Switzerland and Certain EU/EFTA States Have Concluded a Framework Agreement to Facilitate Telework in a Cross-Border Context

1. Introduction

The global COVID-19 pandemic has given a boost to working from home. While the pandemic has – at least for the time being – come to an end, working from home has stayed and become an integral part of modern working life. When employees no longer work 100% on-site in the Swiss premises of the employer, questions arise in cross-border situations, inter alia, regarding social security law (see also our Bulletin of January 30, 2023 regarding cross-border regulations with France for telework, which also covers tax law and labor law aspects).

On July 1, 2023, a new framework agreement concluded by Switzerland and certain EU/EFTA states entered into force. The framework agreement governs aspects of social security law and facilitates telework activity in a cross-border context. Employees who usually work in the country of their employer may work up to 49.9% of their total working time from home in their foreign country of residence while remaining subject to the social security system of the employer’s country. The application of this rule requires that both states involved are signatories to the framework agreement and that the employee is subject to the Regulations (EC) Nos. 833/2004 and 987/2009.

2. Applicable Legislation for Employment Activities From Home

Generally, if employees who fall under the Agreement on the Free Movement of Persons (ALCP) or the EFTA Convention work across borders, they are subject to the provisions laid down in Regulations (EC) Nos. 833/2004 and 987/2009 on the coordination of social security systems. These regulations contain rules for conflicts of law stipulating which legal system applies to cross-border employment constellations. Those rules are designed to prevent, to the extent possible, unnecessary switches between member states’ different social security systems.

The general rule is that the location where the work activity is carried out is the place of employment for the purpose of social security law. In the case of telework, this is the location of a person’s laptop, i.e., his or her state of residence. If an employee regularly works from home in one EU/EFTA state, and on-site at the employer in another EU/EFTA state for the remainder of the working time, article 13(1) of Regulation (EC) No. 833/2004 and article 14(8) of Regulation (EC) No. 987/2009 apply:

• if the share of telework is below 25%, the activity as a whole is subject to the social security legislation of the employer’s country. For example, an employee of a Swiss employer, who regularly works from home in another EU/EFTA state one day per week, is subject to Swiss social security system.
• on the other hand, if the share of telework is at least 25%, the employee shall comprehensively be subject to the social security legislation of his or her state of residence.

3. Flexibilization During the Pandemic

Against the background of the COVID-19 pandemic and the increased telework activity, EU and EFTA states agreed on a temporary flexibilization of the rules on the coordination of social security outlined above. In a nutshell, even if the employee employed by a Swiss company was working remotely full-time in an EU or EFTA state, he or she remained subject to the Swiss social security system. This flexible application of the rules has been extended several times and expired recently on June 30, 2023.

4. New Framework Agreement

4.1 General Information

According to article 16 of Regulation (EC) No. 833/2004, the member states can agree exceptions to the above-mentioned rules on the coordination of social security. Such an exception is – in principle – at the discretion of the competent member state and can only be granted in agreement with the other state involved. However, considering the increased telework activity since the pandemic, as well as the expiry of the flexible application of the rules on the coordination of social security, Switzerland and several EU/EFTA states have concluded a new framework agreement. According to this framework agreement, applications for exceptions for telework up to a maximum of 49.9% of the time will systematically be approved. The framework agreement has entered into force on July 1, 2023.

Currently, the framework agreement has been signed by Switzerland, Austria, Belgium, Croatia, Czech Republic, Finland, Germany, Liechtenstein, Luxembourg, Malta, the Netherlands, Norway, Poland, Portugal, the Slovak Republic, Spain, Sweden and – as announced on June 30, 2023 – also by France (see also our Bulletin of January 30, 2023 regarding cross-border regulations with France for telework). While other states (such as Estonia, Hungary, Ireland, Lithuania) declared their intention to sign, the United Kingdom indicated that it will not sign the framework agreement. The updated list of signatory countries, the text of the framework agreement and explanations are available here.

4.2 Applicability of the Framework Agreement

To the extent that the Regulations (EC) Nos. 833/2004 and 987/2009 are applicable, the framework agreement is subject to the following conditions.

• First, the framework agreement only applies to salaried employees. Self-employed people may not benefit from the framework agreement.
• Second, the framework agreement only applies if both states in question are signatories to the framework agreement.
• Third, the framework agreement only covers employees who work no more than 49.9% from his/her home office in the foreign country of residence (in addition to his/her habitual work in the employer’s country). This 49.9%-limit is calculated over a period of 12 months. Consequently, it is possible to exceed the limit during certain weeks, provided that the limit is observed over the last 12 months. It is worth mentioning that if the cross-border telework amounts to less than 25% of the working time, the situation is governed by Regulations (EC) Nos. 833/2004 and 987/2009 – and not by the framework agreement.
• Fourth, only so-called «cross-border telework» is covered by the framework agreement. Cross-border telework is defined in the framework agreement as an activity which:
  • is carried out in a foreign member state;
  • can be pursued from any location and could be performed at the employer’s premises; and
  • is based on information technology to remain connected to the employer’s working environment as well as stakeholders/clients in order to fulfil the employee’s tasks (IT link).

Additionally, there are two negative conditions that need to be met for the framework agreement to apply. The employee may not:

• habitually pursue another activity in addition to cross-border telework in the state of residence; and/or
• habitually pursue an activity in a state other than the state of residence and the state of the employer.

4.3 Procedure

If the employee wants to enjoy the benefits offered by the framework agreement, the employer (with the consent of the employee) needs to submit a request to the competent authority in the employer’s state (opt-in which means that application is not automatic). Specifically, an application for the issuance of an A1 certificate must be submitted. In Switzerland, this is possible via the via the ALPS platform (Applicable Legislation Portal Switzerland). Usually, the request must be submitted within a maximum period of three months of the desired date of subordination. However, during the first year of the framework agreement (i.e., from July 1, 2023, until June 30, 2024) the maximum period to submit the request is one year after the desired date of subordination.

The period during which the applicable social security legislation will be determined by the framework agreement is limited to a maximum of three years. In case the requirements continue to be met beyond this date, a new request must be submitted.

4.4 Legal Consequences

If the requirements for the application of the framework agreement are met (in particular, the cross-border telework in the state of residence is less than 50% of the total working time), the person carrying out the habitual cross-border telework will – upon request – be subject to the legislation of the employer’s state (i.e., where the employer either has his registered office or place of business).

If the requirements are not met, the application will be treated as an ordinary application for an exceptional authorization under article 16(1) of Regulation (EC) No. 833/2004. Thus, the framework agreement does not affect the possibility of concluding individual agreements based on the individual case.

4.5 Outlook

The framework agreement entered into force on July 1, 2023. It concludes after a period of 5 years and shall be automatically extended each time for another 5 years.

If a new state signs the framework agreement at a later stage, the framework agreement shall take effect for said state on the first day of the month following the signature.