BEST PRACTICE Case
BEST PRACTICE Case Study: Administrative Requirements for a Czech Marketing Specialist with a Local Swiss Employment Contract: What HR and Payroll Need to Know. NORMA REYNOV, CONVINUS Background: A marketing specialist is employed by an affiliated company in Prague, Czech Republic. However, his direct colleagues work at the company's headquarters in Zurich, Switzerland. This remote working arrangement is increasingly becoming a burden for him. Therefore, he is set to receive a local Swiss employment contract (100% workload) and will spend at least 50% of his working time in Switzerland. The marketing specialist is a Czech citizen. His wife and two school-age children will not move to Switzerland but will remain in their apartment near Prague. The plan is for the employee to rent an apartment in Switzerland but travel to Prague every 2 to 3 weeks to work from his home office for several days. Question: What administrative aspects (HR/Payroll) must be considered in this case? Administrative aspects: Work permit for Switzerland The Czech citizen can register himself with the relevant Swiss authorities with the local Swiss employment contract. He is likely to receive a "B" permit. Registration must be completed before the first workday in Switzerland, and the employer should request a copy of the registration/permit. A fixed address or residence in Switzerland is required for registration. 6 convinus.com
BEST PRACTICE Social security Administratively, it is crucial for the Swiss company that the employee is subject to the Swiss social security system. Since the employee will have a Swiss employment contract and work primarily in Switzerland, he will be under Swiss social security. No contributions to Czech social security are required. According to the new cross-border teleworking regulations (signed by Switzerland and the Czech Republic), the employee may work up to 49.9% of his time from his home office in the Czech Republic. The work must be done exclusively from the Czech home office; otherwise, the 25% rule would apply. An A1 certificate must be obtained from the Swiss social security authorities to document the social security status. Income taxes The employee will be subject to regular withholding taxes in Switzerland, which will be deducted from his salary. Since the employee will maintain his residence (and primary place of living) in the Czech Republic, he will be subject to Czech income tax for the days worked in his Czech home office. This responsibility generally lies with the employee. Swiss withholding taxes are not applicable for the days worked in the Czech Republic. Labor Law The employee will be primarily governed by Swiss labor law (including sickness and accident payments). If he continues to have significant workdays in the Czech Republic, more favorable Czech labor regulations may need to be considered, as a Czech labor court could decide these apply. This cannot be ruled out in advance, even with a Swiss jurisdiction clause in the employment contract. Permanent Establishment There is a general risk of a permanent establishment for the Swiss company if employees regularly work in other countries. The more the employee works from his Czech home office, the higher the risk for the Swiss company. This should be evaluated on a case-by-case basis. 7 convinus.com
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