In brief 

In principle, employees are subject to the social security legislation of the country in which they are employed. This principle also applies to cross-border workers. Due to the COVID-19 pandemic, this strict regulation has been relaxed through the flexible application of European Union (EU) social security coordination rules, according to which employees will continue to benefit until 30 June 2023. As a result, Swiss employees residing in an EU/European Free Trade Association (EFTA) member state are still allowed to perform their work remotely from their place of residence, regardless of the scope of work, without this resulting in a change of the applicable social security systems to the country of residence. Switzerland and certain EU and EFTA member states now intend to sign a multilateral agreement stipulating that, from 1 July 2023, this flexible approach will continue to apply to remote work of less than 50% in the sense of a permanent solution. However, the agreement only covers social security, not taxation.

Pandemic-related flexibilization in social security

People who perform at least 25% of their cross-border remote work — in particular work from home — in their country of residence are generally at risk of falling within the scope of the social security system in their country of residence. As a result, before the pandemic, a foreign cross-border worker employed in Switzerland generally could not work more than one day a week from home. However, due to the coronavirus and associated restrictions, many employees were forced to work entirely from home. To avoid a change in the social security system, the social security coordination rules have been applied flexibly until 30 June 2022, with a transitional extension until 30 June 2023.

Multilateral agreement between EU and EFTA countries

With the intended signing of a multilateral agreement, the derogation in the area of social security subordination for cross-border remote work between 25% and 49.9% in the country of residence will be maintained from 1 July 2023. Cross-border workers residing in EU and EFTA countries that have signed the multilateral agreement can therefore continue to be covered by the Swiss social security system if they comply with the 49.9% threshold for remote work. If employees are working abroad in a country that has not signed the agreement — or for an employer based in such a country — the normal rules and procedures for applying for the A1 certificate will apply again from 1 July 2023. In this regard, at least cross-border remote work of a maximum of 24.9% will have no impact on social security.

In addition to Switzerland, the agreement will only be applicable to those countries that have signed the agreement. Currently, the following states have announced their intention to sign the agreement: Germany, Austria, Belgium, Estonia, Finland, Hungary, Ireland, Lithuania, Luxembourg, Malta, the Netherlands, Slovakia, the Czech Republic, Liechtenstein and Norway. It is worth mentioning that neither France nor Italy have yet signaled their intent to sign the agreement. The scope of the new multinational agreement is limited to those who are also covered by the Agreement on the Free Movement of Persons with the EU or the EFTA Agreement.

It is important to note that the agreement does not apply to the following people:

  • Those who, in addition to remote work, carry out other activities (e.g., visiting clients, self-employed secondary activities) in the country of residence, even if that country is a signatory to the multilateral agreement
  • Those who, in addition to remote work in their country of residence, carry out an activity in another EU or EFTA country
  • Those who, in addition to working for their Swiss employer, also work for an employer in the EU or an EFTA state
  • Self-employed people

From a formal point of view, Swiss employers have to apply for an A1 certificate from the Old Age and Survivors' Insurance (OASI) compensation fund via the Applicable Legislation Portal Switzerland platform (ALPS). The certificate is valid for a maximum of three years and can be extended. However, the application does not have to be submitted immediately for the agreement to apply to the employee; the A1 certificate can be issued retrospectively from 1 July 2023 for applications submitted by the end of June 2024.

It should be emphasized that the new rules are optional. Provided that the conditions above are met, employees and employers are, in principle, free to decide whether they wish to remain subject to Swiss social security legislation or whether they prefer to switch to the social security system of the corresponding foreign country if the employee works between 25% and 50%, considering that the cross-border remote work must be agreed between the employer and the employee and, hence, requires consent.

Remote work as part of a posting of workers

For EU and EFTA countries, the European coordination rules apply. In this context, the member states have agreed on a uniform interpretation of the posting rules, according to which a posting is possible even if the 100% cross-border remote work is temporary and on a selective basis. This means that a Swiss employer can post an employee to an EU or EFTA member state for a maximum period of 24 months. As long as this has been agreed between the employer and the employee, on whose initiative the cross-border remote work takes place is irrelevant. Posting would therefore be possible, in particular to care for relatives abroad.

In the case of "workations" where employees work from a holiday location located in the EU or an EFTA member state rather than from home as in the example of a home office, an A1 certificate for postings should also be applied for in the employer's country. If the holiday location is outside the EU/EFTA, a case-by-case analysis will be required.

Key takeaways

Maintaining the pandemic-related flexibility in the area of social security through a multilateral agreement seems sensible and beneficial for both employers and employees. Swiss employers will be spared the enormous administrative burden. Cross-border workers can now better benefit from the widespread trend of home office work without having to worry about social security consequences, provided the thresholds above are respected. However, employers should bear in mind the formal requirements, i.e., that they will have to take care of the application for the A1 certificate in order to ensure that the rules set out in the agreement are actually applied.

Many thanks to Felix Maier for his assistance in drafting this alert.