Global mobility: working in Switzerland

In our today's newsletter on global mobility, we look at Switzerland as one of the more common destinations for postings from Hungary. We summarise the most important labour, tax and social security issues for Hungarian companies to be aware of before posting their employees to Switzerland.

As a non-EU country, Switzerland has joined the EU Commission Directive 96/71/EU (“Posting Directive”), which sets out the minimum working conditions that a Member State’s employer should ensure when posting employees to another Member State.

However, the Posting Directive only binds Member States at the level of general principles. Each Member State is free to lay down the detailed labour rules that apply to posted employees and must be complied with, so it is advisable for employers to familiarise themselves with these rules before they post.

Below we summarize what Hungarian employers should always take care of when posting employees to Switzerland.

As with any posting to another country, it is strongly recommended that a posting (secondment) contract is drawn up in which the parties agree on the terms of the posting:

· the planned duration of the posting,

· the reimbursement and financing form of the expenses,

· the specific terms of each benefit (including its type and amount).

Further, the first and most important requirement for working in Switzerland is that all postings not exceeding 90 days must be notified to the Swiss authorities at least 8 days before the posting (beyond 90 days, working in Switzerland is only possible in possession of a work permit, which may entail additional administrative obligations for the posting company and the employee).

The Swiss authorities require detailed information on the employment of expat workers, including the worker's full work experience, exact qualifications and job title.

Under the Posting Directive, Switzerland also imposes an obligation to pay the Swiss minimum wage for the days worked in Switzerland. In this respect, it is worth noting that in Switzerland there is no nationally regulated minimum wage, the amount of the minimum wage applicable to each profession being determined mainly on the basis of the collective agreements in force or, in the absence thereof, on the basis of age, level of education and length of service in the profession.

We note that the amount of the daily allowance (per diem) received for the secondment should be included when calculating the minimum wage (if the employee is not required to account to the employer for this expense). However, the employer's reimbursement of travel and accommodation expenses should not be taken into account as wages.

It is also important to consider the type of work that will be carried out in Switzerland: for example, whether the expats will only be taking part in a training course or whether they will be specifically involved in the work processes of the host company, which may also be relevant for the Swiss minimum wage.

From a taxation perspective, the following factors are of particular importance in the context of posting:

• whether the period spent abroad exceeds 183 days in the tax year concerned,
• whether the salary and other benefits for the work are borne by the sending or the host Swiss company,
• whether the posting of the workers creates a permanent establishment for the Hungarian company in Switzerland,
• whether the expats integrate into the host company's organization?

The examination of these factors has significant importance, as it will determine whether the wages and other benefits received for the work in Switzerland should be taxable in Hungary or in Switzerland. 

From a social security perspective, it is also important to obtain an A1 certificate from the Hungarian health insurance authority proving that the expats are covered by the Hungarian social security system, so that if the posting does not exceed 2 years and the other conditions of employment are met, there should be no obligation to pay Swiss social security contributions for the Swiss working days.

Our experience shows that the Swiss authorities take very seriously the obligation to register posted workers in Switzerland, to pay the Swiss minimum wage and to respect Swiss working conditions. In the event of an inspection, the fine can be up to CHF 40,000 or a temporary ban on working in Switzerland. The above sanctions do not exempt the employer from paying the Swiss minimum wage and, possibly, the Swiss personal income tax.

In order to avoid or significantly reduce the above sanctions, VGD Hungary renders a full scope of services, with our partner companies in Nexia, the global network of consultancy firms providing all the necessary support to our clients in understanding the provisions of national law and in completing the required administrative tasks.

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Should you have any questions regarding this newsletter,
the tax experts of VGD Hungary will be pleased to assist you.

This newsletter provides general information and does not constitute tax advice.