With the growing acceptance of remote work, companies are increasingly looking for - and finding - qualified workers abroad. In this context, we see it becoming increasingly common for employees not to relocate to Switzerland despite having a Swiss employment contract, but to come to Switzerland for meetings or to work only a few days per month or quarter.
Last week, we highlighted the associated challenges and restrictions in terms of work permits that a Swiss employment contract without residency in Switzerland entails. This week, we turn to social security and taxes.
A Swiss consulting company has recruited a prominent headhunter from the neighboring country Germany, Mr. Besserwisser, who wants to keep his residence in Germany. On one hand, he can do his job perfectly well from home, on the other hand, his wife is gainfully employed, and the children go to school in Germany. A move to Switzerland is, therefore, out of the question. However, he must come to Switzerland for various company matters
What needs to be considered here from a tax and social security perspective?
Mr. Besserwisser is, in general, subject to unlimited tax liability in Germany due to his German residence. On the part of the employer, it must be clarified whether there is an obligation here for the employer to pay German income taxes or whether the employee only has to pay taxes on his salary as part of the German tax declaration.
In addition, Swiss withholding taxes are due for all Swiss working days. There are no exemption limits here, and the obligation is independent of whether the employee has a work permit for Switzerland or not.
Concerning taxes, it is generally irrelevant whether the employee is an EU national, a Swiss national, or a so-called third-country national.
Regarding social security, the nationality of Mr. Besserwisser is certainly relevant. For the sake of simplicity, let's assume that the employee is a German citizen. If he were a third-country national, different rules would apply regarding social insurance.
If the employee works less than 25% on an annual average in the country of residence, Germany, or works less than 49.9% in the German home office, he is subject to Swiss social insurance because he has a Swiss employer. However, if Mr. Besserwisser works more in Germany, he is automatically subject to German social security. The Swiss employer must thus pay German social security contributions.
The Swiss employer will not be able to do this on his own but requires the help of a suitable payroll provider in Germany.
If the company is not afraid of the initial effort and the ongoing additional costs due to the foreign payroll, employment in Switzerland with the employee residing abroad is indeed a valid option to attract qualified employees for the company and to significantly increase the pool of suitable applicants.
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.