As of 1 April 2012, arrangements regarding social security between Switzerland and the EU member states are governed by the provisions of Regulations (EC) No. 883/2004 and (EC) No. 987/2009 (“The Regulations”).

These are the Regulations which harmonise the various European social security systems.

With the revised annex II to the Agreement on the free movement of persons between Switzerland and the EU coming into force from 1 April 2012, the Regulations are applicable between Switzerland and EU member states with respect to the determination of social security contribution liabilities and other social security issues for cross-border workers. These new Regulations replace Regulations (EEC) No. 1408/71 and No. 574/72. The new legislation applies insofar as the cross-border workers are Swiss nationals or nationals of an EU member state.

Substantial Activities

Under Regulation (EEC) No. 1408/71, in the case where an individual was simultaneously working in several states for the same employer, the individual was subject to the social security system of his/her country of residence, if he/she pursued part of his/her activities in the country of residence. Under Regulation (EC) No. 883/2004, under the same circumstances an individual is subject to the social security system of his/her country of residence, only if he/she performs a substantial part of his/her activities in the country of residence. ‘Substantial’ activities are defined as at least 25% of the working time, remuneration or turnover.

Extension of Assignment Period

A further important change under the new legislation is the extension of the assignment period from 12 to 24 months.

For assignments of no more than 24 months, the employer or the self-employed individual must submit a request for a certificate of assignment to the competent AHV/AVS compensation fund office. If the requirements for an assignment are met, the AHV/AVS compensation fund office will issue an A1 certificate to the employer or the self-employed individual. The employer must then forward the A1 certificate to the assignee. Should a period of 24 months not be sufficient, an employer may, in the interest of the assignee, apply to the Federal Social Insurance Office, for a long-term assignment or assignment extension (“Special Agreement”). In accordance with Article 16 of Regulation (EC) No. 883/2004, the Federal Social Insurance Office will then negotiate a Special Agreement with the competent authority in the state of temporary employment. If such a Special Agreement is reached, the Federal Social Insurance Office issues the employer with a confirmation that the assignee remains subject to Swiss social security legislation for the duration of the extended assignment period. An extension application must be made prior to the expiry of the initial 24-month assignment period. The same procedure applies to self-employed workers. In accordance with international practice, a Special Agreement is only negotiated with the competent authority in the state of employment if the total assignment period is no more than five to six years. If it can be reasonably anticipated from the beginning that the temporary assignment period will exceed beyond 24 months, the employer may apply directly to the Federal Social Insurance Office for a Special Agreement covering the entire duration of the assignment.

EFTA countries

Regulations No 1408/71 and 574/72 remain applicable with respect to social security arrangements between Switzerland and the EFTA Countries (Iceland, Liechtenstein, Norway), as the EFTA Convention has not yet been adapted to include the new regulations.

It is crucial that employers of EU member states now implement the new legislation and the related processes with respect to assignments of cross-border workers to Switzerland, if they have not already done so.

Resources

Swiss Federal Social Insurance Office link to relvant Regulations here

For further information or to discuss any of the issues raised, please contact Walter H. Boss or Stefanie Monge on +41 44 220 12 12.