On 11 August 2021 the Swiss Federal Council approved a new social security agreement between Switzerland and the United Kingdom. This new agreement is important for ensuring and simplifying the coordination of social security systems of both states due to the UK's withdrawal from the EU.

The agreement will fully enter into force once accepted by the Swiss and UK Parliaments.

One important aspect of the new agreement is the avoidance of split contribution payments for employees working both in the UK and Switzerland. Nevertheless, multistate worker scenarios and set-ups involving an EU country in addition to Switzerland and the UK should be reviewed closely as a split of social security contributions might still be necessary in such cases.

Background

The United Kingdom left the European Union on 31 January 2020 (Brexit), which marked the beginning of a transition period. With the conclusion of a transitional agreement on 31 October 2019, the same treatment as per the Agreement on the Free Movement of Persons in the area of social security was guaranteed and the existing rules continued to be applied until 31 December 2020.

Until recently, no agreement on the future relationship between the EU/Switzerland and the UK has been concluded. Therefore, the 1968 Totalization Agreement on Social Security between Switzerland and the United Kingdom (which had remained as part of Swiss and UK law despite its limited scope) was again fully applicable as of 1 January 2021.

Please read our earlier blog for more information on this:

Multi-state workers, Assignments and Brexit. How is Swiss Social Security impacted?

In order to provide a better legislative framework to regulating their social security relations again, Switzerland and the United Kingdom have negotiated a new revised bilateral agreement. On 11 August 2021 the Swiss Federal Council approved the new agreement which shall ensure the coordination of both countries’ social security systems.

The new agreement grants insured individuals largely equal treatment and easier access to social security benefits. It avoids over-insurance as well as insurance gaps for individuals having touchpoints with both countries’ social security systems. In addition to that, temporary deployments of individuals from one into the other state is facilitated.

This new bilateral agreement largely corresponds to the coordination of social security systems in the new trade and cooperation agreement the United Kingdom concluded with the European Union and is based on the principles of EU social security affiliation coordination rules, which Switzerland applies under the Agreement on the Free Movement of Persons (FMPA).

Currently, the competent committees of the Federal Parliament are consulted to approve provisional application of this new bilateral agreement. However, the agreement will only fully enter into force as soon as it has been approved by the parliaments of both states.

Despite establishment of the new bilateral agreement between the UK and Switzerland as well as the new trade and cooperation agreement between the UK and the EU, certain set-ups should be reviewed thoroughly from a social security perspective:

New bilateral agreement - Multi-state worker cases touching the UK, Switzerland and another EU country & assigned UK nationals from Switzerland to an EU country/ from an EU country to Switzerland  

With the United Kingdom leaving the European Union, UK citizens are seen as third country nationals in the course of reviewing multistate worker and assignment set-ups for social security purposes.

It is important to note that Switzerland does not apply EU social security affiliation coordination rules based on the Fundamental Regulation (EC) No 883/2004 to third country nationals in multistate worker set-ups respectively on assignments between EU countries and Switzerland.

Despite establishing the new bilateral agreement between Switzerland and the United Kingdom, for these cases the review of the bilateral agreement between Switzerland and the specific EU country/-ies remains necessary. If the bilateral agreement of Switzerland and the EU country/-ies in question does not cover third country nationals, the allocation and splitting of social security contributions might nevertheless be unavoidable irrespective of this new agreement.

Deloitte's View

The new bilateral social security agreement between Switzerland and the United Kingdom is welcome news. However, it is still recommended to review scenarios involving UK nationals moving between Switzerland and EU countries. In such cases a split of social security contributions might still be necessary.

If you would like to discuss this topic, please do reach out to our key contacts below:

Key contacts

David Wigersma - Partner, Global Employer Services

David has 20 years of experience in the area of international corporate and individual taxation planning. He specialises in addressing the complex compliance needs of a cross-border workforce with varied elements of compensation.

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Tabea Nyfeler - Senior Manager, Global Employer Services

Tabea is a recognised expert in the fields of international tax and social security planning. She is the co-lead of our international social security team in Switzerland. Over her career, she has acquired experience in a number of other areas of reward and mobility, including : global employment taxes, rewards, equity based compensation and pensions. Moreover, she has considerable experience in managing global mobility projects for multinational companies across a broad range of industries. Tabea is a Certified Tax Advisor and has authored publications on international tax and social security law.

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Harry Verougstraete - Senior Manager, Global Employer Services 

Harry is a Senior Manager within the Global Employer Services team of Deloitte in Switzerland. He is leading our Posted Workers Directive (PWD) offering and is co-leading our international social security team in Switzerland. Harry has more than 9 years of experience with Deloitte Belgium and Switzerland. He supports companies on global mobility related matters and is specialised in coordinating global mobility programs. He advices on tax, social security and PWD related matters. 

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Gloria Fehringer - Senior Consultant, Global Employer Services 

Gloria is a senior consultant within Deloitte’s Global Employer Services. In that role, she supports clients with a variety of topics within international expatriate taxation, social security and global mobility support to ensure compliance amongst their mobile workforce. Gloria holds a B.A. degree from ebz university in Bochum and a LL.M. degree in corporate tax law from the University of Cologne, both accomplished in dual study programs while being employed with Deloitte in Germany. Alongside working in fields of international- and mobility tax as well as social security in Switzerland, she concluded a CAS in National Individual Taxation from Kalaidos School Zurich. 

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