Switzerland: Labour Market Controls In Switzerland

Introduction

Switzerland concluded the Agreement on the Free Movement of Persons with the European Union on 1 June 2002. This allows EU and Swiss citizens to freely choose their place of work and residence within the EU and Switzerland.

Initially, the prior control of compliance with customary working and wage conditions was wa- ived as a prerequisite for the granting of a permit. Gradually, the pressure on local workers and their remuneration increased, which is why the accompanying measures were introduced as monitoring measures. The Posted Workers Act (EntsG) forms the legal basis for the accom- panying measures. In addition, there are also the generally binding collective labour agree- ments and the enactment of standard employment contracts.

The aim of the accompanying measures is to comprehensively monitor the Swiss labour mar- ket, in particular to guarantee the legally prescribed working and wage conditions at Swiss employers and assignment companies. All posted workers must be protected against undercut- ting of wages and working conditions in Switzerland.

The enforcement bodies - namely the joint and tripartite commissions - have SECO as their su- pervisory authority, which defines the qualitative and quantitative requirements of the control procedures. Based on the legal obligation in the Posted Workers Act, the enforcement bodies are compensated 50% by the canton and 50% by the Confederation or SECO. The joint commis- sions receive a lump sum of CHF 650 for each inspection and are financed by an hourly rate of CHF 100 for special inspections.

The national minimum target for checks is set at 35,000 per year. The checks between the diffe- rent categories of workers are carried out on a risk basis, reflecting the intention to increasingly check posted workers, who are most affected due to the wage gap between Switzerland and the EU/EFTA countries (e.g., Italy, Poland, etc.). In current practice, 30-50% of all posted workers and self-employed service providers who are required to register are checked. In contrast, only 3% to 5% of all Swiss employers are targeted by the controls.

According to the latest report on the accompanying measures of June 2023, 37,134 companies and 165,845 persons were scrutinised in connection with the inspections carried out in 2022. This is approximately 4% more inspections than in the previous year. Swiss employers in parti- cular were inspected 14% more than in the previous year, whereas approximately 10% fewer inspections were carried out on posted workers and self-employed persons.

Against this background, it is important that employment or secondment in Switzerland takes place in accordance with the law.

The following aspects represent fundamental compliance hurdles:

1. Work permit (overview of the most important types of permits)

1.1 Local employment of third-country nationals

Third-country nationals with a local Swiss employment contract require a day 1 work permit in Switzerland. This is only granted if the person is a specialist whose employment represents an economic or scientific interest for Switzerland.

A specialist is someone who can prove a university diploma as well as several years of professi- onal experience in the same field of their specialisation. The position must be advertised in ad- vance for up to 3 months within Switzerland (via RAV) and the EU/EFTA (via EURES). As part of the search efforts, the employer must disclose the list of applicants including reasons for rejec- tions. The employer must essentially prove that the person to be hired is the best qualified candidate for the job.

The employer must also comply with the wage and labour market conditions customary in the locality and the industry, which is why the Swiss minimum wage must be guaranteed. Wages set by collective agreements are negotiated by the contracting parties and are considered mi- nimum wages. In the absence of collective agreements, the wage to be paid must be calculated using a wage calculator. Alternatively, the wage books or the cantonal calculation platforms are available.

As a rule, changing jobs and professions is not possible during the first two years. Any change of function, whether in a lower or higher position, is subject to authorisation.

1.2. Posting of EU/EFTA citizens

In practice, it is common for EU/EFTA employees to be posted to a branch office or to a client in Switzerland. In the case of a secondment, the employer must submit an application, which must be approved before the employee starts work. The employee must move to Switzerland and then register with the competent residents' registration office at the place of residence in Switzerland.

The application is only approved if the quotas for a given quarter are not exhausted. The Swiss minimum wage must also be guaranteed here, whereby the employer abroad must bear the accommodation, travel, and subsistence costs. These compensations may not be added to the gross wage. The employer has the option of either paying the actual costs or paying the flat- rate amounts in Swiss francs per day recommended by the State Secretariat for Economic Affairs (SECO) as follows:

In the case of local employment of EU/EFTA citizens, neither a work permit nor additional re- muneration is required. A residence registration at the competent residents' registration office of the place of residence is sufficient for the issuance of a residence permit.

1.3. Notification procedure vs. 120-day permit for Business Travellers

Foreign nationals who provide a cross-border service or are temporarily employed in Switzer- land on behalf of a foreign employer (up to 90 days or 120 days in a 12-month period) require a permit if the activity lasts longer than 8 days within a calendar year.

A work permit is not required for up to 8 days (8-permit-free rule). Companies based in the EU/EFTA have the option of registering their service providers online for up to 90 days. Non- EU/EFTA nationals who are employed by a company based in the EU/EFTA must show a resi- dence of more than 12 months in an EU/EFTA member state in order to be allowed to register online. A similar regulation applies to EU/EFTA citizens residing in the United Kingdom.

In all cases, the relevant wage according to the wage calculator (lower quartile "25 % earn less than") must be observed. The collective labour agreements for protected occupations, such as electricians, must be taken into account, as the minimum wage may well be lower than calculated using the wage calculator.

However, if the employee has to work longer, a 120-day permit can be applied for. It is a two stage procedure, whereby the existence of a quota is not a prerequisite. However, the employee must be a specialist (proof of a university degree and 2 to 3 years of professional experience) and the expenses must be paid by the foreign employer. The fact that residence is not required is advantageous, but the restriction of a maximum period of 90 days within a 180-day period in the Schengen area for third-country nationals must be observed. This Schengen regulation is also applicable to travel by British nationals.

2. Compliance with the minimum rules on pay and working conditions

The employer abroad must guarantee posted workers at least the working and wage conditions prescribed by federal law and generally binding collective agreements and standard employ- ment contracts within the meaning of Article 360a CO in the following areas:

• Working and rest time
• Minimum duration of the holidays
• Minimum remuneration including supplements
• Occupational safety and health protection at the workplace Protection of pregnant women, women in childbed, children, and adolescents
• Equal treatment of women and men

The following fines or penalties may be imposed for violations of the Swiss Posted Workers Act:

• State sanctions (administrative fines of up to CHF 30,000, temporary service bans of 1 to 5 years, imposition of inspection costs on offending employers),
• Criminal sanctions (criminal fines of up to CHF 1,000,000, confiscation of assets, e.g., ill-gotten gains)
• Sanctions from generally binding collective agreements.

3. Documentation obligation

At the request of the authority during a labour market inspection, foreign service providers must present the following documents to the inspection bodies:

• Copy of the work permit obtained or of the confirmation of registration in the case of a
• registration procedure
• The social security certificate A1 or the Certificate of Coverage
• Copy of the project contract
• Work reports on the hours worked including breaks
• Pay slips of the posting period
• Copy of the employment contracts incl. any personnel regulations
• Copy of vocational qualification documents (certificates, attestations) Payment receipts for the secondment expenses incl. secondment allowances
• Receipts for payment of holiday and Christmas bonuses
• Evidence of regular premiums, gratuities or bonuses, if these have been paid out in recent years

Usually, the authorities require all documents to be sent in the official language of the canton. However, practice shows that English documents are accepted.

It is essential to cooperate with the authorities and to meet the deadlines when responding. Most recently, a client from the UK did not respond to various letters from the authorities due to a possible violation of the Posted Workers Act. After about 7 months of silence, the authority in the canton of Vaud imposed a one-year work ban on the specific branch.

In another case where the work reports were missing, an Italian company received a fine of approximately CHF 500 for a posted employee. However, the highest fines tend to be issued for a violation of the minimum wage requirements. The fine is calculated according to the wage level and the number of posted employees.

Conclusion

In summary, this broadly results in the following steps to be legally compliant:

• Calculate the equivalent Swiss minimum wage and ensure that it is paid.
• Obtain registration or work permit before starting work. Obtaining the A1 or Certificate of Coverage for all seconded employees.
• Notification of employees regarding maximum working hours and rest periods in Switzerland (including public holidays). These result from the national labour law. Nota bene: protected professions partly require an additional work permit for Sa- turdays (working time permit), depending on the canton.
• Ensure that all relevant documents mentioned in this article are documented; in parti-
• cular, work reports, notifications and/or work permits.

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.