The demand from Swiss companies for consulting services from abroad is high and has continued to increase in recent times. Among other things, this can be attributed to the numerous new technologies, regulations and requirements and the reorientation of Swiss companies in global markets.
Swiss companies are also commissioning highly specialised consulting firms from abroad for these complex topics in particular, as these sought-after skills are not available internally or in Switzerland, or not to a sufficient extent.
This current topic and the numerous aspects involved that need to be taken into account are dealt with using the following practical example:
Facts of the case
Peter Müller has been employed by Strategic Consulting AG in Munich (Germany) for 5 years. Mr Müller is 35 years old, a German national and lives in Germany with his partner. He is a Senior Consultant (lowest management level) and receives an annual gross base salary of EUR 85'000. He also receives a quarterly bonus, the amount of which depends on the turnover generated and is not fixed.
He has a master's degree in finance and works as a consultant. According to his German employment contract, he works 40 hours a week.
Strategic Consulting AG has been awarded a contract by an insurance company in Zurich. Mr Müller is to work on this project for a total of 80 days in 2024.
The 80 days are spread over the entire year 2024 and are distributed over various months. It should also be mentioned that Strategic Consulting AG has a branch in Basel (Switzerland), Strategic Consulting (Schweiz) AG.
Assessment
Even if the facts seem simple and clear on the surface, there are still some important points to consider, which are listed and described below:
1) Remuneration
When working in Switzerland, the salary must be comparable to that which a person employed in Switzerland in the same function and with the same training would receive. Compliance with the relevant salary regulations in Switzerland applies to all persons (including seconded employees). However, misunderstand- ings often arise for persons employed abroad, as these categories of persons remain employed abroad and generally also receive their salary from abroad. In practice, we often see that foreign companies assume that this is sufficient. To make matters worse, salary levels are regulated differently in each of the 26 Swiss cantons.
The salary regulations are usually checked when a work permit is submitted or as part of labour market inspections.
To compare the relevant Swiss salary, there are several so-called cantonal salary books and a tool (salary calculator) that generally covers all cantons.
This is the internet link: https://entsendung.admin.ch/Lohnrechner/home
In addition to the fact that Mr Müller must therefore be paid the salary compensation for the 80 days, which amounts to CHF 98.72 or CHF 44.71 per day depending on the work permit, the company must also cover his accommodation costs, the costs for meals and the travel costs to Switzerland and back to Germany, as well as the travel costs within Switzerland.
The accommodation or hotel costs and travel costs to and from Switzerland are often effectively covered by the employer, but the costs for meals and travel costs within Switzerland are paid as a lump sum. The employer is free to organise the assumption of costs as long as the costs are covered.
2) Labour law and employment contract
Mr Müller is employed in Germany by Strategic Consulting AG and only works in Switzerland for 80 days; accordingly, he is generally subject to German labour law. No separate employment contract needs to be drawn up for the work in Switzerland. However, the mandatory relevant labour law provisions for employment in Switzerland must be taken into account, which include the following:
- Working and rest time
- Minimum duration of holidays
- Minimum remuneration
- Occupational health and safety in the workplace
- Protection of pregnant women, women who have recently given birth, children and adolescents
- Equal treatment of men and women
The question also arises as to the extent to which Swiss public holidays must be taken into account for him. In the event that Mr Müller is in Switzerland on a public Swiss holiday, he must observe it and may not work on it.
In the situation described by Mr Müller, as well as in all similar situations in which people only come to Switzerland on a daily basis to carry out an activity and otherwise work in another country, the suspicion often arises that an employee can benefit from public holidays in the country of origin as well as in Switzerland. In such cases, as in the case of Mr Müller, the work assignments can certainly be planned in such a way that Mr Müller is only in Switzerland on "real" working days.
3) Work permit
There are two options for Mr Müller from a permit law perspective:
He can either go through the so-called registration procedure for working in Switzerland or obtain a 120-day permit.
Reporting procedure
Strategic Consulting AG, based in Munich, is entitled to 90 calendar days in 2024 on which it can send employees to Switzerland and can use the notification procedure for this purpose. If Strategic Consulting AG has several employees who are to work in Switzerland, and they do not all work on the same days, the notification procedure will not be sufficient. Once the 90 calendar days have been used up, a different work permit must be obtained for each additional day on which employees are to be deployed in Switzerland.
In addition, the relevant salary for the notification procedure is the lower quartile (see also the calculation table above). For Mr Müller's employer, this would mean that he would only have to pay a difference of CHF 44.71 per day.
Furthermore, no contracts or descriptions of the assignment need to be submitted as part of the notification procedure. The notification procedure is created online. Once the employee has been duly registered, he or she may then work on the corresponding registered days. It is only important to note that the first working day must take into account an 8-day advance notification period, especially for the first notification. The disadvantage is that the employee may only work on the days that have been reported to the authorities in advance.
120-day authorisation
Another option in this case would be for Strategic Consulting AG from Munich to apply for and obtain a 120-day permit for Mr Müller. This could be obtained for the period from 1 January to 31 December 2024, for example, so that he could then work for the client in Switzerland for 120 days during this period with the 120-day permit. The days do not have to be reported to an authority in advance, as is necessary for the notification procedure, so that Mr Müller can work flexibly and as required for the client in Switzerland. He only has to ensure that he does not exceed the 120 days during this period.
In order to obtain a 120-day permit, Strategic Consulting AG must confirm that Mr Müller will receive the applicable Swiss salary (median). This means that he would have to receive the additional compensation amount of CHF 98.72 per day worked in Switzerland (see above in the calculation table).
When applying for a 120-day permit, a permit application must be submitted to the competent labour market authority. This includes the project contract / client contract along with the name of the employee to be deployed (in this case Mr Müller), a description of the project and justification of the necessity of Mr Müller's work assignment for the project in Switzerland.
As a rule, a process time of around 4 to 8 weeks must be expected for obtaining the 120-day permit. This difference exists in particular due to the different processing times in the various cantons and the time (the main holiday periods should also be taken into account if possible) when the application for authorisation is submitted to the authorities.
Strategic Consulting AG must therefore consider whether Mr Müller's flexibility is so important to it that it decides to obtain a 120-day permit. The administrative effort involved in the notification procedure, as every single working day in Switzerland has to be reported, is possibly more manageable compared to the higher wage difference to be paid.
As a rule, companies (especially if there is a need for time flexibility in the deployment of employees for projects) predominantly opt for a 120-day permit in such cases.
However, it is important for the applicant company to note that the project contract must be submitted with the application for authorisation in these cases. The period for which a 120-day authorisation can be obtained generally depends on the duration of the project contract. If, for example, Mr Müller's project contract is only issued for 6 months in this case, the authorities can only issue a 120-day permit for this period. In the past, this was consistently handled by the authorities. Futhermore, it should be noted that some authorities now issue a 120- day permit for a 12-month period despite everything, even if the project contract is not issued for the entire period.
4) Social insurance
There is a so-called Agreement on the Free Movement of Persons between Switzerland and the EU member states, which applies to Mr Müller's situation. Based on this agreement, which covers all branches of insurance in Switzerland and Germany, Mr Müller can remain subject to the German social insurance system and be exempt from Swiss social insurance.
For this purpose, Strategic Consulting AG only needs to obtain the A1 certificate in Germany and hand over a copy to Mr Müller. The A1 certificate confirms that Mr Müller is subject to social insurance in Germany.
Only regarding health insurance is it advisable to take out additional cover abroad for Switzerland. However, there is no legal requirement for this. Due to the fact that Mr Müller only works in Switzerland on a daily basis and the remaining days in Germany, an existing business travel insurance policy from Strategic Consulting AG could also be used to cover possible costs in connection with sickness absence in Switzerland. It is therefore necessary to examine in which cases such insurance can be used.
For Mr Müller, the most important aspect is certainly that his insurance cover will not change because of his work in Switzerland.
It should be noted that the A1 certificate must be obtained from the very first day. In Switzerland, the existence of an A1 certificate is usually checked as part of labour market controls or, if the assignment is within the company's own group, as part of AHV audits.
5) Taxes
A double taxation agreement is in force between Switzerland and Germany, which may apply. According to Art. 15 para. 2 of the DTA Switzerland - Germany, taxation in Switzerland can be avoided for Mr Müller if the following points are met:
- Stay in Switzerland for less than 183 days
- No salary payment from Switzerland
- No onward charging of costs to a permanent establishment or branch in Switzerland
In this practical example, Mr Müller only comes to Switzerland to work for 80 days, he continues to receive his salary from Germany and the costs are not borne by a permanent establishment or branch in Switzerland. As a result, he must pay tax on the earned income accrued on the Swiss working days in Germany. There is therefore no change here either.
All the same, Mr Müller receives a wage supplement for the Swiss working days, which must also be taxed in Germany. Even if the wage supplement is a gross amount, it still increases his taxable income and, accordingly, the tax rate applicable to his total income. In this case and in general, Strategic Consulting AG should consider the extent to which it wishes to assume this additional tax burden and, if so, how it wishes to organise this within the company.
In Switzerland, in addition to the three points from the double taxation agreement mentioned above, which must be fulfilled cumulatively (if you want to avoid tax liability in the country of assignment - in this case Switzerland), the so-called de facto employer must also be examined. This does not apply in Mr Müller's case, as the company he works for in Switzerland is a client of Strategic Consulting AG. Be that as it may, if the assignment were at a Swiss branch of Strategic Consulting AG, this aspect would also have to be examined.
6) Payroll
Mr Müller continues to receive his salary from Strategic Consulting AG in Munich (DE).
No adjustments need to be made in the German payroll accounting system, except for the payment of the salary difference for the Swiss working days.
There will be no adjustments, as Mr Müller will remain fully insured in Germany and no additional Swiss social security contributions will be incurred, meaning that he will continue to be fully liable for tax in Germany.
Conclusion
With this practical example, we have highlighted the most important aspects for you to consider and shown which issues need to be taken into account and regulated.
As can easily be seen from this practical example, it is highly advisable for companies operating across borders to involve internal or external competent professional support with extensive experience in these cross-border matters (in this case between Germany and Switzerland) in good time during the planning and implementation stages.
Finally, we would like to point out that, based on our many years of experience, it is also advisable to subject new projects, even if they appear to be similar on the surface, to a professional review and not simply to adopt the approach from previous similar or similar cases without a professional review. As the differences in such cross-border matters with two (or more) different legal systems are very often hidden in the details, such an approach can lead to unwanted complications, legal difficulties or, for example, surprising additional costs for the company during or after a project.
CONVINUS Global Mobility Insights NEWSLETTER Sommer / Summer 2024
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.