Switzerland regulates the sharing of employees between group companies (loan staffing) through the Federal Recruitment and Loan Staffing Act (RLSA). Among other things, this legislation requires companies to obtain a permit in order to loan staff between affiliated companies in Switzerland or to loan staff from a Swiss company to a foreign affiliate. 

According to the RLSA, foreign loan staffing to Switzerland is in general illegal. However, in 2003, the SECO issued a directive exempting intragroup loan staffing (i.e. loan staffing between affiliates of the same group of companies, “secondments”) from most of the restrictive provisions of the RLSA. In particular, secondments were not subject to the permit requirements of the RLSA, and secondments from abroad were allowed within a group. However, already over the last few years the SECO has interpreted the 2003 directive more and more restrictively, driven by the sharp increase in the number of secondments and in particular the establishment of “staffing companies” (also known as Global Employment Companies)which centrally hire employees for the sole purpose of loaning them to affiliates.

This stricter practice has now been formalized in a new directive dated 20 June 2017¹ . The intention of the new directive is to better regulate certain loan staff arrangements (hereafter, “secondments”) by requiring companies to obtain an RLSA permit. However, intragroup cross border staffing arrangements (hereafter, “assignments”) can still be made without an RLSA permit (immigration requirements, however, do still apply).

^{1SECO, Konzerninterner Personalverleih — Beurteilung der Bewilligungspflicht Weisung 2017; Präzisierung der Weisungen und Erlauterungen zum AVG, 20 June 2017}

The new SECO directive means companies need clear guidelines to be able to determine if a cross border intragroup loan staffing arrangement is subject to an RLSA permit (secondments) or not (assignments). In both cases, the employees remain on their home employment contract and work in Switzerland based on an assignment letter. As it will be explained below, the distinction is made on factors such as who instructs the employee as well as the scope, timeline and goal of the project requiring the loan staffing.

Intragroup secondments

The deployment of a foreign employee to a Swiss group company is seen as a secondment if the employee reports to someone in Switzerland, and becomes  part of the Swiss organization (e.g. access badge, assigned work-place, provision of a computer, telephone and other work materials, Swiss e-mail address and business cards, application of local employment regulations) and appears (at least de facto) to be an employee of the Swiss company. Furthermore, the Swiss company is liable for the work activities of the deployed employee.

According to the new directive, cross-border secondments to Switzerland are only allowed in exceptional cases. The following criteria may serve as an indication that a secondment from abroad is admissible:

• The secondment of staff is not the main activity of the employer and is not done on a commercial scale. The secondment of staff is qualified as commercial if a) the limit of 10 profit oriented secondments (single cases or groups of employees) is exceeded or, an aspect that is in practice primarily relevant, b) the secondments result in a revenue from the secondment of staff of more than CHF 100’000 within 12 months.
• The secondment is limited in time.
• The secondment of staff occurs only sporadically and in exceptional cases to cover a temporary shortage of staff.
• The acquisition of knowledge or the knowledge transfer is the main focus of the secondment.

When reviewing these criteria, the determining factor is not the wording of the relevant deployment contract and policies, but rather the actual working conditions implemented in practice in the individual case at hand.

Intragroup assignments

It is allowed to assign an employee within the same group from abroad to Switzerland if the assigned employee continues to report to someone outside of Switzerland and if the scope of the project in Switzerland has a clear desired end result and a pre-defined timeline.

In practice, determining whether a loan staffing arrangement is an assignment or a secondment is difficult because in both cases the deploying company generally continues to pay salaries and keeps some authority over the employee (e.g. merit increases, determining bonus objectives, the right to give termination notice, etc.). The new directive states that the main determining distinction between a secondment and an assignment is the authority to give instructions, which needs to remain completely with the deploying company in the case of an assignment. Evidence of this would be that the deploying employer remains fully responsible for the activity of the employee. Further evidence of an assignment would be that the employee remains a part of the deploying company’s organisational structure. Also, the authorities would expect that the assignment has a clearly defined project plan, limited in time from the outset, whereby the relevant specialists continue to be subject to the instructions of their superiors in their home country.

Possible Alternatives

Hiring locally
Should the conditions for an assignment not be met, Swiss companies may want to consider simply hiring loan staff candidates. In this alternative, additional internal administrative expenses (e.g. duplicated entry and exit procedures in both of the companies involved) might apply. From an immigration perspective, challenges arise especially for non EU/EFTA nationals. For non EU/EFTA local hires, companies typically would need to prove that despite all recruitment efforts, no equivalent or better qualified candidate could be found on the local market in order to obtain a work permit.

Assignment of employees from abroad directly to a client in Switzerland
It is allowed to assign an employee from abroad to Switzerland directly to a client if such an assignment is based on a contract for work and service (Art. 363 code of obligations) or an agency contract (Art. 394 code of obligations). These structures typically require the employer to sign a project contract with the client in Switzerland. The right of instruction remains with the employer abroad and the scope of work defines a clear timeline and end result. Furthermore, the foreign based employer bears the commercial risk for the success of the project.

On the other hand, it would not be allowed to deploy an employee to the client if the essential right of instruction would be transferred to the client, were the employee to become part of the client’s organisation and if the scope of the work were to consist of performing work without a clearly defined end result, project or timeline. This would typically qualify as a potentially illegal secondment.

Deloitte’s view

It remains to be seen in practice how strict the authorities will apply these restrictions on intragroup secondments. So far, we have yet to see the Swiss immigration authorities refer to the conditions set out in the new SECO directive. It is, however, entirely possible that with time, the immigration authorities will integrate these changes into their permit application review procedures. Companies that regularly staff projects in Switzerland using intragroup loan staffing arrangement would be advised to review their staffing procedures and documentation.

Finally, given that the new SECO directive specifically targets intragroup staffing company (GEC) structures we would strongly recommend to review the set-up and, as the case may be, to apply for the relevant loan-staffing permits as such structures would most certainly be seen as secondment arrangements subject to the restrictive provisions of the Recruitment and Loan Staffing Act (RLSA).

Renaat Van den Eeckhaut – Partner, Global Employer Services Leader Switzerland and EMEA

Renaat leads the Global Employer Services (GES) Practice for Deloitte Switzerland and EMEA. He specialises in international assignment and cross-border employment matters and advises on tax, social security and international mobility policies. Renaat has nearly 20 years of experience with Deloitte Belgium and Switzerland and has worked with many companies across a broad range of industries. Renaat holds a Master in Law and Accounting Law and has authored many publications on international taxation.

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Julia Stutzer - Senior Manager, Immigration

Julia is an Immigration Senior Manager at Deloitte in Switzerland. She has been supporting both global companies as well as medium and small sized enterprises with their immigration needs for more than 7 years. Julia puts her focus on immigration advisory services, advising clients on best practice and coordinating complex interdisciplinary requests with the tax and social security teams.

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Katrin Stefanicki - Senior Manager, Legal

Katrin is an attorney-at-law and is a team member in the Legal practice at Deloitte in Switzerland. She has advised listed multinationals headquartered in Switzerland and abroad as well as privately held companies and family owned businesses in various industry sectors such as pharmaceuticals, energy, manufacturing and commodities. Her areas of practice include corporate law and reorganizations, transactions (M&A), contract law and labor law.

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