Hiring in Switzerland: What EU Businesses Need to Know

Expanding your EU-based business by hiring talented employees residing in Switzerland can offer substantial advantages. Cities like Zurich, Basel, Zug and Geneva host highly skilled professionals. Yet, navigating Switzerland’s regulations on employment, taxation, and social insurance requires careful planning and precise compliance.

Understanding the EU-Swiss coordination rules ensures smooth employment processes, minimizes legal risks, and promotes financial efficiency.

Common Challenges for EU Employers

Social Security Coordination

Usually, employment and social insurance in Switzerland follow domestic laws: a Swiss employer hiring a Swiss resident must comply only with Swiss rules. However, when international factors are involved—like an EU-based employer hiring someone living in Switzerland—rules for international coordination apply.

EU businesses employing staff residing in Switzerland must therefore understand the EU-Switzerland social security agreement outlined in Regulation (EC) No 883/2004. The regulation applies specifically to nationals of EU Member States and clearly stipulates which social security system applies in international employments:

• Article 11: This general provision establishes that persons covered by the regulation shall be subject to the legislation of only one Member State at a time (different approach to international tax coordination, as we describe further below). Par. 3(a) of this article clarifies that a person pursuing an activity as an employed person in a Member State shall be subject to the legislation of that Member State. 

• Article 13(1): This article regulates the applicable social security legislation for persons who normally pursue an activity as an employed person in two or more Member States. It states:
  • If the person pursues a substantial part of their activity in the Member State of residence, or if they are employed by multiple employers with registered offices or places of business in different Member States, the legislation of the Member State of residence applies.
  • If the person does not pursue a substantial part of their activity in the Member State of residence, the legislation of the Member State where the employer’s registered office or place of business is located applies.

Identifying which social security system applies should be done immediately when employment begins or when the employee relocates to Switzerland. Although Regulation (EC) No 883/2004 provides the framework, many real-world situations depend on established administrative practice to interpret and apply the rules—particularly under Article 13. The regulation itself does not define specific thresholds for what qualifies as a “substantial part” of the activity in the state of residence, leaving room for interpretation by authorities. 

Illustrative examples:

• An employee working predominantly (e.g., 90%) in Switzerland must be affiliated with Swiss social security.

• Conversely, employees primarily working in the EU state of the employer while residing in Switzerland typically remain subject to the EU state’s social security where the employer is domiciled.

Access to Swiss Social Security

Once it has been determined that Swiss legislation applies under the EU coordination rules, the employer—despite being domiciled in the EU—is generally treated as if it were based in Switzerland for social security purposes. This is regulated under Article 21 of Regulation 987/2009, which specifies the administrative obligations for employers without a Swiss establishment.

An EU employer without a registered establishment in Switzerland must still comply with all social security duties. Practically, employers must either:

• Appoint a representative in Switzerland for payroll and reporting duties, or

• Arrange with the employee to handle these duties directly, under Article 21(2). Such agreements must be formally submitted to the relevant Swiss authorities.

Another critical component of aligning with the Swiss system is the implementation of mandatory insurances. These ensure that cross-border employees receive protection equivalent to local Swiss employees, as prescribed by national law and reinforced by the coordination rules.

• Accident insurance (UVG): Under the Swiss “Unfallversicherungsgesetz” (Accident Insurance Law), all employees must be insured against both occupational and non-occupational accidents. It is important to emphasize that this coverage must meet UVG standards; substituting with private insurance plans—such as accident insurances based on health insurance law (KVG) or daily sickness benefits (KTG)—are not considered compliant. Employers must therefore ensure that employees are enrolled in a proper UVG-conformant policy.

• Occupational pension plan (BVG): According to the “Berufliche Vorsorgegesetz” (Occupational Pensions Act), employees above a certain salary threshold must be included in a second-pillar pension plan. This ensures that they accumulate retirement benefits on par with Swiss-based colleagues.

• Family allowances and unemployment insurance: Employees working in Switzerland must also be affiliated with the local system for receiving cantonal family allowances and be insured for unemployment. This guarantees that they are entitled to support in the event of job loss or dependents-related entitlements.

Taxation Coordination: Avoiding Double Taxation

Another complex area in international employment is the coordination of income taxation. Unlike social security, where exclusive affiliation to a single system applies under EU coordination rules, taxation often permits overlapping rights between countries. Employment income taxation between EU states and Switzerland is regulated through bilateral double taxation agreements (DTAs), most of which follow OECD principles.

While the specific provisions may vary slightly from one DTA to another, most agreements share these guiding principles:

• Tax residency: Income is typically taxed in the country where the employee is resident.

• Place of employment taxation: If work is physically carried out in another country (e.g. Switzerland), that country may also gain the right to tax the portion of income attributable to that work.

This dual taxation right means that employees working across borders may face taxation in both countries. Relief is typically provided through mechanisms such as tax credits or exemptions, based on international tax allocations—where income is divided between jurisdictions according to where the work was physically performed.

For example, DTAs often include a clause similar to OECD Model Article 15, which states that employment income is taxable only in the country of residence unless the work is performed in the other state—at which point, that other state may also tax the income related to those workdays.

In practice, this means:

• The physical location where work is performed is crucial to determining tax liability.

• Workdays in the state of the employer should be taxed individually and should be exempted from taxation in the residence state to avoid double taxation.

A common misunderstanding is that Swiss withholding tax (Quellensteuer) automatically applies when a Swiss-resident employee holds a B permit. However, in international setups where the employer has no domicile in Switzerland, no Swiss source taxation is triggered. Instead, the employee must typically declare the income directly via tax return filings.

Let’s look at two common pitfalls:

1. Continuing EU Payroll Without Adjusting to Swiss Realities
Employers may continue operating payroll and source taxation solely in the domicile state of the employer, assuming no changes are needed after the employee moves to Switzerland or that there would be grace period. This often stems from misconceptions about required thresholds.  In reality, Swiss tax and social security authorities will generally base their expectations on the registration date (Anmeldung) in Switzerland. If salary is paid during that time, authorities may assert taxation or contribution rights—regardless of whether tax or insurance has already been paid in the state of the employer. Recovering foreign contributions and/or overpaid taxes then often remains the only way to avoid financial damage.

2. Unclear Presence or Delayed Action
When the employee’s relocation is gradual, or when hybrid/remote work plans are unclear, employers may hesitate to formalize the employment status. This hesitation increases the risk of misalignment. Whether an employee “has moved” is ultimately determined by facts on the ground—such as habitual residence or primary work location—and not necessarily the employment contract wording. In uncertain cases, it is advisable to seek guidance or a ruling from the Swiss cantonal tax office or social insurance authority to establish legal certainty.

Possible Solutions for Hiring in Switzerland

Note that the details described above refer specifically direct employment relationships, where an EU-based company engages a Swiss-resident employee under a cross-border setup. We refer to this as a EU-Employment.

However, EU-Employment is not the only viable route. If this setup leads to practical challenges—such as the described coordination complexities—there are alternative approaches. The following section introduces those options and helps weigh them according to the employer’s long-term goals and the employee’s legal status.

EU-Employment

• Eligibility: Suitable when the employer is domiciled in the EU and the employee is a national of an EU/EFTA country.

• Advantages: Offers clear application of the EU-Swiss coordination rules. The relationship is structured directly between the employer and employee, avoiding third-party intermediaries. This setup is typically favored for long-term or senior positions.

• Considerations: Employers must comply with Swiss social security administration where applicable, which typically involves appointing a Swiss representative or delegating administrative duties to the employee. Even in the absence of Swiss withholding tax, income taxation must still be tracked accurately based on workdays.

ANobAG (Employee Without Swiss-Accessed Employer)

• Eligibility: Typically applies where the employee is a third-country national (no EU/EFTA nationality) and direct application of the bilateral social security treaty is not possible. Just the employee is accessed to the system, not the employer.

• Advantages: In this model, the employee takes on the formal obligations of a Swiss employer, managing their own social security registration and payments. This reduces the administrative load on the UK employer and avoids the need for Swiss payroll setup.

• Considerations: The ANobAG setup is less advantageous in terms of benefit coverage and integration with local schemes, such as occupational pension plans. It also varies in execution across cantons, sometimes complicating implementation.

Employer of Record (EOR) Services

• Eligibility: Suitable for all nationalities and company sizes, especially when direct setup is not feasible or time is a constraint.

• Advantages: The EOR model legally employs the individual in Switzerland on behalf of the UK business, ensuring full local compliance with social security, tax, and labor law obligations. It offers a plug-and-play solution for hiring in Switzerland with minimal internal resources.

• Considerations: The EOR is a third party in the employment chain. While practical, this can sometimes cause perception issues—especially if the employee holds a senior or client-facing role. Furthermore, long-term retention through EOR may become costly or complex.

Establishing a Swiss Subsidiary or Branch

• Eligibility: Best suited for companies with multiple employees in Switzerland or with plans to develop local operations.

• Advantages: A full Swiss legal presence allows direct employment under Swiss law, with full control over HR, payroll, and compliance. It also enables local invoicing and contracting, which can be strategically beneficial.

• Considerations: Incorporating a Swiss entity entails upfront legal, notarial, and capital costs, along with ongoing accounting, payroll, and regulatory obligations. It is a long-term investment rather than a quick solution.

Comparison Table: Employment Methods

Method	Administrative Effort	Cost	Employer Responsibility	Suitable Scenario
Direct EU-Employment	Moderate	Moderate	Coordinate Swiss social security & taxes	Long-term roles for UK, CH, or EU nationals
ANobAG	Low (for employer)	Low	Limited to salary payments & contracts	Non-UK/CH/EU nationals, short-mid term roles
Employer of Record (EOR)	Minimal	Higher	Delegated to EOR provider	Quick setup, any nationality, limited HR capacity
Swiss Subsidiary/Branch	High	Initially highest	Full local compliance & HR infrastructure	Multi-employee operations or strategic presence

Conclusion

Hiring employees who live in Switzerland from an EU-based company offers significant opportunities, but it demands careful compliance with EU-Swiss rules on social security and taxation.

Direct employment is efficient for eligible employees but demands careful setup and compliance management. Alternative approaches like Employer of Record services, or establishing a Swiss entity offer practical solutions for different scenarios.

If you’re considering hiring in Switzerland, we invite you to schedule a non-binding call with our team. In this initial conversation, we’ll help you assess which employment model is the best fit for your specific situation—whether it’s direct employment, ANobAG, EOR, or establishing a local entity. Our goal is to give you clarity, highlight risks, and offer a compliant path forward without any commitment required.