How does payrolling work in Switzerland?
Freelance administration is a form of employment that allows you to work as a self-employed person while enjoying the benefits of salaried employment. This increasingly popular form of employment is particularly well-developed in France.
In Switzerland, and particularly at Helvetic Payroll, we talk about service leasing or, more simply, payrolling. As part of our payrolling services, we offer our consultants the opportunity to establish an employer-employee relationship regulated by the LSE (Loi fédérale sur le service de l'emploi et la location de services). Then, as a Helvetic Payroll employee, we place you at your client's disposal to carry out the assignment that you have agreed together.
Do you have any questions about this form of employment? Helvetic Payroll offers you a complete guide to everything you need to know about payrolling: definition, how it works, benefits, compliance and legislation, we explain it all here!
📌What is payrolling?
PRINCIPLE AND DEFINITION
Payrolling is a tripartite contractual relationship between a payrolling company, a consultant, and the client company which receives the services of the consultant. It is distinguished from other statuses by its position between salary-earning and independence.
Two types of contracts are signed between the different parties:
- A work contract: it concerns the consultant and the payrolling company, which has the same clauses as any other work contract.
- An assignment contract: it summarises the conditions of the assignment execution by the service provider for the client.
Payrolling is an interesting alternative for consultant workers and salaried workers who wish to launch their own activity while benefiting from certain social and financial security.
Payrolling enables you to preserve your status as a salaried worker while conducting a consultant activity, which can be particularly attractive for workers who are looking to test a project or retrain professionally.
Payrolling can also prove to be practical for workers who carry out assignments abroad or who are looking to obtain a mortgage. It is worth noting that payrolling can concern operations in Switzerland as well as in all European Union countries.
⚙️How does Swiss payrolling work?
Before conducting a payroll assignment in Switzerland, it is essential to understand the fundamentals of this form of employment. The functioning of payrolling in Switzerland is simple :
- The payroll consultant becomes an “employee” of the payrolling company which manages all the administrative procedures, Switzerland payroll taxes, and social security charges for them. A triangular relationship is established between the payroll company, the employee, and the client company.
- The relationship between the payroll company and the client company is ruled by a service contract, while the relationship between the payroll company and the employee is ruled by a work contract.
- The relationship between the payroll consultant and the client is defined by the assignment specifications.
⭐️ What are the advantages of payrolling?
Payrolling offers consultants a solution to free themselves of administrative and legal constraints while benefiting from the advantages and security of the employee status. Therefore, consultants can fully concentrate on the quality of their services and the development of their activity.
- Simplified administrative management: payrolling offers you a solution to preserving your independence while being free from administrative tasks such as invoicing, payment reminders, accounting, and different procedures with public organizations. This enables the consultant to fully concentrate on their assignment, choose their clients, and set the price for their services.
- A secure status: payrolling companies take charge of the payment reminders to ensure the payment of their consultants’ salaries. Furthermore, they enable the latter to perfectly comply with Swiss legislation.
- Social advantages: the consultant benefits from a Swiss work certificate, which guarantees them social insurance identical to that of a “classic” employee: health insurance, pension, unemployment insurance, and work-related accident insurance.
- Financial optimization: payrolling companies offer financial security to the consultant by allowing them to have a regular income. Furthermore, their specialized teams support you in the optimization of your income, therefore allowing you to have the best salary possible.
Helvetic Payroll is a payrolling company that can support consultants and employees in their projects by offering them services adapted to their needs.
📍The Swiss system
SOCIAL INSURANCE
Social insurance in Switzerland is a key concept of the social system. It aims to protect citizens against social risks such as illness, accidents, unemployment, old age, infirmity, and death. It, therefore, involves different types of social insurance which cover the expenses linked to these risks:
- Illness insurance (LAmal) is composed of compulsory health insurance and optional daily sickness benefit insurance.
- The lost earnings allowance (AGP) involves maternity, paternity, and care (of a sick child) allowances
- Cover for old age, survivors, and infirmity consists of “3 pillars”: old age and survivors insurance (AVS) and infirmity insurance (AI), the professional old age, survivors and infirmity pension (PP) (compulsory for workers), and the individual pension (optional)
- Work-related and non-work-related accidents insurance (AA)
- Unemployment insurance (AC)
- Family allowances
With the exception of the 3rd pillar, all these insurance schemes are compulsory.
In summary, social insurance in Switzerland is a comprehensive and efficient system that enables citizens to face social risks while benefiting from financial support and professional assistance if necessary.
COVER FOR OLD AGE, SURVIVORS, AND INFIRMITY
The Swiss social insurance system covers the following domains:
- The 1st pillar, related to public powers, involves AVS and AI. The annuities of these two insurance schemes are destined to cover the vital needs of the policyholders. The 1st pillar is compulsory for all, including self-employed workers and non-workers.
- The 2nd pillar (LPP) completes the 1st pillar with a professional old age, survivors, and infirmity pension. These two pillars guarantee the policyholder who contributes at least 60% of their last salary towards their pension. The second pillar is only compulsory for salaried workers.
- The 3rd pillar, namely the individual pension destined to cover more extensive needs, is optional but allows you to partly benefit from tax advantages, unlike other forms of savings. The funds can only be allocated to the person in certain cases (retirement, death, or infirmity) or, under certain conditions, for the purchase of their own accommodation.
FAMILY BENEFITS
Family benefits, in the federal system, are managed by the cantonal compensation funds and, in the cantonal systems, by the family benefits funds (recognized professional or inter-professional funds and cantonal funds).
COMPULSORY SWISS HEALTH INSURANCE
Compulsory health insurance guarantees anyone living in Switzerland access to a range of high-quality medical care and suitable medical treatment in the canton in which they live. Health insurance for medical expenses is required by Swiss law.
This private insurance must be taken out within 3 months of your arrival into the country, depending on the employee’s responsibility. The amount varies according to the level of cover you desire.
TAXES AND TAX LAW IN SWITZERLAND
Taxes and the tax system in Switzerland are complex to the extent that the rules change according to your permit type (border dweller or resident of Switzerland), your salary rate, and the canton in which you work. Taxes in Switzerland are further complicated by the number of cantons (the tax law applied is different from one canton to another). However, the tax calculation method in Switzerland is rather simple compared to other countries. Our teams support you throughout the calculation of your taxes.
THE LEGAL SYSTEM
In order to work in Switzerland as a foreigner, a work contract is insufficient as a matter of fact. You also need a Swiss work permit. The Swiss work permit is an official document issued by the social services department of your canton and gives you the right to work in the Swiss territory.
The main work permits for European Union immigrants are as follows:
- The B permit for long-term residents
- The L permit for short-term residents or for an activity lasting less than a year
- The C permit which is an authorization of establishment after 5 years of residence in Switzerland
- The G permit for border workers who live in a European Union country
For more information, do not hesitate to consult our article on this subject or contact our teams.
📝 Conformity and legislation
WORKING IN SWITZERLAND: THE LAW
To work legally in Switzerland, a worker must obtain a Swiss work permit which must be requested by a Swiss employer to the administration. Any temporary worker who wishes to work for a Switzerland-based company must therefore work for a Swiss company which is authorised to offer work in that country.
Consequently, a temporary worker cannot work for a company based in Switzerland and be paid by a company based abroad. They can no longer be hired by a Swiss company which does not have the necessary licences. An end Swiss company can only work with a Swiss company which has all the necessary licences.
This is particularly the case with Helvetic Payroll which has all the licences necessary to support your activity.
CANTONAL AND FEDERAL LICENCES
The private placement and renting of services in Switzerland are strictly controlled by public institutions. Helvetic Payroll has all the licences essential to our activities:
- Cantonal licence agreed by the SPE (Public Employment Service) to work anywhere in Switzerland
- Federal licence agreed by the SECO (State Secretariat for Economic Affairs) for trans-border activities
These licences allow us to work in Switzerland and in the European Union countries.
You can consult them directly on the Swiss authorities’ website here.
Helvetic Payroll is in permanent contact with the administrations and insurance companies (SECO, SPE, AFC, AVS) to ensure perfect compliance of our processes with Swiss legislation. In fact, sanctions for not complying with, for example, the payment of social benefits charges can be extremely heavy, which is why it is important for our clients to ensure in advance that they do not run that risk.
We know that it is of the utmost importance to ensure that the pay slips of each employee are established in strict compliance with the Swiss and European standards, in particular the calculation of the social benefits charges and the tax deductions when the taxes are deducted at source.