ANobAG: How to deal with social security contributions?

In an increasingly globalized world where “employment borders” are dissolving, more employees in Switzerland have foreign employers. There is nothing fundamentally illegal about employment arrangements like this, yet they do create additional complexities surrounding labor law and social security.

In this blog, we explore these issues in depth, specifically how to deal with social security contributions for these types of employees, who are also known as ANobAG.

What is an ANobAG?

The term “ANobAG” stands for “Arbeitnehmende ohne beitragspflichtigen Arbeitgeber” which means “Employees without an employer liable to pay contributions”. In other words, an “ANobAG” is someone who works in Switzerland for an employer who is not liable to pay Swiss social security contributions (AHV/IV/EO).

As all Swiss employers are required to pay such contributions on behalf of their employees, this basically means that the employer has neither residence nor a permanent establishment in Switzerland (i.e., is a foreign employer).

How does such an arrangement come about?

There are no restrictions on a foreign company hiring someone who lives and works in Switzerland. In other words, it is not a requirement to set up a company or branch office in Switzerland to employ someone here.

Combine this fact with an increasing trend towards cross-border remote work, globalization, and a high demand for talented workers, and it’s easy to see why more Swiss employees are being hired by foreign employers.

How social security contributions work in Switzerland

Anyone who lives and works in Switzerland is required to contribute to mandatory social insurance. That includes ANobAG (those with a foreign employer). Usual social security contributions include:

• AHV/IV/EO: these are the three basic social security protections of old age and survivor’s insurance (AHV), disability insurance (IV), and loss of earnings compensation (EO)
• ALV: unemployment insurance
• FAK: family allowance benefits
• BVG: Occupational pension fund mandatory for employees earning more than CHF 22,050 per year. The BVG becomes a grey area for ANobAG as we will see later.

As of 1 Jan 2023, the social security contribution rates as a percentage of gross salary are:

• AHV: 8.7%
• IV: 1.4%
• EO: 0.5%
• (AHV/IV/EO combined: 10.6%)
• ALV: 2.2% of gross salary up to CHF 148,200
• FAK: Contribution rate varies depending on canton and FAK; 1.08 – 2.65%
• Administration expenses: max 5% of AHV contribution

In ordinary circumstances, the employer and employee split these contributions equally (both pay 50%). In other words, employees would only contribute 5.3% of their gross salary to AHV/IV/EO while the employer contributes the other 5.3%. The FAK contributions and the administrative costs of the AHV are paid exclusively by the employer.

However, this is where the situation of an ANobAG employee becomes more complex. Here, the employee is legally required to contribute to social security in Switzerland, but the employer is not necessarily required to do the same.

We will now examine how the social security contribution works in such situations:

“Fake” vs “Real” ANobAG?

Fake ANobAG

The provisions of the social security agreement between Switzerland and the EU/EFTA mean that EU/EFTA employers are typically obliged to contribute to the AHV. Therefore, in situations where the foreign employer is based in the EU/EFTA, the treatment for social security is almost identical, hence the term “fake” ANobAG.

In these cases, the simplest approach is for the foreign employer to register as an employer with a compensation fund in Switzerland and take out the necessary insurance for their Swiss employees, which is allowed due to the bilateral agreements between Switzerland and the EU and the EFTA Agreement. The advantage of this is that registration and taking out insurance is quite easy and doesn’t need to be updated if there is a change in employee.

However, in some cases, the EU/EFTA employer prefers to not register itself in Switzerland, and indeed is not obliged to. This is where the employee must be registered as an ANobAG in Switzerland. The registration is also an agreement that the employee will fulfil the social security contributions themselves. However, this doesn’t mean that the employer is not liable for their share, as EU/EFTA employers are still liable for social security contributions for their employees working in Switzerland.

All it now means is that the employees cover the contributions and administrative costs usually paid by their employers themselves, and the employers must add their contribution and cost share to their employees’ wages. In addition, foreign employers must inform the compensation fund about such an agreement with their employees to prove that they are still fulfilling their social security obligations as employers.

Real ANobAG

A real ANobAG is a Swiss employee whose employer is not domiciled in the EU or EFTA (so-called “third countries”). These foreign employers are under no obligation to contribute to Swiss social security on behalf of their employees working in Switzerland. In this case, the employee must register as a “real” ANobAG with the compensation fund and take on full responsibility for paying the social security contributions themselves (i.e., they pay both their own share and the share which would typically be covered by the employer under Swiss social security laws).

BVG contributions for ANobAG

There is another important consequence pertaining to the second pillar (occupational pension fund). That is, according to The Ordinance on Occupational Retirement, Survivors’ and Disability Pensions (BVV 2), employees whose employer is not liable to contribute to the AHV are not subject to compulsory insurance.  This basically means that Swiss employees with employers outside the EU/EFTA are not subject to BVG contributions, and in fact have difficulty finding a BVG solution even if both the employer and employee want one.

On the other hand, “fake” ANobAG employees are subject to BVG in the same way as employees with Swiss employers. The only consequence is that it makes it more difficult to set up the occupational pension scheme, as few foreign employers would consider setting up their own Swiss pension fund, and not all insurance companies offer collective pension fund solutions for ANobAG employees.

How are the contributions determined?

All ANobAG employees in Switzerland must declare themselves as such by submitting a registration to the cantonal compensation office in which they work. When registering, it must be clearly mentioned whether the foreign employer is domiciled in the EU/EFTA or outside it. In the case that the employer is based in the EU/EFTA but have made an agreement where the employee is responsible for paying the full contributions to the compensation fund and is thereafter reimbursed by the employer, such an agreement should be communicated to the compensation fund by the employer.

Anyone registered as ANobAG with the compensation fund in Switzerland will receive an annual form for declaring their income. They should submit this to the compensation office, as well as their wage certificate, and the corresponding social security contributions will be determined.

Summing it up

Social security contributions in Switzerland are mandatory for all residents and employees, but employees without an employer liable to pay contributions (ANobAG) face a unique situation. The distinction between “fake” and “real” ANobAG arises from the employer’s location, determining their obligation to contribute. While EU/EFTA employers usually fall into the “fake” category, those outside these zones create “real” ANobAG scenarios.

The intricacies extend to BVG contributions and the challenges faced by ANobAG in establishing occupational pension schemes. The contribution process involves registration with the cantonal compensation office, with ANobAG either handling contributions independently or entering agreements with their employers. In navigating this complex legal landscape, clear communication and adherence to Swiss regulations is paramount for both employees and employers involved.