Switzerland Update: Home office and international part-time employees – a dangerous mixture?

The special regulation for employees working from home introduced due to the corona pandemic has been extended until 30 June 2023. After that, the 25% limit will probably apply again. What this means for part-time workers, we explain here.

As many employees had to work from home during the corona pandemic, the members of the EU Administrative Commission for the Coordination of National Social Security Systems (EU UK) introduced a special regulation according to which employees continue to be subject to Swiss social security law, even if a significant part of the work is now carried out in the country of residence (abroad). Conversely, the same thing was recorded. Swiss nationals who normally work abroad and now had to stay in their home office remained subject to foreign social security law. This applies within the EU/EFTA and in Switzerland based on the Agreement on the Free Movement of Persons with the EU, EU Regulations (EC) No. 883/2004 and (EC) No. 987/2009 and the EFTA Agreement.

Without this special regulation, most cross-border commuters would have had to change their insurance status to the state of residence of the employees, which on the one hand would have been associated with considerable administrative effort and, on the other hand, would have led to a renewed change after the lifting of restrictions in connection with the coronavirus.

1. Extension of the special scheme

In mid-November, the EU UK decided to extend the special solution for home office until 30 June 2023. This, after a first extension until the end of 2022 had been surprisingly decided.

In addition, it is envisaged that from 1 July 2023 the subordination rules will be adapted in such a way that even a larger proportion of the work in the country of residence may be carried out as home office work (previously a maximum of 25%) without the social security subordination changing to the country of residence of the employees.

2. Calculation of the “25% rule”

Without the aforementioned special agreement, the well-known “25% rule” would apply. This means that if a substantial part (25% or more) of the work is carried out in the country of residence, employees are subject to insurance for the entire salary as well as for additional remuneration of other employers exclusively in the country of residence.

But how exactly is the 25% calculated?

First of all, it is important to understand that the working time (workload) and/or the remuneration are decisive for the calculation. As a rule, only the workload is first considered as an indicator of whether a significant part of the work takes place in the country of residence. In the case of activities that cannot be quantified with a workload (e.g. board membership), the salary is taken as a comparative figure.

Secondly, it should be noted that the sum of the effective employment percentages of all employers is taken as the 100% basis for assessing the 25% limit. The following table shows different scenarios for a better understanding:

The overview shows that with a high workload of 90-100%, it is possible, for example, to work from home (abroad) one whole day a week without the social security obligation falling abroad. For employees with lower workloads, however, a full day of home office is not possible if the law of the place of work is to remain decisive.

We assume that the functionality of the calculation will remain the same even if the limit is changed (e.g. to 40%) from 1 July 2023.

3. Risks for employers

It is therefore not sufficient for employers to set a limit of one working day in the home office for cross-border commuters; rather, the restriction must be specified according to the workload.

In the case of part-time employees, there is still the risk that they will pursue another employment in the country of residence, which can also lead to a change of insurance subordination, perhaps without the knowledge of the employer.

For this reason, we recommend that employers prevent the risk of an unnoticed change in the reporting obligation, e.g. by reviewing the situation of part-time employees twice a year. An additional sensible measure is to include in the employment contract an obligation to inform the employer in the event that work is taken up in the country of residence.

Employers are obliged to do everything reasonable to insure employees correctly. However, it is also in the interest of the employee to be correctly subject to social security law. Especially in the case of disability or accident, a false insurance assumption can have worshipping consequences for those affected, if none of the possible funds is willing to make a payment. In the event of uncertainty (e.g. whether pay or working time should be weighted higher in a case), it is advisable to clarify this directly with the competent compensation office.

4. Conclusion

The insurance assumption can change very quickly, especially with the increase in activities from the home office over the last few years. The special arrangement during the corona pandemic was necessary and a massive administrative relief. However, one must be aware that after the expiry of the special regulation, adjustments to the internal guidelines may be necessary – probably against the wishes of the cross-border commuters concerned. The further extension of the special scheme is to be welcomed, but even more important is the prospect of adjusting the materiality limit for home office activities. What will remain, however, is the danger for part-time cross-border commuters who pursue additional work in the country of residence without the knowledge of the employer. This risk, as well as the special situation of part-time employees, can be taken into account by means of careful contractual arrangements or internal guidelines.

The tax situation in international constellations such as these, which does not move parallel to the social security solution, must also be taken into account, but their explanations in this blog are omitted for reasons of space.

By Vischer, Switzerland, a Transatlantic Law International Affiliated Firm.

For further information or for any assistance please contact switzerland@transatlanticlaw.com

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