Author: Norma Reynov , CONVINUS global mobility solutions
For the German version, please read here >>
Introduction
Cross-border remote working has long been a reality, and not just for technology companies or executives. Today, it also applies to many roles that used to require a physical presence at the company's main office. However, when remote work is combined with permanent residence abroad, things become significantly more complex, especially from an HR, payroll, and income tax perspective.
The following case study, involving Switzerland and the United Kingdom, illustrates how international remote work setups can be implemented in practice and what needs to be considered along the way.
Example
An employee is hired by a Swiss company but lives in the UK and works primarily from home. Her position allows for location-independent work. On average, she spends four working days per month in Switzerland for workshops, management meetings, or client visits. She keeps a detailed travel calendar.
The administrative setup was implemented as follows:
- The employee has an employment contract with the Swiss company, based on UK employment law.
- In the UK, both income tax and social security contributions are processed via a local payroll provider.
- Salary payments are still made by the Swiss company.
- For the workdays in Switzerland, Swiss withholding taxes are deducted and paid to the relevant tax authority.
This setup has been running smoothly for several years now, but it required significant coordination efforts in the early months.
Employment Law
Since the employee performs the majority of her work in the UK, UK employment law applies. The employment contract was, therefore, drafted based on UK regulations and adapted to the framework of the Swiss company.
The contract was written in a way that is both legally sound and understandable for the Swiss HR team, and it meets UK employment standards such as minimum holiday entitlement, termination periods, and maternity provisions.
Social Security
Because the employee works mainly in the UK, she is subject to the UK social security system. National Insurance Contributions (NICs) are processed via a local UK payroll provider. This requires close coordination between the Swiss employer and the UK partner. To formally exempt the employee from Swiss social security coverage for her occasional workdays in Switzerland, proof of UK coverage was obtained (similar to an A1 certificate). This certificate must be requested from the relevant UK authority.
Income Taxes
Due to her residence in the UK, the employee is subject to full UK tax liability. However, her regular business trips to Switzerland create a limited tax liability there since she works for a Swiss company and is physically present for several days per month.
The main challenge lies in the practical implementation:
- Swiss workdays must be documented via a travel calendar and reviewed regularly.
- Withholding tax must be calculated, deducted, and reported correctly and transparently on the payslip.
Double taxation can generally be avoided through the UK-Switzerland double taxation agreement. Nevertheless, it is strongly recommended that the employee consult a qualified UK tax advisor to ensure that the agreement is applied correctly in practice and not just in theory.
Permanent Establishment Risk
The Swiss company does not intend to create a permanent establishment (PE) in the UK. To avoid this risk, precautions were taken when drafting the employment contract. The employee is not permitted to negotiate or sign contracts on behalf of the company. She has no signatory power or proxy authority.
Payroll
A local UK payroll provider is essential. The provider processes payslips, handles communication with the UK tax and social security authorities, and takes care of additional administrative tasks such as statutory reporting, tax documents, and pension contributions (e.g. enrollment in a UK pension scheme like "Nest").
Work Permits
The employee is a UK national, so she does not require a UK work permit. However, a Swiss work permit is required for her occasional Swiss workdays. This leads to a regulatory gap, as there is currently no consistent permit category for third-country nationals with foreign residence working for a Swiss employer.
Some cantons issue 120-day permits as a pragmatic solution. Others refuse to issue a permit or insist on formal labor market checks even if the employee is only working a few days in Switzerland.
It remains to be seen how Swiss authorities will address this legal grey area and develop a more consistent practice to reflect what many companies are already doing.
Conclusion
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.
