• Fabio Summermatter, Expert |
  • Gaurav Bhagwanani, Expert |

The gig economy has been on the rise for several years. Conceptionally, the gig economy grants workers flexible work arrangements. However, often workers are legally not that independent, but rather qualify as employees from a social security, tax and employment law perspective. If so, particularly the hiring party (i.e. employer) may be retroactively liable for social security contributions and taxes on already paid remunerations. 

Currently, mostly food delivery or transportation platform providers engage a lot of workers in flexible settings worldwide. In many cases, their holding companies are located abroad. However, this does not mean that they may not be subject to employer obligations in Switzerland.

Recent landmark ruling by the Federal Supreme Court (FSC)

Recently, the FSC held that a Dutch transportation platform provider was generally liable for social security contributions as a deemed employer of drivers operating in Switzerland due to its permanent establishment in Switzerland. Thus, the Dutch company needs to retroactively pay social security contributions on certain paid salaries in Switzerland.

Essentially, the FSC ruled that the drivers were generally subject to substantial instructions (the compliance of which was monitored via an app), subordinated in significant areas and virtually had no own economic risk. Additionally, the FSC found that the Dutch company’s contact office for drivers in Switzerland (operated by the Swiss subsidiary) qualifies as a permanent establishment, because the Dutch company could dispose over its permanent facilities and partially conducted its business from that Swiss contact office.

Therefore, the Dutch company qualified as employer with a permanent establishment in Switzerland from a social security law perspective and must pay social security contributions for a particular calendar year for workers operating here.

What does this verdict mean from a social security and tax law perspective?

Even though the verdict in this specific case has assessed the presence of a Swiss permanent establishment (PE) of the company in question, the FSC decision might have far reaching consequences for all gig economy employers. 

The FSC confirms that the assessment of employment doesn’t take place on a case-by-case basis but can be done for a whole group of workers with identical work settings. Hence the Swiss authorities will likely have the possibility to claim employee status for larger groups of workers.

Based on EU regulation 883/2004, any company having an establishment within the EU/EFTA and receiving services from an EU/EFTA citizen residing in Switzerland can be affected by this. If the services provided are qualified as employment, not individually, but on the level of an entire worker group, the foreign company would likely be deemed a “Swiss” employer for social security purposes based on Art. 21 of the aforementioned regulation. 

“Swiss” employers are subject to a pecuniary penalty in case of under-withholding of social security and are liable for both, employer and employee, contributions. Not remitting social security contributions can also be prosecutable in accordance with criminal law. Further, retroactive contributions would not only apply to state pension (Pillar I) but would also necessitate registration with an occupational pension plan (Pillar II), which entails considerable administrative efforts and costs.

For foreign companies not in the scope of EU reg. 883/2004, the verdict is specifically interesting with regards to the establishment of a PE in Switzerland, since this generally entails full liability for all employer obligations as a “Swiss” employer.

Additionally, all employers should consider that in case their employees are not Swiss nationals or have another Swiss residence permit other than a C permit, or generally are non-residents, source tax has to be withheld and remitted accordingly to the Swiss authorities. Under-withholding of source tax is again a prosecutable offence under federal law.

What needs to be considered from an employment law perspective?

From a Swiss employment law perspective, employee qualification depends on the chosen structure and mainly the actual circumstances. Typically, a key factor is the presence of a subordination relationship. Thus, it needs to be examined whether a Swiss subsidiary or its holding company abroad qualify as employer. Should a setup with a gig worker be (retroactively) qualified as an employment relationship, the worker could (retroactively) benefit from employment rights, such as sick pay, vacation, overtime and termination protection as well as likely have jurisdiction in Switzerland. Hence, gig companies should beware that their flexible work setups may end up being governed by a variety of (local) labor regulations.


In light of the recent FSC ruling, gig economy companies must (re-)assess their structure, contractual arrangements and operations carefully, in order to avoid retroactive contribution payments and establishment of employee rights – even if the respective company is domiciled abroad.

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