Employees without an employer liable to pay contributions (ANobAG)
All persons who live or work in Switzerland must pay AHV contributions from January 1 after they reach the age of 20 until they reach retirement age (Art. 1 and Art. 3 AHVG). As long as both employer and employee live in Switzerland or are domiciled in Switzerland, there are usually no problems or questions. Uncertainties usually arise when a person lives in Switzerland and works for an employer who is not domiciled in Switzerland.
Employees without an employer liable to pay contributions ("ANobAG") are persons with a place of work in Switzerland who work for an employer who is not liable to pay contributions in Switzerland. Employers in this sense include, for example, foreign companies without a domicile in Switzerland or embassies/consulates.
The topic has become increasingly important in recent years, as more and more jobs no longer require the employer to be present in the same country. At the same time, there has been a growing awareness that working for just one "client" often constitutes bogus self-employment and that the (de facto) employer in question runs the risk of being charged social security contributions. As a result, there is an increasing number of employees who work for a foreign company without a registered office in Switzerland from this country and are therefore considered to be an ANobAG.
Who has to pay AHV contributions?
Art. 1a para. 1 lit. a and lit. b of the Federal Law on Old Age and Survivors' Insurance(AHVG) stipulates that natural persons domiciled in Switzerland and natural persons who are gainfully employed in Switzerland are compulsorily insured under the Old Age and Survivors' Insurance ("AHV"). The obligation to pay AHV contributions is therefore primarily linked to the employee's place of residence, even if the employer has no domicile or registered office in Switzerland.
In principle, it does not matter whether the employer is located in the EU/EFTA or in a third country with regard to the AHV insurance obligation of the person concerned. However, the modalities differ depending on the employer's place of domicile. Switzerland has concluded social security agreements with almost 50 countries. The primary aim of these agreements is to ensure equal treatment of nationals of the contracting parties, to determine the applicable legislation and to pay benefits abroad. The most important agreements are with the EU/EFTA: employers from these countries are generally liable to pay AHV contributions on the basis of these agreements (which is why this constellation is also referred to as "non-genuine ANobAG").
The modalities for the implementation and coordination of social security systems (and thus social insurance) between Switzerland and EU/EFTA states are laid down in Regulation (EC) No. 987/09.
The provisions stipulate that Swiss employees, as well as those from EU/EFTA states, agree with their employers based in the EU/EFTA that the employees will settle the social security contributions themselves. However, the contribution must be paid by the foreign employer. This means that employers transfer the employer's contribution owed under Swiss law to employees in addition to their salary (Art. 21 of Ordinance No. 987/09). A form for a corresponding agreement can be found on the SVA website(German version / English version).
Employees with a different nationality and employees with employers outside the EU/EFTA are responsible for paying their own social security contributions. However, they do not need an agreement with their employers in this regard, as they are not liable to pay contributions or remuneration.
These employees must register with the AHV compensation fund at their place of residence in Switzerland (if they are not resident in Switzerland, they must register with the AHV compensation fund at their place of work or the AHV compensation fund of their professional association) and pay the AHV contributions owed in full themselves.
Does this also apply to temporary assignments?
If employees are only temporarily posted to Switzerland by employers in the EU/EFTA area, they continue to pay contributions to the local social security system in the country from which they were posted to Switzerland and to which they return. They therefore remain insured under these social security schemes (Regulation (EC) No. 883/2004). Here too, only Swiss nationals or nationals of an EU/EFTA member state can invoke these provisions. A posting period generally lasts up to 24 months. Employers who post employees from an EU/EFTA member state to Switzerland must apply for a certificate of posting (A1 certificate) from the competent authority in their country of domicile before the employee starts working temporarily in Switzerland.
Employees of employers from countries outside the EU/EFTA area with which a social security agreement exists are treated similarly. These agreements stipulate that employees remain subject to the legislation of the country of origin. The maximum duration of this initial posting varies between 12 and 60 months, depending on the agreement.
Employees with employers in countries with which no social security agreement exists must in principle take out compulsory insurance in Switzerland if they work here for more than three consecutive months per calendar year. If foreign law also provides for continued compulsory insurance and inclusion in Swiss insurance would mean an unreasonable double burden, a corresponding application for exemption from the obligation to pay contributions can be submitted to the AHV compensation fund.
What about the 2nd pillar?
The distinction as to whether the employer is located in the EU/EFTA or in a third country is also important in the area of the second pillar (i.e. in occupational pension provision ["BVG"]). Art. 1j para. 1 lit a of the Ordinance on Occupational Retirement, Survivors' and Disability Pension Plans(BVV 2) states that employees whose employer is not liable to pay AHV contributions are not subject to compulsory insurance.
For the so-called non-genuine ANobAG, this means that they are subject to BVG contributions under the same conditions as employees with Swiss employers, as their employers are liable to pay AHV contributions under the agreements.
This does not apply to so-called genuine ANobAG, i.e. those with employers outside the EU/EFTA/UK. They are exempt from the BVG contribution obligation under Art. 1j para. 1 lit. a BVV 2.
In practice, the problem is that not all insurance companies offer BVG solutions for ANobAG. In order to meet the affiliation obligation, the only option is often to register with the Substitute Occupational Benefit Institution.
What about international employment?
In principle, as already mentioned, all taxes are only ever paid in one country in order to protect internationally active persons from double taxation and to avoid the loss of entitlements. The person in question is usually subject to the legislation of the country of residence if they carry out a significant part of their activities there.
If such international employees work in EU/EFTA states, the Agreement on the Free Movement of Persons(AFMP) between Switzerland and EU/EFTA states or other social security agreements must be observed for the question of where contributions must be paid.
Under the other bilateral social security agreements, employed persons are subject to the social security system of the contracting state in which they carry out the corresponding activity. They are therefore liable to pay insurance and contributions in both countries, but only for the income earned there. In most cases, however, this only applies if the employees are nationals of Switzerland or the corresponding contracting state.
If they live in Switzerland, all other nationals are also insured and liable to pay contributions in Switzerland for income earned abroad.
What additional insurance obligations or claims exist?
Irrespective of the employer's domicile, employees in Switzerland are obliged to insure themselves against accidents (Art. 1a para. 1 lit. a UVG).
For employees moving to Switzerland, it is also important to know that health insurance is compulsory for the entire resident population. The person subject to compulsory insurance takes out the insurance themselves and is free to choose which licensed health insurer they wish to join(more information).
However, there may also be entitlements for ANobAG: The additional financial burden caused by having children should be partially offset by so-called "family allowances". These are monthly allowances, the amount and type of which can vary from canton to canton. In principle, parents are entitled to family allowances regardless of their personal or professional situation. As ANobAG are subject to Swiss social insurance, they can also apply for family allowances if they are entitled to them (Art. 13 para. 2 FamZG). If the children concerned also live in Switzerland, this is possible without further ado. Family allowances are also paid in full to children of nationals of EU or EFTA countries who live in EU or EFTA countries. If the children live in another country, it depends on whether a social security agreement exists and whether this establishes an entitlement to allowances. Without an agreement, or without a corresponding entitlement, no allowances can be drawn in Switzerland for children abroad.
What needs to be done with regard to AHV contributions?
Employees must register with an AHV compensation fund in order to settle the contributions owed.
Swiss employees and employees from EU/EFTA countries with employers from EU/EFTA countries are liable to pay contributions and must register with the AHV compensation fund themselves. For each employment relationship, a signed agreement in accordance with Article 21 para. 2 of Regulation (EC) No. 987/09 between the employee and employer and a copy of the employment contract are required.
Employees who are not citizens of EU/EFTA states and employees with employers outside the EU/EFTA also settle their own accounts with the AHV compensation fund. However, they only need to submit a copy of their employment contract. As employers in this constellation are not obliged to pay the corresponding contributions in addition to the salary, no additional agreement between employee and employer is required.
Employers not domiciled in Switzerland do not have to pay any contributions directly to Swiss social security institutions.
However, as already explained, employers from EU/EFTA countries who wish to employ staff in Switzerland and do not have a registered office here are still (indirectly) liable to pay contributions. They must make an agreement with the relevant employees that the employees will settle their accounts directly with the social insurance institution. Employers must pay the social insurance contributions owed to employees in addition to their salary. Employers must also inform the compensation office of the agreement with the employees. It is also good to know that, despite the agreement and information, employers remain liable to the social security institutions.
Employers outside the EU/EFTA countries and the United Kingdom, with which no agreement exists, do not have to deal with social security contributions, even if their employees are liable to pay contributions in Switzerland.
Arife Asipi and Balthasar Wicki will be happy to answer any questions you may have regarding the obligation to pay contributions for employees in Switzerland. Of course, we also offer assistance in drawing up employment contracts and levy agreements with ANobAG.