Case study
A Swiss company is looking for a qualified employee for the position of "International Head of Software Development". The search proves to be difficult and lengthy.
During the ongoing selection process, it turns out that a potential candidate not only has the required skills, but also fits in perfectly with the corporate culture. However, the candidate prefers not to work from Switzerland, but mainly from his home office in Germany.
The Swiss company is open to this proposal and is very accommodating.
Question
What does the Swiss company have to consider if it hires the employee, but the employee wants to perform the work almost exclusively from the German home office?
Challenges & possible solutions
Employment law
The future employee will be subject to German labour law due to the predominant work activity in Germany. For this purpose, a German employment contract must be drawn up. Here, the integration of the Swiss employer's regulations must also be considered.
If German regulations are more advantageous than Swiss regulations (e.g. vacations, working hours), the more advantageous German regulations are generally decisive.
Social security
Due to the predominant work in the German home office, the employee will be subject to German social security. The Swiss employer is responsible for calculating and paying the social security contributions. However, this cannot be done from Switzerland alone but requires the support of a competent German payroll provider.
For the occasional Swiss working days, the A1 certificate for social security subordination in Germany must be obtained. It should be noted that the competent German authority may refuse to issue an A1 certificate due to insufficient activities by the Swiss employer in Germany.
In such cases, it is advisable to obtain another confirmation of social security status in the German social security system, which can be submitted to the Swiss authorities instead of the A1 in order to obtain formal exemption from Swiss social security contributions for the occasional working days in Switzerland.
Income taxes
The Swiss company is also responsible for calculating and paying German income taxes. This responsibility cannot be delegated to the employee (any more). Therefore, the German payroll provider also handles the German payroll taxes.
For any Swiss working days, Swiss withholding taxes are owed, which must be calculated, remitted, and deducted from the employee.
Permanent establishment
The Swiss company does not wish to establish a permanent establishment in Germany. It is, therefore, advantageous to exercise appropriate caution when drawing up the employment contract and to prohibit the employee from negotiating and/or signing contracts for the company in Germany. In addition, he should not be given power of attorney.
Payroll
The involvement of a German payroll provider is essential. The payroll provider will prepare the monthly payroll and handle any communication with the German tax and social security authorities. He will also be responsible for various other administrative tasks, such as insurance with the relevant employers' accident insurance association "Berufsgenossenschaft".
Work permit
The German employee does not need a work permit for Germany. For the occasional Swiss working days, however, a permit is mandatory. The best (and often the only) option here is the registration procedure ("Meldeverfahren").
Conclusion
"Remote work" is becoming more and more the norm. Companies that are open to remote work and do not shy away from the initial effort in drawing up the employment contract and setting up the foreign payroll provide themselves with much greater access to qualified workers than companies that concentrate solely on the domestic market for skilled workers.
Overall, this case study shows that hiring a remote worker in another country involves numerous legal and administrative aspects that must be carefully planned and implemented to ensure smooth operations. Collaboration with local experts and service providers is often essential to meet the requirements of both countries.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
