As of January 2021, the Swiss social security will undergo some changes. There will be increases in the social security rates due to new regulations adopted by the Swiss government, amongst them the incorporation of the Swiss paternity leave as of 1 Jan 2021.
The blog will also revisit the COVID-19 Swiss flexible approach updates, and will update you on the changes of the ALPS system for A1 applications.
Impact of the paternity leave on the first pillar:
The paternity leave has been approved in September 2020 within a Swiss referendum. This law allows fathers to take two weeks of paid leave within six months of the birth of a child, or to spread the leave during individual days during this period.
Similar to the maternity allowance, the father can take leave and get up to 80% of the average salary paid before the birth of the child, but no more than CHF 196 per day. For two weeks of leave, 14 daily allowances are paid out, which amounts to a maximum of CHF 2,744.
This leave is financed by the Occupational Replacement Regulations (EO), this means that the employer and employee contributions will increase as of 1 January 2021 from 0.45% to 0.50% in order to finance the paternal leave.
Changes to the second pillar (occupational pension scheme) and third pillar:
Due to an increase of the maximum first pillar old age annuity, a slight increase of the contributions to the mandatory occupational scheme (second pillar) will be implemented. The coordination deduction will be increased from CHF 24,885 to CHF 25,095, while the entry threshold will rise from CHF 21,330 to CHF 21,510.
Further, the maximum permitted tax deduction in pillar 3a is now CHF 6,883 (currently CHF 6,826) for persons who already have a second pillar, and CHF 34,416 (currently CHF 34,128) for persons without a second pillar. These adjustments will also come into force on 1 January 2021.
COVID-19 Swiss flexible approach:
The pandemic has impacted the social security systems worldwide and has interfered with the free movement of people as contemplated in the EU principles. In order to ensure that the social security insurance does not change due to COVID-19 restrictions, a person employed in Switzerland should continue to be subject to the Swiss social security and all its branches (first pillar, second pillar and health insurance affiliation), even if the employee is physically unable to perform the work in this country.
The common law governing the European Union/European Free Trade Association’s coordination of social security is the regulation 883 adopted in year 2004. According to this regulation, a person who is working in two or more member states, will be subject to the legislation of the country of residency, if the employee is working 25% or more, within a period of 12 months, in the country of residence. During COVID-19, the 25% rule of work performed in the country of residency is directly impacted. This particularly affects cross-border commuters working from home during the pandemic. Therefore, the Swiss authorities have entered in agreements with the EU neighboring countries Germany, France, Italy, Austria and Liechtenstein, to apply a flexible application of the subordination rules. This agreement on the flexible interpretation of the 25% rule is valid until 30 June 2021.
In relations with the other EU/EFTA countries, flexible approach interpretation of Switzerland with the rest of the EU/EFTA countries will also apply until 30 June 2021. Once the situation is returning to normal, the 25% rule should be interpreted in a regular way and the flexibility will no longer apply.
What does the Swiss flexible approach mean in practice? It means, that for individuals who were subject to the Swiss social security scheme prior to the COVID-19 pandemic, they continue to be affiliated to it. For example: a cross-border commuter employed in Switzerland and living in Germany, should continue to be affiliated by the Swiss social security, even if work in excess of the 25% rule is performed in Germany due to the Pandemic restrictions.
In addition, A1 certificates to and from Switzerland are still valid, even if they exceed the 25% rule of working in the country of residency.
The flexible approach is applied to EU/EFTA countries, and is not applicable to countries outside this area. Bilateral agreements continue to be in place and interpreted flexibly by the Swiss authorities according to current pandemic regulations and restrictions.
ALPS System update:
ALPS is an electronic platform used to process A1 applications or Certificates of Coverage (COC) for international assignments, international posted workers, etc. to ensure the continuance of the Swiss social insurance coverage during the posting period. This system allows the Swiss authorities, compensation funds and companies to share information in a secure way and supports a paperless process.
The system was recently updated to link it to EESSI, which is a system for electronic data exchange between the social insurance authorities in the EU/EFTA countries. As such, the major impact of this upgrade is that each EU country, where the multistate work is performed, will be informed about the application, and each country has a period of 60 days to provide feedback on an A1 multistate application. The A1 multistate application therefore will take 60 days to be finalized / approved, however depending on the Swiss compensation fund, the approval may be provided earlier, not waiting for the 60-day deadline to pass.
Please note that in the past a multistate application could be applied for all countries in the EU/EFTA area. However, with the upgrade and link to EESSI, it is recommended that the application is now discussed in advance with the business and only the relevant countries are applied for, to avoid further delays or unnecessary challenges.
In addition, it is recommended that the employee has the A1 multistate certificate from day one of the cross-border activity. It is our recommendation that companies review their internal initiation process and clarify with the responsible compensation fund how the 60-days period is handled, and whether A1 certificates will be issued prior to the expiry of the deadline.