Following the Swiss National Bank's recent decision to end the three-year cap of 1.20 Swiss francs per euro, the fluctuation of the Swiss franc against major currencies is expected to have an impact on assignees and their compensation, as well as compliance with Swiss immigration law. Salaries currently paid to assignees in euro or other major currencies bear the risk of not meeting Swiss salary requirements and therefore not meeting immigration compliance requirements anymore.
Following the Swiss National Bank's recent decision to end the three-year cap of 1.20 Swiss francs per euro, Switzerland’s currency jumped by nearly 30 percent against the euro and 18 percent against the dollar. The fluctuation of the Swiss franc against major currencies has an impact on assignees and their compensation, as well as compliance with Swiss immigration law.
According to Switzerland’s Federal Act on Assignments (Entsendegesetz; EntsG) every inbound international assignee must be paid a salary that meets Swiss reference salary requirements in relation to their time working in Switzerland. Salaries currently paid to assignees in euro (€) or other major currencies bear the risk of not meeting Swiss salary requirements and therefore not meeting immigration compliance requirements anymore.
According to Swiss immigration law, non-Swiss companies providing services in Switzerland must compensate employees temporarily working in Switzerland (so called “assignees”; German: grenzüberschreitende Dienstleister / Entsandte) at a level which at least equals a Swiss reference salary for the relevant industry, profession, and geographic area in question.
There is no blanket minimum wage in Switzerland (with the exception of certain industries where generally binding collective labor schemes or cantonal standard employment contracts apply). The relevant salary level must be assessed on a case-by-case basis using criteria such as:
Each of Switzerland’s 26 cantons apply their own reference salary levels and assess the salary level they deem to be appropriate at their own discretion.
Generally, cantons with a higher level of costs of living apply higher minimum salaries than cantons in which cost of living is lower. All cantons, however, base their assessment on their statistical reference salaries for comparable Swiss employees in their canton.
Where the Swiss authorities deem a base salary paid in the home country to be too low compared to the Swiss reference salary level, the employer is required to pay additional allowances (referred to as assignment allowances) to close the gap for the duration of the assignment in Switzerland (i.e., to bring the base salary up to Swiss standards). On top of this total remuneration (i.e., base salary and assignment allowances), assignment-related expenses such as the costs of accommodation, meals, and trips, while working in Switzerland must also be borne by the employer (or by the host company, as the case may be) in order to comply with Swiss immigration law.
For compensation paid in a foreign currency, the competent immigration authorities usually apply the official currency exchange rate of the Federal Tax Authority (FTA) of the day on which they process the work permit application.
Labor inspection authorities perform random inspections of foreign workers and their employers. During such inspections, the pay-slips of foreign employees and other documents are examined. With regards to foreign currencies, the labor inspection authorities apply the monthly average exchange rate of the FTA when assessing the compliance of salaries and expenses paid to the employees in question.
During periods of high currency exchange volatility, there is increased risk that total compensation, which had been properly calculated or converted to Swiss francs at the immigration application stage, ends up being insufficient at the time of inspection.
If a labor inspection reveals that salaries paid to inbound assignees are too low based on Swiss standards, the employer may be sanctioned for violating Swiss immigration law. Sanctions range from fines to being banned from providing services in Switzerland.
Apart from the threat of penal consequences, it is important to be aware that non-adherence with Swiss salary requirements may also cause a great deal of administrative work since the employer will typically have to engage in time-consuming dealings with Swiss authorities including the filing of comprehensive documents and frequent lengthy discussions. Furthermore, the company may be required to make salary back payments (German: Lohn-Nachzahlungen), as well.
To mitigate the risk of sanctions and extra administrative work as a result of non-compliance with Swiss salary requirements, employers should consider the following steps:
This article is republished, with permission, from “Impact of the falling euro exchange rate on the assignment of foreign employees to Switzerland“ by Shirin Yasargil with the KPMG International member firm in Switzerland.
For further information or assistance, please contact your local People Services or GMS professional or:
tel. +41 58 249 54 36
The information contained in this newsletter was submitted by the KPMG International member firm in Switzerland.
© 2019 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. Printed in Switzerland. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.
KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.
Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.