ARTICLE
22 January 2024

Determining The Correct Social Security Status Of Foreign Assignments

C
CONVINUS

Contributor

CONVINUS is since 2002 the leading specialist in the field of cross-border employment, international employee assignments, and is the only global mobility provider in Switzerland with a comprehensive range of services. Benefit from our unique combination of professionalism and expert know-how as well as the high level of commitment and involvement for clients.
Cross-border work has become an integral part of many companies; foreign assignments are part of the daily routine in most companies.
Switzerland Employment and HR
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Cross-border work has become an integral part of many companies; foreign assignments are part of the daily routine in most companies. One of the key issues in HR in this regard is the correct social security system. In some situations, it is easier to determine the correct coverage than in others.

One mistake you should never make, however, is to think that the same situations always result in the same social security coverage. In most cases, the situations differ in small details, which are elementary for determining the social insurance obligation. Only with the right social insurance cover will the employee receive the right insurance protection during the assignment abroad. This can otherwise be very expensive, especially in the event of accident, illness, or disability.

The most important factors to be considered for the social insurance obligation are Employee's nationality, country of residence, country of assignment, employer's registered office and type of assignment in the country of assignment and social security status prior to the assignment.

Based on these factors, it is easy to determine the social security status during the foreign assignment and the formalities required.

The following situation, which occurred a few years ago, is intended to illustrate the importance of determining the correct social security status.

Situation

A Swiss company bought a Thai company. After a few years of not generating the turnover, they had hoped for and a high fluctuation in the workforce, the decision was made to send an employee from Switzerland to Thailand for 3-5 years. The right person was quickly found. It was a somewhat younger employee who had already worked for the company for several years and the management agreed that he had a lot of potential.

The employee was very much looking forward to the opportunity to go to Thailand with his wife and two children (aged 3 and 5). After 1.5 years, the employee managed to gain the trust of the Thai employees, exceed the expected turnover, and generate a good profit. As a thank you, the employee and his team received a voucher for a great river rafting tour.

However, the happy event was overshadowed by the fact that the employee hit his head on a rock during the tour and subsequently died. The employee's wife wanted to stay in Thailand for a few months after his death before returning to Switzerland.

When the wife enquired about the payment of the lump-sum death benefit from the pension fund and widow's pension from the AHV, she was told in no uncertain terms that even if contributions had been paid during the assignment, there was no insurance cover and therefore no entitlement to any insurance benefits.

The Thai staff heard about this and collected money for the wife. The Thai company's trust in the Swiss parent company, for which the employee had worked so hard, was broken again. No one could understand why the employee had not been properly insured. After checking with the Swiss company, it turned out that they had not considered that the continuation of the Swiss AHV would have to be applied for. For the previous employee, who had been in Thailand for 6 months, this continuation had not been applied for either. For this reason, it was thought that this would not be necessary for him either. The contributions had simply been deducted and paid monthly as before, but without ever applying for them. In addition, it turned out that he did not meet the conditions for continuation. He had been working abroad for years and had only returned to Switzerland 3 years before his assignment in Thailand. He therefore did not fulfill the 5-year pre-insurance period. After a few months had passed, the Swiss company then agreed to pay the wife a monthly payment for the next 10 years.

The situation and, above all, the fact that the Swiss company had taken a very long time to help the family meant that expatriate employees wanted to have their situation checked. Everyone feared that they might be in a similar situation. At the time, 60 employees were working abroad with their families. The existing HR team was not able to cope with this in terms of capacity, so additional employees were hired.

The unrest that this situation caused in the company was huge and it took several years to rebuild trust.

By examining the situation and making the right decisions, this situation need not have had this impact.

Conclusion

It is important to look at and check each situation separately so that no errors are made when determining social security obligations. There are several risks involved in making the wrong social security assessment. The greatest risk is the resulting lack of insurance cover and insurance benefits.

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.

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