The case of regular teleworking abroad:
Normally, people working in Switzerland are subject to Swiss social security, even if they live abroad; however, there are exceptions. First of all, let’s look back at the agreement on the free movement of persons between Switzerland, the European Union and the European Free Trade Association (EFTA): Swiss nationals or nationals of an EU/EFTA state who carry out salaried activities simultaneously or alternately in several countries (Switzerland and EU/EFTA) are subject to the social security system of their country of residence if they carry out a substantial part of their activities there. A substantial part is deemed to exist when 25% of all activities are carried out in the state of residence (art. 13, par. 1 of regulation [EC] no. 883/2004).
In the wake of the new post-COVID managerial trend towards teleworking, a number of EU and EFTA countries have decided to conclude an agreement with each other with the aim of adapting the notion of substantial activity. Under this agreement, people working in the country where the employer’s head office is located can carry out up to 50.1% cross-border teleworking (maximum 49.9% of working time) from their state of residence. Switzerland signed this multilateral agreement on 01.07.2023. The same applies to 18 other countries: Austria, Belgium, Croatia, Czech Republic, Finland, France, Germany, Liechtenstein, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain and Sweden. It should be noted that Italy (a border country) has not yet validated this agreement. This means that an employer hiring a person resident in Italy to work in Switzerland and in the country of residence will have to pay Italian social security contributions.
This measure is also complied with if the employee teleworks at least 25% of his or her time on Italian territory. It is important to stress that one of the conditions of application of the agreement is that the alternation between teleworking in the state of residence and working on site must be carried out with a certain regularity.
In the event of temporary “secondment” abroad:
According to the European Union’s Administrative Commission for the Coordination of Social Security Systems, the countries applying the European coordination rules have agreed to interpret teleworking in the same way as secondment. Secondment is also possible for temporary and ad hoc full-time cross-border teleworking (100% of working time). Agreement is required from both employer and employee. Employers may second employees to an EU/EFTA state for a maximum period of 24 months (subject to extension), provided that the following 2 conditions are met (ch. 2024 ff of the AVS and AI insurance directives – DAA):
- If they were insured in Switzerland immediately prior to their departure (in principle, a period of one month’s prior insurance is assumed)
- If they intend to work again in Switzerland for the same employer at the end of the secondment period
A secondment is possible, for example, in the following situations:
- Care for relatives abroad
- Medical reasons
- Offices closed for renovation
- Teleworking from a vacation destination
For the time being, these conditions also apply to the UK, but do not apply to secondments under bilateral social security agreements with other countries outside the EU/EFTA – please refer to the relevant agreements. Employers wishing to benefit from secondment for a maximum of 24 months must register directly with their AVS compensation fund. If the conditions are met, the AHV fund will draw up an A1 attestation (formerly form E101) for the employer, who will forward it to the seconded worker. If the 24-month period is insufficient, a request for extension must be made to the Federal Social Insurance Office (FSIO) in Berne, which will attempt to reach a special agreement with the competent institution in the country of temporary employment.
Secondment is also possible for countries outside the European Union but with an agreement between the two countries (Albania, Australia, Bosnia-Herzegovina, Brazil, Canada, Chile, China, Channel Islands, India, Israel, Kosovo, Japan, Northern Macedonia, Montenegro, Philippines, Republic of St. Martin, Serbia, South Korea, Tunisia, Turkey, United Kingdom, Uruguay, USA): If there is no agreement, insured persons may continue their AVS/AI/APG/AC insurance with the employer’s agreement, provided they have been insured for at least five consecutive years immediately prior to starting work abroad. Employees and employers must submit a joint application to the employer’s AVS compensation fund within 6 months. Employees may also remain insured in Switzerland for two years (with a possible extension of a further 4 years) for accident insurance.
The Swiss pension system is unique and highly complex. As an employer, you have a number of duties and tasks to perform in compliance with Swiss social insurance law. With them come risks that can prove costly for your company if you fail to manage them properly.
| DEPENDENT ACTIVITY | LEGAL BASES |
|---|---|
| Employed by a public limited company | Head office of SA |
| Employed by a corporation in several states, but at least 25% in the state of residence | State of residence |
| Employed by a corporation in several states, but less than 25% in home state | Head office of SA |
| Employed by several SAs in several states | State of residence |
Focus on cross-border retirement:
Just over 1 in 10 working people in Switzerland are EU nationals. With the free movement of people, this figure is constantly on the rise, leading to insurance and pension situations in several countries, making the system complex to understand.
Let’s take the example of the French general pension scheme: the minimum age is set at between 62 and 64 (legal age). It is 62 for people born between 1955 and August 31, 1961. For subsequent generations, it increases by 3 months a year.
To qualify for a full pension at legal retirement age, you need to have completed a certain number of contribution quarters, depending on your year of birth. If the insurance period is shorter, the amount of the old-age pension will be reduced. However, from the age of 67, the pension is calculated at the full rate (50% regardless of the number of quarters). Pension calculation is based on 3 elements:
- Average annual income
- liquidation rate
- the insurance period used to determine the pension settlement rate.
At the same time, Swiss social security operates on a 3-pillar principle, with 2 different systems: one based on average annual income and insurance duration, the other on a funded system.
Focus on pension applications from European countries (EU/EFTA) and Switzerland :
Having worked in one or more countries of the European Union and Switzerland, and having reached statutory retirement age, entitles you to apply for a basic old-age pension. In this case, a single country is responsible for receiving all applications. This is the “one-stop shop” principle that has been in place since the bilateral agreements came into force. In this case, the country of residence is competent. The periods spent in these countries will then be taken into account for the calculation of the French basic pension as validated periods (but not contributory periods).
Each country (EU / EFTA) will calculate the expatriate’s pension by taking into account all contribution periods validated in another country. To calculate the amount of the expatriate’s basic pension, each state pension fund must first calculate the amount of the national pension and then that of the fraction of the “European” pension. The state pension fund will pay the higher of the two to the employee. Each European country proceeds in the same way, with its own rules concerning the legal retirement age and the number of validated periods.
Thanks to our expertise in social insurance and our many years of experience in advising employers, our highly qualified team can help you understand the complexities of these issues, avoid risks and use your resources efficiently.
