Agreement on the free movement of persons (AFMP) concluded between the European Union (EU) and Switzerland
From 1 June 2016, the same conditions based on the application of the AFMP apply to all citizens of the 27 EU member states (which include Bulgaria and Romania) and EFTA. However, the Federal Council decided to invoke the safeguard clause provided for in the AFMP from 1 June 2017, applying it to Bulgaria and Romania. The safeguard clause allows Switzerland to reintroduce quotas for a specified period of time (one year) if immigration exceeds a certain threshold. From 1 June 2017, category B EU/EFTA residence permits granted to citizens from Bulgaria and Romania are subject to quotas. This measure is in force for a year and applies to Bulgarian and Romanian citizens who wish to take up an employment in Switzerland with a work contract whose duration is longer than one year or unlimited. The same restriction applies to self-employed individuals who wish to settle in Switzerland.
Croatia joined the EU on 1 July 2013. The extension of the AFMP to Croatia was negotiated in Protocol III to the AFMP, which came into force on 1 January 2017. With the entry into force of Protocol III, Croatian citizens may now travel to Switzerland without having to apply for a visa and stay for up to three months. Longer stays require a residence permit.
Protocol III includes various transitional provisions regarding Croatian citizens wishing to take up salaried employment or provide services in Switzerland. During the first implementation period, special transitional measures apply to Croatian nationals, with quotas and restrictions regarding access to the Swiss labour market. These measures can be extended after a first two-year period. As a result, until further notice, Croatian citizens may only take up salaried employment in Switzerland under the following conditions:
Modification of the Federal Act Against Undeclared Work
The Federal Act Against Undeclared Work provides for measures and administrative simplifications (specifically a simplified announcement process) aiming to facilitate and encourage employers to fulfill all of their obligations related to social security, immigration and tax law. The simplified process applies to employers with a small wage bill; among other things, it allows employers to save time on administrative tasks and allows employees to benefit from an attractive tax rate. The Federal Act also provides for control mechanisms and sanctions.
The simplified process provided for in the law has been utilised in some instances contrary to its initial intended purpose and abuses and misuses have been observed. As a result, the Law was amended as of 1 January 2018. The two main changes are the following:
Modification of the Federal Posted Workers Act
The Federal Posted Workers Act (PWA) aims to protect the Swiss employment market from salary dumping by ensuring that employers respect minimum working and salary conditions when they post workers to Switzerland.
Employers must comply with minimum conditions, when the related applicable rules are provided for in Federal Acts, Collective Agreements that have been declared compulsory or Model Contracts with minimum wages, regarding the following fields:
Suitable housing must also be provided. PWA provides for sanctions (administrative and criminal penalties) in the event of infringements.
PWA has been modified with effect from 1 April 2017 in order to increase the applicable administrative penalties. Administrative sanctions range from a warning or administrative fine to an exclusion from the Swiss market. Minor infractions can result in a warning or administrative fine of up to CHF 5000. For violations concerning minimum pay and working conditions, employers can expect administrative fines of up to CHF 30,000 (previously the fine was CHF 5000) or exclusion from the Swiss market for between one and five years. Serious infractions may result in both an administrative fine and exclusion from the Swiss market. Exclusion from the Swiss market means that the service provider is barred from working and providing services in Switzerland. In addition, major infractions are published in an openly accessible online list.
Intra-group temporary recruitment
The Federal Act on Employment Services and the Hiring of Services (lease of personnel and temporary agency work) provides that a licence is required, under certain conditions, when employers make their employees’ services available to other companies (temporary agency workers). Companies offering services for hiring within Switzerland only must hold a licence delivered by the cantonal authority; companies offering hiring services between Switzerland and other countries must have a licence from the State Secretariat for Economic Affairs (SECO; Federal authority).
The Federal Act does not contain specific rules related to hiring services within a group of companies but SECO commented on this situation in its administrative Directives. Initially, SECO’s Directives stated that hiring services within a corporate group did not trigger the obligation to obtain a licence. This was based on the assumption that such a loan of personnel would only occur rarely and for a short period of time and would mainly be used for the employees to acquire knowledge and skills abroad or for know-how transfer purposes.
Subsequently SECO noticed that more and more group companies hired out staff professionally, that is, on a commercial basis or for commercial purposes. Corporate groups also tended to use one group company as an employer, engaging workers for the purpose of hiring them out to other entities within the group. These developments encouraged SECO to limit the exemption from the obligation to obtain a licence for intra-group personnel hire.
On 20 June 2017, SECO issued and published a new Directive in which the authority sets out current practice and specifies the conditions under which intra-group personnel loans can be exempted from the obligation to hold a licence. According to the new Directive, the obligation to apply for a licence is the general rule. This also applies to companies created within a corporate group for the purpose of leasing employees to other group entities. A licence is not required where the loan occurs on an exceptional basis for example if it is an isolated case, covers a short period of time or is only occasional, aims to develop employees’ knowledge and skills or aims to share skills and know-how with the group.
Legal Note: The information contained in this short overview is of general nature and does not constitute legal advice. In case of particular queries, please contact Schneider Troillet for specific advice.
