Intragroup staff leasing

Christine Bassanello Head Employment Law 23 Oct 2017

In June of this year, the State Secretariat for Economic Affairs (SECO) issued a new directive on the permissibility of intragroup staff leasing. It clarified that intragroup staff leasing also generally requires the relevant licences – contrary to a previous directive dating back to 2003. To fully understand its impact, it is necessary to be familiar with the legal concept of staff leasing. Below, we will therefore provide you with more information on staff leasing in general before focusing on intragroup staff leasing, and on crossborder staff leasing in particular. To conclude, we will give our views on the consequences of the new SECO directive.

What is regarded as staff leasing and when is it subject to prior approval?

In short, staff leasing can be defined as the provision of staff by the employer to a third party with the simultaneous transfer of its right for instructions and control. Further indicators for staff leasing can be the way in which staff are integrated into the host company’s organisation (considering personal, organisational and temporal aspects), invoicing based on the hours worked and the non-liability of the home company for misperformance of the staff provided. Whether or not staff leasing is given is assessed primarily on the basis of the contract between the home and host company, and secondarily by taking into account the so-called “lived-reality”, i.e. the contractual parties’ understanding of the situation and how they carry out their duties on a day-to-day basis.

Commercial or professional staff leasing is subject to prior approval. According to the applicable legal provisions, any company which regularly, i.e. more than ten times a year, deploys a single employee or a group of employees with the aim of achieving a profit, or which generates a yearly turnover of CHF 100,000, has to obtain the approval of the competent cantonal authority (“licence”). In case of staff leasing to a company located abroad, the approval of the SECO is additionally required.

However, a cantonal or federal licence will only be issued to companies domiciled in Switzerland. Foreign companies cannot obtain a licence as staff leasing from abroad is legally forbidden. For the sake of completeness, please note that in case of staff leasing from Switzerland to other countries, it is also necessary to check whether the host country allows staff leasing from abroad. 

Intragroup staff leasing

In its directive issued in 2003, the SECO stated that staff leasing within a group is permissible without a licence. Since then, the SECO has revised its opinion and has now published a new directive. Accordingly, intragroup staff leasing is also generally subject to approval.

Exceptions apply in the following cases: 

  • If it is considered to be an isolated 
  • If it serves the transfer of know-how within the group;
  • If the aim is the acquisition of experience on a professional, linguistic or other level; or
  • If it is an occasional provision of personnel (i.e. staff leasing is not considered regular according to the law; see above).

In practice, the concrete circumstances have to be taken in account. Namely, staff leasing for a limited period but also a transfer of knowhow in connection with the group wide implementation of new technology or education on a new machine or the opportunity for an employee to acquire international work experience as part of an internal career path, may be regarded as cases of permissible intragroup staff leasing not requiring a licence.

Excursus: Group-internal staffing firms

The new directive affects group-internal staffing firms in particular (e.g. so-called global employment companies; “GEC”), i.e. companies whose main or sole purpose is the provision of staff to other group companies while handling all administrative matters and acting as the formal employer.

If these companies are domiciled in Switzerland and are leasing personnel to companies abroad, they need to obtain the relevant cantonal and federal licence. However, if their legal domicile is outside of Switzerland, sending employees to Switzerland may be restricted and the legal permissibility must therefore be assessed in each individual case.

Staff leasing vs. international secondments

Not every secondment qualifies as staff leasing. Specifically, secondments with the purpose of providing services to a group company or to a client on the basis of a contract between the group company or the client and the assigning company are exempt from this requirement. On the other hand, secondments in case of a staff shortage or secondments to a group company in order to provide services to the group company’s client on its behalf are clearly regarded as staff leasing. Each situation therefore has to be assessed on a case-by-case basis to determine whether or not the secondment qualifies as staff leasing. If staff leasing is indeed established, an intragroup secondment as mentioned above is still possible for the purpose of know-how transfer, internal education, acquisition of experience and the like.

In any other case, staff leasing from abroad remains legally forbidden. With respect to the latter case, one option would be to offer local employment with the host company instead of assigning the relevant employee. This is possible in particular for EU nationals who - according to the bilateral agreement with the EU on the free movement of persons - would be entitled to work in Switzerland.

In case of third-country nationals, a local employment contract could be offered to executives or highly qualified individuals if their secondment is not anyhow regarded as permissible intra-group staff leasing, given that in any other case, further immigration restrictions would apply, notably the priority of local workforce. If staff is leased to provide services to the host company’s client, it could be also considered that the host company is subcontracting the assigning company. This way, the services are provided by the assigning company with its own personnel and would therefore not qualify as staff leasing. 

Consequences of the new directive on the practice of the migration authorities

Considering the above and according to our discussions with the authorities, we do not expect the SECO directive to have any immediate effect on the authorities’ practice in the near future. Work permits may thus still be obtained for secondments not qualifying as staff leasing or which do not require a licence according to the SECO directive, and are thus also permissible from abroad. 

Recommendations

As intragroup secondments may qualify as staff leasing, it is advisable to assess the internal assignment policy. Should they indeed qualify as cases of staff leasing generally requiring a licence, or as secondments from abroad, which are legally forbidden, it is possible to consider drawing up a local employment contract or, in case of a client, working on a subcontracting basis.

 

Contacts

Christine Bassanello

Head Employment Law, Basel

+41 58 792 51 21

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Mirela Stoia

Director PwC Legal, Geneva, PwC Switzerland

+41 58 792 91 16

Email

Ara Samuelian

Tax Director, Head of Immigration, Zürich, PwC Switzerland

+41 58 792 19 95

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