions for employees working remotely outside of Switzerland
While this rule is fairly simple and easy to memorize: working in Switzerland means paying social security in Switzerland, however it gets more complicated when employees are working abroad. As the employer remains in Switzerland, theoretically, the contributions would need to be paid there accordingly. However, if employees work for a longer period from another country, they risk becoming subject to contributions there. As the employer is always responsible for the correct payrolling – no matter where the employees live, it can become complicated for the employer as in depth knowledge about the other country’s social security system is required. Besides the administrative burden, having to pay foreign contributions can get very expensive for the employer.
Risk of paying contributions in the wrong country
While paying taxes in the wrong country usually leads to immediate problems with the respective tax authorities, wrongly paid contributions are usually not an issue right away. However, it may come up during an audit, but most of all in case of an accident that leads to an employee’s invalidity. As this leads to long-term payments from the insurances to the employee, they check very carefully if they are liable in the country where the employee resides. For instance, if the Swiss invalidity insurance might come to the conclusion that they are not liable, because the employee does not reside in Switzerland, they might refuse payment. It gets even more expensive for the Swiss employer if they have to cover the costs themselves, as usually foreign insurance will not cover an employee after the accident has already happened. Either way employees are entitled to coverage by their employer according to their work contract.
Social security contributions for seconded employees
Besides employees of Swiss companies working either in Switzerland or abroad, there are also employees who usually work in Switzerland, but are being seconded for a certain amount of time by their employer. In that case, the employer continues paying the contributions domestically. However, this is only possible if the seconded employees either work for a client of their employer, or an affiliated company on site. Letting an employee work from a private home or office abroad does not qualify as a secondment. A continued payment of contributions in Switzerland would only be permitted if the employee works for a limited amount of time from home. For instance, cross-border employees who work from Germany for a company in Switzerland, may only do so at most once a week.
What is an A1/CoC certificate and how does it protect employer and employee?
If a seconded employee is confronted by the foreign authorities regarding social security contributions, the A 1 certificate (also known as Certificate of Coverage CoC) confirms that the contributions only need to be paid in the employee’s country of residence, in this case Switzerland. Some countries use the requirement for this documents as means to prevent clandestine work and wage dumping, making sure that local regulations are being followed. France and Austria in particular, have tightened their controls, especially at work places and at borders. Not showing an A1 or at least proving that it has been applied for can lead to severe fines and penalties.
The A 1 /CoC application must be submitted prior to travelling with the employer’s corresponding OASI/DI, ideally not immediately before the trip, but as soon as the travel dates are known, as the processing might take a considerable amount of time.
This document only applies to EU and EFTA nationals and is required for secondments, working frequently in other countries outside of Switzerland and certain professions where crossing borders is part of the job such as flight personnel or sailors. It not only guarantees social security while working abroad, but also prevents employer and employee from becoming subject to double contributions.
How People2.0 can help?
People2.0 (formerly TCP Solutions) is the leading provider of contingent workforce engagement solutions within the EMEA, U.S. and globally.
Should you like further information about how we could assist you and your company regarding working with temporary workers and contractors compliantly following local tax rulings, GDPR and work safety regulations, do not hesitate to contact us via firstname.lastname@example.org or send us a message via our contact page. We would be delighted to speak to you regarding the possibilities.