The assignment of employees from Switzerland abroad raises many questions relating to labour law, residence law, tax law and insurance - and is often associated with many uncertainties for the employees concerned. In this article, you will find out what an assignment is, what the differences are between a temporary and a long-term assignment, which guidelines apply and what tax consequences need to be considered.
What is an assignment?
The term assignment refers to the temporary geographical secondment of an employee from Switzerland to another country. This type of transfer is carried out so that the employee can perform and fulfil certain tasks for the company. Assignments are made for various reasons depending on the strategy of the company in question: the development of new markets, knowledge transfer, international co-operation, etc.
The term "assignment" has no standardised legal or tax definition or standardisation. However, according to the Swiss Posted Workers Act (PWA), at least the following two criteria are required for an assignment to be considered an assignment: Firstly, the employee must be transferred from one country to another. Secondly, the duration of the stay in the country of employment should be limited.
Difference between assignments, transfers and business trips
Assignments must be differentiated conceptually from business trips and transfers. A business trip is a departure from the regular workplace for a temporary activity, including travelling there and back. This means that the employee in question returns to his or her usual place of work as soon as the purpose of the trip has been achieved.
If an employee is transferred, the away-from-home activity is indefinite. The employee is usually seconded abroad for an indefinite period of time, whereas in the case of an assignment, the employee usually works for the company abroad for a longer but limited period of time.
The legal complexity of secondments abroad
International assignments of employees always involve the legal systems of at least two countries: on the one hand, the legal system of the country in which they carry out their assignment and, on the other, the legal system of the country in which they have their official place of residence. If the employee has a nationality other than that of their country of residence and work, the legal system of their country of origin may also play a role.
In order to ensure the legal success of an international assignment, it is therefore important to take into account the different labour law provisions in the countries concerned when drawing up the employment contract. The lack of specific regulations for assignments from Switzerland offers both flexibility in drafting the employment contract and a certain degree of uncertainty for the employee.
Relevant areas of law
In principle, assignments abroad affect the following four areas of law:
- Tax law
- Residence and work permit law
- Labour law
- Social security law
Apart from labour law, all of these areas of law belong to public law and are shaped and applied by each country itself. Due to the principle of territoriality, every person is subject to the law of the country in which they reside. However, foreign nationals are subject to different provisions than nationals, particularly with regard to social security benefits. It is therefore particularly important for employees on assignment to find out in advance about any existing agreements and contracts between Switzerland and their host country in order to avoid double charges and to know what rights and obligations they have during their time abroad.
How important is the duration of an assignment from a tax perspective?
The duration of an assignment is particularly important from a tax law perspective. As a rule, you must always state at the time of the assignment whether you wish to retain or give up your tax domicile in Switzerland during the assignment.
Short-term assignments
In general, an assignment of less than 12 months is considered "short-term". From a tax law perspective, short-term assignments can be divided into two categories: Away assignments of less than six months and those lasting more than six months. In the case of a short-term assignment, the residence and unlimited tax liability generally remain in the home country. The limited tax liability may also apply in the host country.
If you are posted abroad as an employee for a short-term period, it is advisable to keep your tax domicile in Switzerland. The transfer of your tax domicile is generally rejected if your employer has no intention of settling you abroad in the long term. In the case of a short-term assignment, it is worth checking whether there is a double taxation agreement with the host country so that you do not have to pay tax in both countries.
Long-term assignments
Assignments to another country that last longer than one year are considered long-term. They generally lead to a transfer of residence to the country of employment. In this case, the unlimited tax liability in Switzerland ends on the day of the transfer of residence and now applies in the respective host country.
Assignments and taxation
Assignments are complex from a tax perspective and must be clarified on a case-by-case basis, depending on the law of the respective destination country. For example, two employees posted to the same country may be taxed differently. Taxes make up a significant part of the cost of sending an employee abroad, and preliminary clarifications are required on the part of the employer to determine any tax liabilities in connection with the assignment of an employee.
What is an assignment agreement?
The fact that there are no specific standards in Switzerland for the assignment of employees abroad often means a great deal of legal uncertainty, which can lead to insecurity for the employees concerned. However, it is possible to conclude a basic assignment agreement. This is not a new employment contract, but a contract that amends or supplements it in order to adapt and clearly clarify the employment relationship during the period of assignment.
The basic assignment contract is subject to full contractual freedom in accordance with Article 19 of the Swiss Code of Obligations (CO), including the employer's choice of the applicable legal system. However, in accordance with Article 2 of the Swiss Posted Workers Act (PWA), the employer must guarantee that the applicable minimum provisions on labour and wage conditions are also complied with during the assignment.
As a rule, basic secondment agreements include the following points:
- Country of destination and duration of the assignment
- Salary during the assignment
- Additional benefits
- Scope of insurance
- Modalities for the return
- Formulation of the duty of loyalty
- Authorisation or prohibition of secondary employment
- Any ancillary agreements and confidentiality obligations
- Place of jurisdiction and applicable law
Tip: A basic assignment agreement guarantees you the greatest possible legal certainty during a secondment abroad. If you are unsure about the content and provisions of your contract, you can seek advice from specialists in international labour law.
What consequences does an assignment have on my social security?
In the European Union (EU) and the so-called European Free Trade Association (EFTA), special regulations have been made to ensure the continued payment of social security contributions for employees posted abroad. This ensures that employees remain affiliated to the Swiss social security system in accordance with Articles 111 to 117 of the Federal Constitution even during an assignment to an EU or EFTA member state and that a so-called "contribution gap" is avoided.
To this end, the assignment must fulfil the following criteria:
- The employer has its registered office in Switzerland
- The employer maintains its relationship with the posted employee during the stay abroad.
- The employee is not posted as a replacement for another posted employee.
- The duration of the assignment is less than 24 months.
- The employee must have paid at least one month's contribution to the Swiss social security system prior to the assignment.
- After returning to Switzerland, the employee is re-employed by the company on a regular basis.
Assignments to non-contracting states
If the assignment is to a country outside the European Union or EFTA states, there are two cases: Countries with which Switzerland has concluded a bilateral agreement on social security, and third countries with which no agreement has been concluded. If a social security agreement has been signed, similar rules apply as for an assignment within the EU. If no agreement has been signed, the employee is subject to the social security system of the host country. However, it is possible to make voluntary social security and health insurance contributions in Switzerland during the period of assignment. In such a case, this is known as double insurance.
Tip: The Swiss Federal Social Insurance Office (FSIO) has drawn up a number of information sheets for posted workers that explain the basic rights and obligations with regard to social security in EU, EFTA, contracting and non-contracting states. If this is not sufficient, you can always seek advice from a labour law attorney.
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FAQ: Assignment abroad
An assignment is the temporary secondment of an employee to another country to fulfil certain tasks for their employer. It should be noted that this is not a legally binding term and is therefore subject to various interpretations.
When travelling on business, the employee travels abroad for a short period of time and back again. He therefore remains employed at his usual place of work, to which he returns after completing his work away from home.
Like a business trip, a transfer must be distinguished from a posting. In contrast to an assignment, a transfer abroad is not limited in time.
Assignments of less than twelve months are considered short-term assignments. Assignments with a duration of more than twelve months are considered long-term.
The duration of the assignment is of decisive importance, particularly in the area of tax law. It determines whether the tax domicile in Switzerland can or should be retained or whether the employee is also liable to pay tax in the host country during the assignment.
No. A secondment agreement can supplement and amend the employment contract, but does not replace it. It describes the new employment relationships that apply in connection with the posting. In Switzerland, secondment agreements are subject to full contractual freedom.
If the foreign assignment takes place in a country of the European Union (EU) or the European Free Trade Association (EFTA), the posted employees can retain their social security affiliation for the duration of the assignment. This also applies if the assignment takes place in a country with which Switzerland has concluded a bilateral agreement. If the destination country is not a contracting state, the posted employee is henceforth affiliated to the social security system of the host country.