Determining the correct social security status of an employee on a foreign assignment is fundamental. The employee's nationality, the duration of the assignment, the home country, the country of assignment, and the country in which the employee was covered by social insurance before the assignment abroad play a key role in this.
Situation
Consulting Inc., based in New York (USA), is seconding an employee with Brazilian nationality to its subsidiary in Zurich (Switzerland) for 3 years. He will support the Swiss employees in the introduction of new processes. The employee has been employed by Consulting Inc. in the USA for 5 years and was also covered by social security in the USA before his secondment to Switzerland. After his assignment abroad in Switzerland, he will return to the USA.
Can the employee remain subject to social insurance in the USA during his assignment abroad in Switzerland?
In this example, the employee can continue to be subject to the USA, as the basic conditions are met:
- There is a social security agreement between Switzerland and the USA.
- The employee's nationality is irrelevant.
- The posting is at the intention and on behalf of the American employer.
- The foreign assignment is limited to 3 years.
- The employee is to return to the USA after the assignment in Switzerland.
- The employee was subject to compulsory social insurance in the USA before the assignment abroad.
- The employee will not be assigned to a position for which another employee from the USA was previously assigned.
After checking whether a person can remain insured in their home country (here: USA), the scope must be clarified.
The social insurance agreement between Switzerland and the USA only covers the following branches of social insurance: Old Age and Survivors' Insurance / Disability Insurance (AHV/IV)
In principle, an exemption in Switzerland for a posting from the USA can only be made for AHV/IV and contributions would have to be paid in Switzerland for all other branches of social insurance. For an exemption to be granted in Switzerland, a Certificate of Coverage must be obtained from the social security authorities in the USA. In Switzerland, you would apply for this certificate via the ALPS.
What exactly does this mean for the individual branches of insurance?
- AHV/IV: Exemption in Switzerland and continued payment of contributions in the USA
- Unemployment insurance: Exemption in Switzerland, as not subject to AHV/IV
- Occupational benefits insurance: exemption in Switzerland
- Accident insurance: there is no insurance coverage in Switzerland for the first year, as compulsory insurance only begins in the second year. However, if the employee has equivalent accident insurance coverage in the USA, an application can be made to the Swiss accident insurance company to exempt the employee from the obligation to pay contributions.
- Health insurance: If the employee can provide proof of equivalent health insurance coverage, the employee can be exempted from the health insurance obligation upon separate application. The application must be submitted within 3 months of taking up residence in Switzerland.
The following administrative steps must therefore be taken:
- Obtain a certificate of coverage in the USA
- Possibly apply for exemption from the accident insurance obligation
- Possible application for exemption from compulsory health insurance
During the assignment in Switzerland, the employee will continue to pay social security contributions in the USA.
Conclusion
By carefully examining the facts of the case, as in our example, social security contributions can be made in the correct country and the employee can be granted the appropriate insurance cover.
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.
