In the wake of digitalization, more modern forms of work have found their way into our everyday working lives, enabling mobile working independent of an actual office infrastructure. The term "remote work" has become established as a generic term for work that is not performed on the employer's premises. The term "home office" is used to describe the form of work performed in the private home of the employee's main place of residence. The word combination "workation" covers work at a vacation location and "bleisure work" covers work from a leisure location. Employees who do not perform their work at a fixed location are included under the term "Digital Nomads". Co-working space" or a "shared office" is a workplace that is flexible in terms of time and location and is shared by several people.
Employers hope to gain a strategic advantage on the labor market by offering modern forms of work. In addition, they are no longer only active on the national market, but also accept orders abroad. If employees are sent to other countries to fulfill these orders, this entails in particular reporting obligations. What these constellations have in common is that the potential risks are often not sufficiently considered. In addition to the aforementioned aspects of reporting law, social security law, labor law and direct and value-added tax aspects must also be considered. Failure to comply with these regulations can result in heavy fines and sanctions. The tax and, in particular, value-added tax risks can also be considerable in certain constellations.
Workation
It may sound a bit paradoxical, but working on vacation is an absolute dream for many employees. What sounds so simple, however, hides numerous stumbling blocks.
In the case of "workation", in contrast to a classic secondment, the duration of the work is not clearly defined. It can last from a few days to several months. From the point of view of labor law, the remuneration, vacation days, working hours and rest periods, etc. must be correctly defined. It is important to create clear conditions by means of a supplementary agreement to the employment contract or a general "workation policy" in order to avoid later disputes. For example, it must be clearly defined which part of the workation is considered vacation and which part is considered working time. As soon as the activity has a connection to the Swiss market, the mandatory provisions of Swiss labor law and the applicable collective labor agreements, including minimum wage regulations, must also be observed.
Apart from that, workation within Switzerland is basically unproblematic. However, workation abroad is not quite as simple. Even within Europe, local legislation varies greatly. Depending on the duration of the activity, questions may arise regarding the employee's personal tax or social security obligations, the establishment of a permanent establishment by the employer in the vacation country, or work and residence permits. In order to avoid unexpected inconveniences such as compliance obligations in different countries, we recommend implementing a uniform workation regulation and defining exactly in which countries and over which period of time workation is approved.
In cooperation with various foreign consulting firms, the Deutsche Visa und Konsular Gesellschaft (DVKG) and the digitization company ESCRIBA, we can offer standard solutions for the majority of cases. We can assist in the development of a workation policy or conduct personalized workshops on the most important do's and don'ts. With the help of DVKG, an automated application and approval process can be set up, which enables all involved parties in a company to process the application in an uncomplicated manner.
Homeoffice
In contrast to workation, the activity in the home office has a certain continuity and is usually not limited to a few weeks. From a labor law perspective, working outside the employer's country of domicile entails the risk that the place of work may change and that the employer may find himself before a foreign court in the event of labor law disputes and, in the worst case, foreign labor law may apply.
From the point of view of social security law, a substantial activity in the country of residence within the EU/EFTA/CH can change the insurance status. A substantial activity is considered to be a workload of 25% or more of the total activity on average, with efforts being made to increase this threshold. In the worst case, this can lead to the employer having to register with the social security authorities of a foreign country and settle the corresponding contributions. In Switzerland, this situation has long been known in the inbound relationship under the term of the so-called "genuine/non-genuine ANOBAG". However, the same problem can also arise in reverse if a Swiss employer or an EU employer becomes liable for social security contributions for its employees in another EU country. In relation to third countries, the respective bilateral social security agreements must be considered. As a rule, this results in a twofold assessment, whereby the contributions in one country can potentially be reduced.
From a tax perspective, there is a risk that a company may establish a permanent establishment in the country of residence of its employees due to their home office activity. The consequence is the allocation of a part of the company's profit. This is particularly the case if essential activities are carried out on a permanent basis or decisive business decisions are made outside the employer's place of business in a home office in a fixed business facility. According to the analysis of the Swiss Tax Conference (SSK) on the effects of teleworking on the intercantonal tax segregation of companies dated 26.04.2022, it is now at least clear that home offices in Switzerland do not generally constitute a permanent establishment. This is particularly the case because the company does not establish a sufficient right of use in the employees' premises. In the international context, it can also be assumed as a rule that, according to the current opinion of the OECD, the use of home office by cross-border commuters or the activity at Workation only constitutes a permanent establishment of the company in exceptional cases. However, the foreign tax authorities, in particular Germany and Austria, partly deviate from the OECD's view and are less reserved when it comes to the assumption of a home office permanent establishment. In this context, the possibility of a so-called representative permanent establishment must also be considered. Under certain conditions, a permanent establishment can also be established without a physical facility being available, namely if a person has a de facto power of attorney and also usually exercises this power (so-called dependent representative with power of attorney). Finally, there is a practice in certain cantons according to which managing directors who work for a foreign company from their home office in Switzerland establish a permanent establishment here. According to their opinion, the concepts of obligation or choice in the context of the organization of their work or the place from which it can or must be carried out are relative for executives who work as managing directors. As far as the activities of managing directors with signatory powers are concerned, according to this line of reasoning, these are not auxiliary activities by definition. Even if the managing directors do not make any significant decisions from Switzerland or have direct or indirect contact with clients, these cantons nevertheless assume a certain permanence and therefore the establishment of a permanent establishment purely on the basis of the function as managing director with predominant residence in Switzerland.
Cross-border provision of services
Employed persons from EU/EFTA countries can work in Switzerland without a permit for up to 90 working days per calendar year. However, their assignments must be reported online to the State Secretariat for Migration SEM. This is associated with the verification of compliance with minimum wage and working conditions. This means that in most cases, foreign employers must pay their employees a supplement to their normal salary for work assignments in Switzerland. Violation of the reporting obligations as well as non-compliance with the minimum wage regulations are strictly sanctioned by the cantons.
What many Swiss companies are not aware of is that the European Union also has reporting and registration obligations as well as minimum wage regulations (Equal Pay). The EU reporting obligations apply to posted workers, whose stay - depending on the country - must be reported to the labor authority, the social security authority or the occupational safety authority before the assignment. The EU Posted Workers Directive has been implemented in many EU/EFTA countries in such a way that the employer must report the business traveler - even if the stay lasts only one day. Failure to comply with the reporting obligation leads to considerable sanctions and far-reaching consequences such as sanction payments, legal penalties, entry bans and even exclusion from the local market. It is therefore worthwhile to check the respective reporting requirements at an early stage.
As part of our cooperation with the German Visa and Consular Society, we can provide a simple process to complete the EU declaration with just a few entries.
CONCLUSION
The aspects described above present employers with major administrative hurdles. For example, there is often a lack of appropriate internal processes that ensure compatibility with the employment, reporting, social security and tax aspects described above. In the worst case, a company is not even aware of existing risks. Through our network and with the help of our electronic applications, we can implement an automated process that reduces the administrative effort to a minimum. We can also provide with an automated alarm system that triggers an alarm in the event of special constellations, so that we or our network partners can then initiate a more in-depth investigation. In this way, possible risks can be identified at an early stage and appropriate measures can be taken.