Many Swiss companies employ cross-border workers who sometimes wish to work from home. However, the current legislation provides them with limited leeway in this regard. Issues regarding social security, tax and labor laws must be clarified to avoid negative consequences for both employers and employees. It is particularly advisable to specify in the employment contract which labor law applies to the employee-employer relationship and to what extent remote work from abroad is feasible.
Social security contributions
Switzerland, like the EU and EFTA member states, participates in the European system for coordinating social insurance, for Swiss and EU/EFTA nationals. In principle, the current regulation stipulates that:
- The employee is subject to only one social security system, generally that of the country where they work (Regulation (EC) No 883/2004 of the European Parliament and the Council of 29 April 2004, Art. 11, para. 1 – only in German);
- An employee who works in Switzerland while carrying out a substantial portion (25% or more) of their activity in their country of residence within the EU/EFTA should be affiliated with the social security system of that country, not the Swiss social insurance (Regulation (EC) No 883/2004 of the European Parliament and the Council of 29 April 2004, Art. 13 – only in German);
- The 25% portion is generally determined proportionally to the total working time;
- The calculation is based on the forecast for the next 12 months.
For more detailed information, please refer to Memento 2.12 "Coverage for Social Insurance" (only in German) from the AVS/AI Information Center.
However, starting from July 1, 2023, a new multilateral agreement allows cross-border workers who engage in teleworking for less than 50% (of total working time) to maintain their state of affiliation for social insurance purposes in certain states (see new agreement in German, French and Italian).
The list of relevant states and explanations regarding the conditions of the agreement's application can be found on the website of the Federal Social Insurance Office FSIO (only in German, French and Italian).
It should be noted that when an employee no longer meets the conditions for affiliation with Swiss social insurance or if they are not applicable, the Swiss employer will be responsible for paying social security contributions to the competent authority abroad. This includes being aware of the amount of contributions and the organization of the social security system in the respective country to fulfill legal obligations. This can result in a significant additional workload.
Social security contributions abroad may be higher than in Switzerland. Even if unintentional, non-compliance with affiliation regulations can have serious consequences for both the company and the employee.
For further information, employers can consult their AVS compensation funds, which are the competent entities for matters related to social insurance coverage.
Income Taxation
Switzerland and France have reached a permanent agreement regarding teleworking for cross-border workers. Since January 1, 2023, it has been possible to perform up to 40% of one's work remotely on both sides of the Franco-Swiss border without affecting the usual taxation regime for cross-border workers.
In Germany, for full-time employment, the cross-border worker status can be maintained as long as the employee travels to their workplace in Switzerland at least once a week.
Starting from January 1, 2024, an agreement adopted in May 2023 by both parties will govern the taxation of cross-border workers residing in Italy (within a 20 km radius of the Swiss border). The agreement stipulates that the competent authorities of both countries will periodically review the conditions for cross-border telework (see agreement between the Swiss Confederation and the Italian Republic, only in German, French and Italian).
As of the current state (August 2023), cross-border workers are required to perform their work at their Swiss workplace in order to be eligible for the cross-border worker taxation regime. Any income earned during potential episodes of working from home, even for a single day, must be taxed in Italy.
With the end of the special taxation regime implemented during the pandemic, cross-border workers residing in Austria currently do not benefit from any specific tax regime related to teleworking.
Any income derived from professional activities carried out at their place of residence remains subject to taxation in their country of residence.
Labor Law
It is strongly recommended to clearly specify in the employment contract which labor law applies. If the applicable labor law is not mentioned in the contract and a substantial amount of work is performed abroad, the application of Swiss labor law may be questioned.
However, if the employment contract explicitly states that Swiss labor law is applicable, it will also apply to cross-border workers, even when teleworking in their state of residence.
