The US remains one of the most important markets for international companies. Many companies are currently considering how they can increase their presence in the US and, in particular, consolidate or, if possible, expand their market share there. For Swiss companies looking to expand their business activities in the United States, the deployment of skilled workers from Switzerland is often a key factor for success. At the same time, this step involves considerable legal challenges. Some of the key aspects are examined in more detail below.
1. Immigration and residence law
Probably the biggest hurdle when employing Swiss employees in the US concerns the immigration law. In principle, foreign employees require a visa that entitles them to work in the US. Relevant categories include the L-1 visa for intra-company transfers, the H-1B visa for highly skilled professionals, and the E visa for investors and their employees.
- These visas are often subject to quota restrictions and strict application procedures.
- In addition, the current processing times are quite long, which severely limits flexibility when assigning employees to the US.
- The number of requests for additional documents/information has also increased significantly, leading to considerable delays.
- Incorrect or incomplete applications can also often lead to application rejections.
2. Special features of labour law
Even if employees from Switzerland are legally permitted to work in the US, they are subject to US labour law or, at the very least, the mandatory legal provisions of US labour law. It should be noted that this differs significantly from Swiss law:
- "At-will employment" means that employment relationships can often be terminated without giving reasons.
- At the same time, there are strict regulations on discrimination protection (e.g., Title VII of the Civil Rights Act) that companies must comply with.
- There are relatively large differences in social benefits, vacation entitlements, and health insurance obligations, which lead to additional administrative work.
3. Tax law aspects
The assignment of Swiss employees raises complex tax issues:
- US tax law is generally considered to be very complicated, mainly because of the many different additional reporting requirements.
- Furthermore, the tax burden in most states is considerably higher than in Switzerland, which makes employee assignments quite expensive from a tax perspective. As a rule, the additional tax costs are reimbursed to the employee as part of a tax adjustment and also constitute a component of the salary for tax and social security purposes, which in turn must be "extrapolated."
- The double taxation agreement (DTA) between Switzerland and the US does offer relief, but its practical application is complicated and often involves increased consulting costs.
- Taxation in the US can be avoided for short-term assignments under the 183-day rule in accordance with the DTA between Switzerland and the US, provided that the specified conditions are met. However, it should be noted that the 183 days are days of residence and are calculated over a 12-month period.
- In addition, however, the "substantial presence test" must also be observed.
- When US tax liability arises, it is important to carefully examine the components of remuneration and assess them according to US criteria. For example, employer contributions to a Swiss pension fund are often considered taxable.
4. Social security coverage
Many questions also arise in the area of social security:
- There is a social security agreement between Switzerland and the US. However, the agreement does not cover all types of insurance; accident insurance and unemployment insurance are not included.
- Employees who are sent from Switzerland to the US can generally remain subject to the Swiss social security system and be exempted from the insurance branches mentioned in the agreement in the US.
- Health insurance coverage under the Swiss health insurance system is generally not sufficient, so additional insurance coverage must be taken out.
5. Liability and compliance
Another problem area is liability. Assigned employees are subject to both the company's internal compliance rules and US regulations.
- This applies in particular to the handling of sensitive data (keyword: data protection, e.g., CCPA in California).
- Product liability and due diligence obligations may also be relevant for expatriate employees. Companies must implement clear training and compliance guidelines to minimize legal risks.
Practical example: Secondment of a Swiss employee to the US
Müller AG, headquartered in Basel, is a medium-sized industrial company. In order to strengthen its US business, the Swiss project manager Mr. Schneider (Swiss citizen) is to be assigned to the US subsidiary in New York for two years.
1. Right of admission
Mr. Schneider needs a work visa to work in the US. The L-1 visa is suitable in this case, as he is being transferred within the company to a US subsidiary. The company must prove that there is a legal connection between the Swiss parent company and the US subsidiary (for example, by demonstrating the corporate structure).
2. Employment contract and differences in labour law
Mr. Schneider remains formally employed by Swiss company Müller AG and receives an assignment agreement for his assignment in the US.
Swiss labour law remains applicable to the assignment agreement, but the mandatory labour law provisions of US labour law must be taken into account.
Irrespective of this, the right of termination in the US is particularly complex compared to Switzerland, so that it is definitely advisable, in the event of a possible separation from Mr. Schneider, to bring him back to Switzerland beforehand, terminate his assignment by mutual agreement, and only then give notice of termination.
3. Tax law aspects
With his move to the US, Mr. Schneider will be subject to unlimited tax liability in the US from the date of his move. In return, his unlimited tax liability in Switzerland will end on the date of his move.
The payroll accounting department of the US subsidiary must deduct income tax on a monthly basis, even if Mr. Schneider's salary continues to be paid in Switzerland.
Due to the higher tax burden in the US, a tax equalization agreement will be concluded with Mr. Schneider. It is important that both the payroll accounting departments in Switzerland and the US understand the mechanism and procedure involved.
4. Social security
Under the social security agreement between Switzerland and the US, Mr. Schneider can remain insured in all branches of social security in Switzerland for the duration of his assignment.
To do this, Müller AG must apply for a Certificate of Coverage via ALPS.
It is important that Mr. Schneider retains his Swiss health insurance but also takes out international supplementary insurance for his assignment in the USA.
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.
