Remote work and home office abroad – What do Swiss employers need to consider?

Since the COVID-19 pandemic, it has become increasingly common for employees to work with limited or no physical attendance time. Employees want freedom of location and more flexibility in their day-to-day work. As such, companies are increasingly enabling their employees to relocate their jobs abroad with remote work arrangements.

This can offer many advantages, but it also presents employers with complex organizational and legal challenges. So, what do you have to consider as a Swiss employer to give your employees the opportunity to work remotely abroad? In this article, we answer this important question and more.

The Growing Attractiveness of Remote Work

Remote work has been gaining popularity in recent years due to technological advancements, a changing work culture, and the COVID-19 pandemic. Remote work allows employees to work from anywhere in the world, offering greater flexibility and work-life balance. In Switzerland, many employers have become increasingly open to allowing their employees the option of working remotely or establishing a home office abroad. This comes with many benefits for employers and employees alike, including increased productivity and job satisfaction, lower overhead costs, access to different labour markets, and many more. However, employers need to understand the legal and practical considerations that come with this.

What Is Meant by ‘Home Office Abroad’?

‘Home office abroad’ refers to an arrangement where an employee works from a different country for a certain period of time. The work is usually performed from the comfort of their own home or other location that suits them (as opposed to a designated company office). This could be a temporary arrangement, such as a few weeks or months, or a long-term arrangement, such as years or even indefinitely. Allowing employees to set up a home office abroad enables them to work in the environment they most prefer, and still maintain their employment relationship with their Swiss employer.

Is it even permitted?

In Swiss employment law, the contracting parties may designate a “place of work”. This contractually agreed place of work is an essential aspect of any employment contract. There is nothing legally prohibiting designating a home office abroad as the place of work, provided the employer agrees to it. However, this should be clearly stated in the employment contract to avoid issues down the line. It is also possible for the company to include these allowances in their regulations which apply to all employees.

While in practice such arrangements are permitted and do regularly occur, it is important to understand their implications in various areas such as social security, tax liability, data protection, and so forth.

What is the difference between a home office abroad and a ‘workation’?

A ‘workation’ is generally a short-term arrangement where an employee combines work and leisure activities in a different location. It usually involves a few days or weeks and is primarily focused on vacation rather than work. In contrast, a home office abroad is a longer-term arrangement where the employee is primarily working and living in a different location. The main purpose of a home office abroad is to allow the employee to work remotely while living in a different country.

The Most Important Issues and Pitfalls that Employers Should Consider

While remote work arrangements can provide many benefits, employers need to be aware of the potential issues and pitfalls when allowing employees to work from home abroad. These issues include residence and work permits, social security, tax liability, labour law, data protection regulations, remuneration, and other practical considerations.

Residence and Work Permits

If an employee is working from a country within the European Union (EU) or the European Free Trade Association (EFTA), the process is relatively straightforward. Due to the EFTA Treaty and the Agreement on the Free Movement of Persons (FZA) between the EU and Switzerland, the employee can work from that country without any additional work permits or visas. The prerequisite for the allowance of free movement is that the person must either have a valid employment contract, be self-employed, or have sufficient financial resources if they are not gainfully employed. The former would apply to any employee who sets up a home office abroad.

However, if the employee is working from a country outside the EU/EFTA, there are additional legal restrictions. Firstly, they will require a work permit and residence permit or visa to work in that country. This can be a complex and time-consuming process, and Swiss employers need to consider this when allowing employees to work from home abroad in a country outside the EU.

What About Social Security?

Social security rules are another important aspect to consider when it comes to working from home abroad. Again, the situation depends on whether the home office is located in the EU/EFTA zone or not.

If the country of residence and therefore place of work is inside the EU/EFTA, social security is only paid once, in either the country of employment (in this case Switzerland) or the country of residence (i.e., where the employee lives and works). The usual stipulation is that if more than 25% of the annual gainful employment occurs in the home office abroad, social security insurance is paid in that country of residence and the employee is insured there, irrespective of where the employer is based. This has important implications for employers as the cost of social security can vary greatly across EU/EFTA nations.

Due to recent issues with the global Covid-19 pandemic, as well as a changing attitude towards and improved ability to perform work remotely, the aforementioned subordination rules may not always apply in practice and can be overridden. There are also exceptions for temporary foreign assignments and the posting of employees in foreign countries.

Outside the EU/EFTA area, the situation is not uniformly regulated, and it depends on what agreements have been made between Switzerland and the host country. In some cases, an employee may be subject to social security regulations in both Switzerland and the country they are working from. This can result in double social security contributions, which can be costly for both the employer and the employee.

Fortunately, Switzerland has negotiated social security agreements with numerous countries, which are decisive for the coordination of social security payments.

Tax Liability While Working Abroad

If an employee works remotely from a home office abroad, they will need to determine whether their tax liability lies in the country where the home office is based or the country of employment. There is no clearcut answer to this question, and each case must be assessed individually. In general, tax law issues depend on the length of the stay abroad and the location.

In principle, income taxes are liable in the country which is the “centre of one’s life”. The length of time spent, as well as the level of personal and financial involvement in the foreign country (e.g., property owned, bank accounts, whether you have family there, sending children to school there etc.), all come into play when determining the country of tax residence. The employee’s place of taxation is likely to shift if:

• They work in another country for more than 183 days per year,
• The centre of their life is in the foreign country,
• They give up their place of residence in Switzerland.

In all cases, the rules of the employer’s country and the country of residence apply to tax treatment, whereby existing double taxation agreements between the states must be observed.

Are Employees Protected by Swiss Labour Law?

Swiss labour law only applies territorially, i.e., within the borders of Switzerland. This means that an employee working in a home office abroad is not protected by Swiss labour law, even if the employer is based in Switzerland.

That said, the employer may specify in the contract certain aspects of Swiss labour law which are applicable and should be adhered to. As the labour law does not automatically apply in full, it is in fact advisable that the important rights and obligations which apply are explicitly mentioned and agreed upon in the contract, under private law. This includes protective regulations which are found in Swiss labour law pertaining to maximum working hours, regulations on taking breaks, and prohibition of working at night and on Sundays.

It is also advisable for employers to specify a Swiss location as the jurisdiction as well as the appropriate choice of law. This means that legal action surrounding the employment agreement can only be taken in Switzerland.

Are data protection regulations applicable?

All data protection regulations which are applicable in Switzerland are also applicable abroad and must be strictly observed. In fact, the issue of data protection often becomes even more crucial when employees work remotely from another country. The employee should take the utmost care to protect against unauthorised access to their computer, they should use encrypted internet connections and secure communication channels etc. It is important for employers to check that such practices are being followed and support their employees in their efforts to keep their data private and protected.

Does an employee’s salary change when they are working from abroad?

A Swiss employer is not allowed to reduce the contractually agreed salary for an employee working abroad if, for example, the living costs are reduced. An employee who works from a home office abroad is entitled to the same contractual salary as if they were working in Switzerland. Only additional compensation is permitted for work-related expenses such as public transport, meal allowances, and so forth. These should be discussed between both parties and an agreement should be made as part of the employment contract.

Other Issues to Keep in Mind…

In addition to the considerations mentioned, there may be many other practical issues which confront an employer who allows their employees to work from home abroad. These include issues such as ensuring that the employee has access to the necessary equipment and technology to perform their work properly, such as a reliable internet connection and access to company systems. Employers also need to consider the language and cultural differences that may arise when working with employees in different countries, as well as time zone differences.