Switzerland is home to many skilled professional workers, who may be looking to work remotely for overseas companies. This can be of enormous benefit when you can access talent abroad that fits with your business needs while offering a Swiss worker an opportunity to work with your company.
It is possible to hire Swiss nationals (or expats living there) as remote independent contractors, without the expense and complexity of hiring full-time employees. There are several advantages to hiring contractors including no long-term commitment, lower cost, and flexibility in structuring the contract terms. Hiring contractors is a quick and simple way to fill a position or complete a project.
To do so, you will need to understand your company’s compliance obligations in Switzerland, as well as the best way to structure the contract to make sure that your remote worker is fulfilling their assigned project goals.
How do hire and pay remote workers in Switzerland?
Once you have completed the recruitment process, you have to decide how you will hire and pay your remote Swiss contractor. Due to the cross-border business relationship, this is not as straightforward as hiring within your own country.
You have a few choices depending on your level of confidence in the contractor, and their preference on how to set up the contract. Many established contractors will work with multiple clients, which can also be a factor.
Hire and pay them as a freelancer
In some cases, you might just hire remote workers in Switzerland as self-employed freelancers. It is also suitable in cases where you can verify that they have registered and qualified as self-employed under Swiss law.
This option is great for short-term contracts. However, in the event of poor performance or a contract dispute, there is no recourse for your company except to terminate the relationship. This is not the best method to hire expat contractors, who may need a work visa sponsored by a Swiss entity unless they have another type of long-stay visa.
Pay them through their limited company
Experienced contractors may have their own Swiss limited company, where you would contract directly with the company, who in turns ‘leases out’ the contractor/employee. This is a true B2B relationship with the limited company and avoids the grey compliance area of self-employed vs employee status.
This payment and contracting method give your company some assurance that the contractor is reliable and is set up as a legal entity in Switzerland serving multiple clients.
Work with a Swiss umbrella company
A final option is to use a Swiss umbrella company to act as a third-party intermediary, and oversee the entire contracting, performance, and payment process. You would submit payment directly to the umbrella company, and they would confirm time/project completion and issue a payslip to the contractor, with all taxes and contributions withheld.
This is one way to eliminate the contract risk of hiring freelancers, as the umbrella company is in a position to facilitate any disputes and guarantee performance and payment for both parties.
SECO License: Do you need one?
A SECO license in Switzerland is required for agencies that recruit workers for either Swiss or foreign companies. Your company does not need to secure a SECO license if you are contracting directly with the worker or their limited company, but if you use a recruitment agency for hiring you should verify that they have the correct licensing.
It is also possible that an umbrella company might be subject to SECO licensing rules in some circumstances.
Tax obligations when paying a contractor in Switzerland
As an independent contractor, your worker will handle all of their tax and withholding obligations, and your company does not have to play any role in their compliance. However, if the contractor is generating local Swiss revenue for you, such as concluding sales contracts, you might be creating a permanent establishment (PE) for your company.
PE results in having a business presence in a country leading to corporate taxation. Remote positions such as customer service, IT support, or marketing will not lead to PE in most cases.
Compliance risks when hiring contractors in Switzerland
Compliance with foreign labour laws is a major hurdle when you hire employees, but this is less of a burden when hiring contractors. The major compliance risk with contractors is that of misclassification, where your Swiss or expat contractor meets the criteria for employment and is not operating as a true self-employed.
The following are requirements for workers to claim self-employment in Switzerland.
- First, they are independent of the client in their work and
- Secondly, bear the financial risk of their activity.
Indicators of independence are organizing their work schedule, issuing invoices in their own or company’s name, and paying the full social contributions due from self-employed workers.
You can confirm this by asking the contractor to show proof of registration with the municipal social insurance agency. This will verify they are valid self-employed workers in Switzerland. Absent this, a contractor could at any point claim they are your employee and due to all employee benefits, including your payment of employer social contributions. Using an umbrella company could help to avoid this compliance risk.
How Contractor Taxation helps you hire remote workers in Switzerland
Contractor Taxation has a global network of umbrella companies, including in Switzerland, who are ready to hire the contractor and administer all the tasks related to taxes, payments, and contributions. As a company looking to hire Swiss contractors, you can recommend to the new hire that an umbrella company is used to assist with the relationship.
Most contractors will be open to this, as it reduces the risk of non-payment with a new client, and relieves them of the administrative burden of self-employment. Please contact us if you are interested in hiring a Swiss or expat worker for your company, either as a contractor or a formal employee.