Hiring foreign talent without missing out on AVS

Recruiting a foreign employee can drive growth, fill a skills gap or stabilise a team under pressure. But for a Swiss SME, hiring is not simply a matter of signing a contract: it triggers a series of obligations relating to work permits, payroll, social insurance and, often, withholding tax.

The issue is back in the spotlight because cantonal authorities and social security funds are reminding employers of the need to coordinate these procedures from the moment of recruitment. An error in tax liability or a late declaration cannot always be rectified by simply adjusting the salary figure: it can affect contributions, tax deductions, the employee’s social security cover and the company’s administrative burden.

Geneva puts the recruitment of foreign workers back on the agenda for SMEs

The canton of Geneva has announced a training session focusing on the possibilities for hiring foreign employees and the rules governing social insurance contributions. The session is scheduled to take place in person in Geneva on Thursday 1 October 2026 from 2.00 pm to 5.00 pm or on Friday 2 October 2026 from 8.30 am to 12.30 pm. According to the cantonal announcement, the aim is to clarify the procedures for recruiting nationals from the European Union, the European Free Trade Association and third countries, as well as the current conditions for granting residence permits.

This type of training highlights a very practical reality: several authorities are involved in a single recruitment process. The labour market service does not deal with the same issues as the immigration authority, the compensation fund or the tax authorities. For a small organisation, this division of roles can become confusing. Who should be contacted first? When can the employee start work? What deductions should be made from the first payslip? The answer depends on the person’s status, the duration of their employment, their country of residence and, in some cases, their other professional activities.

The difficulty is not just legal; it is also organisational. An SME that needs to hire urgently must coordinate the HR manager, the payroll service provider, the payroll software, the AHV fund and, where applicable, the tax authority. The earlier the paperwork is prepared, the less likely the first payslip is to require retroactive correction.

Permits and registration: payroll begins before the first salary

The first step is to distinguish between the right to work in Switzerland and liability for social insurance contributions. These are two related but distinct issues. An employee may need to go through a registration or permit procedure even before the company processes their salary. For EU/EFTA nationals, the research file notes that work for up to 90 days per year may be carried out without a permit, subject to a registration requirement. Beyond this, a work permit is required. For third-country nationals, the procedures are generally more strictly regulated and must be verified before the employee starts work.

In practical terms, this means that the job offer and the contract alone are not sufficient. The employer must document the employee’s status: nationality, place of residence, expected duration of employment, working hours, usual place of work and whether they hold any other employment abroad. This information is not merely administrative data. It affects visa applications, tax at source and, in some cases, the country responsible for social security contributions.

In an SME, the typical risk is treating a foreign employee as a standard Swiss employee in the payroll software, only to discover afterwards that a tax declaration was required or that a cross-border worker’s case had specific requirements. An accountancy firm can help set up a straightforward process: no first payslip is issued without copies of the relevant documents, the tax status having been established and the compensation fund notified where necessary.

The AVS does not look at the passport, but at the work carried out

As regards the first pillar, the basic principle is clear: anyone carrying out gainful employment in Switzerland is compulsorily insured under the AVS, including foreign workers and cross-border workers. Nationality is therefore not the decisive factor. What matters first and foremost is whether the person is carrying out gainful employment covered by the Swiss system, subject to specific international cases.

For the employer, this obligation is reflected in the payslip. AVS, AI and APG contributions are deducted from the gross salary. The rates indicated by the Confederation’s SME portal are 8.7% for the AVS, 1.4% for the AI and 0.5% for the APG, with the costs shared equally between employer and employee: 4.35% each for AVS, 0.7% each for AI and 0.25% each for APG. These rates are stated as having been in force since 1 January 2020.

For a company, these percentages are not merely a deduction from salary. They form part of the employer’s costs and must be factored into the budget for the post. When an SME compares two candidates – one resident in Switzerland and the other a cross-border worker or from abroad – the gross salary alone is not sufficient to gauge the financial impact. It is also necessary to factor in social security contributions, reporting obligations and the administrative time required to finalise the paperwork.

Secondment, multiple employment and remote working: situations that can quickly go awry

The most sensitive situations arise when an employee does not work exclusively in Switzerland or when they retain a professional link with another country. The Federal Social Insurance Office draws attention to international situations, particularly secondment and multiple employment. The Federal Compensation Office also provides specific information for people working in several countries.

In such cases, social security coverage cannot be automatically determined by the location of the employer’s registered office. An employee who divides their time between several countries, who regularly works remotely from their home abroad, or who carries out secondary employment outside Switzerland may require a more detailed assessment. The research paper also highlights that cross-border remote working raises complex issues relating to social insurance and taxation.

For SMEs, the sensible approach is not to treat such arrangements lightly. A single day of remote working abroad may seem insignificant from an operational perspective, but it can have implications for social security coverage if it forms part of a regular, international work arrangement. Before formalising a remote working policy for cross-border workers or employees residing abroad, it is prudent to have the applicable framework validated.

Pay-as-you-earn tax: the employer acts as tax collector

Hiring a foreign employee also has immediate tax implications. According to the research report, foreign employees without a residence permit – that is, without a C permit – are subject to tax at source. The employer must register these employees with the relevant tax authorities within eight days of their recruitment.

This obligation changes the payroll process. The company does not simply pay a net salary after social security contributions: it must also deduct tax at source where the conditions are met, apply the relevant tax scale and pay the amounts to the relevant authority. For a manager, this means that tax information must be available before the first month’s payroll is finalised. For the payroll service provider, this requires the employee to be correctly set up in the payroll system and clear communication with the employer in the event of a change in circumstances.

The Canton of Geneva also mentions, as part of its training programme, a module on the collection of tax at source for employers, scheduled for Friday 2 October. This link between migration, social insurance and taxation is essential: dealing with these issues in isolation increases the risk of error. A valid work permit does not guarantee that the payslip is correct; a payslip that is socially fair may still be incomplete if tax deductions have been overlooked.

The payroll service provider: the control tower for employee records

For an SME, the best protection remains a structured onboarding procedure. It does not need to be cumbersome, but it must ensure the company asks the right questions before the start date. The employee’s status, their place of residence, the expected duration of employment, the place of work, whether they hold another job, and the type of permit or registration must be documented. The payroll agency can then process this information in the payroll system: social security contributions, withholding tax, notifications to the relevant authorities and filing of supporting documents.

A short internal checklist can save a lot of back-and-forth:

• identify the employee’s country of nationality and country of residence;
• check whether a notification or permit is required before the start of employment;
• determine whether tax at source must be withheld and reported;
• confirm liability for social insurance contributions, particularly in cases of cross-border remote working, secondment or multiple employment;
• set up payroll only once the essential information is available.

International recruitment is no longer the preserve of large companies. SMEs in French-speaking Switzerland are turning to it to find technical, sales or administrative staff. But the more the labour market becomes cross-border, the more strategic the payroll function becomes. Hiring quickly remains possible; hiring correctly requires treating the work permit, AVS and withholding tax as a single process. This is precisely where a fiduciary firm adds value: by transforming administrative complexity into a controlled process, without promising a one-size-fits-all solution where each situation must be assessed on a case-by-case basis.