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Background
Most EU and EFTA countries, including Switzerland, have in the mean time signed-up to the Teleworking Framework Agreement based on Article 16 (1) of EU Regulation (EC) No. 883/2004 to regulate cases of regular cross-border homeoffice work. For more details, we refer you to our article published last year on this subject here.
This agreement, which came into force on 1 July 2023, states that cross-border workers employed in a country that is a signatory to the Framework Agreement and living in another signatory country can remain affiliated to the social security of the country where their employer is headquartered if their homeoffice activity rate does not exceed 49.9%, and provided they are citizens of one of the member countries of the EU Regulation (EU and EFTA).
The Framework Agreement applies to cases where an employee works from 25% to 49.9% as foreign homeoffice days. If the foreign homeoffice days do not exceed 25%, this new agreement does not apply and the standard multi-state worker rules apply and remain in force. No action is therefore required in these cases.
Teleworking A1 certificate
To maintain the affiliation to Swiss social security of teleworkers and cross-border employees who work from home more than 25% and up to 49.9%, employers have until 30 June 2024 to apply for A1 certificates with a retroactive date of 1 July 2023.
After this date, the Teleworking A1 certificate can only be retroactively applied for a maximum of the previous 3 months.
This A1 certificate is mandatory and represents the only document justifying the maintenance of affiliation to Swiss social security while the employee is working remotely from their foreign homeoffice. A lack of an A1 certificate can result in a change in the applicable social security legislation from the country of the employer to the employee’s country of residence.
Actions to be taken in Switzerland
It is therefore necessary that you apply without delay for Teleworking A1 certificates for your teleworking employees concerned by cross-border homeoffice work if it exceeds 25%. This request can be made on the ALPS platform of the OFAS or via our specialist social security team.
Once the request has been made, the compensation fund will issue the A1 certificate for a period of 3 years, which must be renewed at the end of the term if necessary.
All changes (end of contract, change in telework rate) must be reported.
Although the social security agreement accepts a maximum homeoffice presence of 49.9%, tax agreements are not aligned with the Framework Agreement and other thresholds for income tax purposes may apply. We therefore recommend considering the double taxation treaties in place as well and to only permit foreign homeoffice days at the lower threshold between the social security agreement (49.9%) and the one defined by the double taxation treaty with the relevant country. With this approach, the employer reduces the risk of any withholding tax obligation and/or any social security obligations in the employee’s country of residence.
Pitfalls to avoid
The rules set out above only apply to nationals of the member states of the EU Regulation (EC) No. 883/2004. Only citizens of EU and EFTA countries are therefore covered by the Framework Agreement, provided that the Framework Agreement has been signed by both the state of residence and the state of work.
At least for cases with a connection to Switzerland, third-country nationals cannot carry out work from home within the conditions as set out in the Framework Agreement.
The case of British citizens must also be analysed on a case-by-case basis as the UK is no longer a member state of the EU Regulation (EC) No. 883/2004.
Assistance by PwC
Our Payroll and Employment Solutions team is at your disposal for any questions in relation to your remote working population and your obligations from an employer perspective on international social security and/or international taxation and to provide you with the assistance you may need.
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