Employer of Record in Switzerland: the AVG staffing licence

A German or Austrian company that wants someone in Switzerland to work for it through an Employer of Record (EOR) needs to check one thing that many comparisons skip: the Swiss staffing licence. Switzerland’s State Secretariat for Economic Affairs (SECO) states in its directives that Employer of Record arrangements are to be assessed as staff leasing (Personalverleih) under the Employment Services Act (Arbeitsvermittlungsgesetz, AVG). SECO’s directives also say that a Swiss leasing business that leases staff to user companies abroad needs a SECO licence in addition to the cantonal licence, and its licensing overview treats the client’s seat as the place of assignment. On that reading, a Swiss EOR working for a German or Austrian client will typically need both licences, with the SECO licence covering the client’s country. SECO does not address this exact EOR set-up expressly, so confirm the licence position with the provider and, if in doubt, with SECO or the cantonal labour office.

Quick answer

Why is an Employer of Record staff leasing in Switzerland?

SECO’s directives on the AVG (June 2024 edition) address the model by name. In payrolling and Employer of Record arrangements, the first company wants to use a person’s labour but does not employ them. A second company employs the person and makes them available. The first company exercises the right to give instructions, while the second pays wages, accounts for social-security contributions and, for foreign workers, handles registrations with the immigration and tax authorities.

SECO’s conclusion is direct: such an arrangement is to be assessed as staff leasing. The client is the user company (Einsatzbetrieb) and the EOR is the leasing company (Verleihbetrieb). The EOR normally needs a licence, because it acts commercially. According to SECO, leasing is commercial when a business regularly leases workers to user companies with the intention of making a profit (regularity means more than ten leasing contracts within twelve months), or when leasing generates annual turnover of CHF 100,000. An EOR business will usually meet that test.

Which licences must the EOR hold for a German or Austrian client?

The cantonal licence

Under Art. 12(1) AVG, employers that commercially make workers available to third parties need an operating licence from the cantonal labour office. The licence is unlimited in time and valid for all of Switzerland (Art. 15(1)). It requires, among other things, entry in the Swiss commercial register and suitable business premises (Art. 13(1)), and a deposit to secure wage claims (Art. 14).

The additional SECO licence for leasing abroad

Art. 12(2) AVG requires an additional SECO licence for leasing abroad. This matters for German and Austrian clients because of how SECO defines the place of assignment. SECO’s directives say that Swiss-based lenders that lease staff to user companies abroad need the SECO licence (section 3.1.4). Its overview of licensing cases states that the place of assignment within the meaning of the AVG is the seat of the client, and that this does not change when workers work online from another country.

Read together, this indicates that a Swiss-based EOR that employs a worker in Switzerland for a client based in Germany or Austria is likely to be treated as leasing abroad. SECO does not apply this rule to EOR arrangements by name, so treat it as the cautious reading and ask the provider how it has licensed the arrangement. SECO’s overview table lists this case, a Swiss-based lender recruiting in Switzerland with the place of assignment abroad, as requiring both the cantonal and the federal licence.

Two details make the check practical:

• The SECO licence is limited to specific states (Art. 15(2)). Ask whether the EOR’s licence covers Germany or Austria, whichever applies to your company.
• The deposit is higher. SECO’s directives describe a deposit that increases by CHF 50,000, to a total of CHF 100,000, when the business also leases abroad, and say a business that will not provide it receives no federal licence.

Why a foreign EOR entity cannot do this

Art. 12(2) AVG also states that leasing from abroad into Switzerland is not permitted. SECO explains that the legislature wanted to prevent it because foreign leasing businesses cannot be adequately supervised. Its overview adds that a leasing business based abroad that recruits in Switzerland cannot obtain the licence, because it cannot be entered in the Swiss commercial register, and therefore may not operate in Switzerland.

So if a provider proposes to employ your Swiss-based worker through its German, Austrian or other non-Swiss entity under a staffing arrangement, treat that as a serious warning sign.

How can you check a provider’s licence?

SECO keeps a public register of licensed private employment and staff-leasing businesses (Art. 35b AVG), available at avg-seco.admin.ch. Search for the Swiss entity that will employ your worker and check:

• that the entity is listed with a staff-leasing licence;
• whether the entry shows cross-border activity (“Tätigkeit in der Schweiz und grenzüberschreitend”); the register does not appear to list which states a SECO licence covers, so ask for a copy of the SECO licence showing the covered states; and
• that the company name matches the entity named in your contract.

If the register is unclear, ask the provider for copies of both licences and the name of the cantonal authority that issued the cantonal licence. The AVG also requires the leasing contract to state the address of the licensing authority (Art. 22(1)), so the information should appear in the contract you sign.

What must the contracts contain?

The AVG prescribes written contracts on both sides of the arrangement:

• The worker’s employment contract with the EOR must normally be in writing and cover the type of work, place of work and start, duration or notice period, working hours, pay, expenses, allowances and social-security deductions, benefits for overtime, illness, maternity, accident, military service and holidays, and payment dates (Art. 19(1) and (2)).
• The leasing contract between the EOR and your company must be in writing and state, among other things, the addresses of the lender and of the licensing authority, the worker’s qualifications and type of work, place and start of the assignment, duration or notice periods, working hours and the costs of the leasing, including all social benefits, allowances, expenses and ancillary benefits (Art. 22(1)).

Under Art. 20 AVG, the lender must apply the pay and working-time provisions of a generally binding Swiss collective agreement that covers the user company. SECO’s directives say the agreement in force at the place of work is in principle the one that applies, not the one at the client’s seat (section 3.9.9), so a Swiss collective agreement can matter even though your company is based in Germany or Austria. SECO’s directives also refer to the staffing sector’s own collective agreement (GAV Personalverleih). Ask the provider which collective agreement it applies to your worker and how that affects pay and contributions.

What if the licence is missing?

The AVG attaches consequences to both contracts and to both companies:

• Without the required licence, the worker’s employment contract with the lender is invalid, with the consequences set out in Art. 320(3) of the Code of Obligations (Art. 19(6)).
• The leasing contract with your company is void (Art. 22(5)).
• A lender that intentionally leases staff without the required licence can be fined up to CHF 100,000 (Art. 39(1)).
• A company that uses a lender it knows has no licence can be fined up to CHF 40,000 (Art. 39(2)(a)).
• A lender that negligently leases staff without the required licence can be fined up to CHF 20,000 (Art. 39(3)). The negligence fine does not extend to the client-side offence, which requires knowledge.

The client-side fine depends on knowledge, which is one more reason to check the register and keep the evidence on file.

Can you hire the worker yourself later?

Yes. Agreements that make it harder or impossible for the client to hire the worker after the assignment are void (Art. 22(2)). The only permitted exception is a fee where the assignment lasted less than three months and the worker joins the client within three months of its end, and the fee is capped (Art. 22(3) and (4)). The worker’s own contract also may not stop them from moving to the client (Art. 19(5)(b)). For a planned move from an EOR to your own Swiss entity, these rules work in your favour, but confirm the provider’s terms in writing.

What about foreign nationals?

A lender may only employ foreign nationals in Switzerland who are admitted to work and entitled to change jobs (Art. 21(1)). Exceptions are possible where special economic reasons justify them (Art. 21(2)). SECO’s directives also say that leasing newly arriving persons from abroad in Switzerland requires the federal licence in addition to the cantonal one. If your candidate does not yet hold the right to work in Switzerland, ask the provider in writing whether and how it can support the permit route for that person before you make an offer.

Which hiring model fits a Switzerland-based worker?

The Federal Social Insurance Office (FSIO) describes the direct route for employers based in an EU or EFTA state without a Swiss establishment: they are obliged to pay the Swiss contributions and in principle settle directly with the competent Swiss institutions, for employees within the scope of the coordination rules. Its page on this constellation names the cantonal compensation office as the contact point for foreign employers and also covers occupational pension and accident insurance. Hiring in Switzerland from Austria walks through that route, Swiss permits, commuters and telework in detail; most of the mechanics are the same for a German employer. The employee, contractor or EOR framework compares the models generally, and what an Employer of Record is explains how the model works.

When does an EOR fit in Switzerland?

An EOR can fit when the role is clearly employment, you have no Swiss entity, you do not want to operate Swiss social-insurance and payroll administration yourself, and the provider’s Swiss entity holds a cantonal licence and a SECO licence covering your country. It also suits a market test before you decide on a Swiss entity, because the AVG protects your ability to hire the worker directly later.

When does an EOR not fit in Switzerland?

An EOR is a weak fit when the provider cannot show the licences for your country, when it proposes a foreign employing entity, when direct foreign-employer registration is manageable for your team, or when the role needs a lasting Swiss presence. It also does not decide contractor status, guarantee a permit, or settle your company’s own permanent-establishment and tax position in Switzerland.

Questions to put to Deel or any other EOR provider

Put the same written questions to every provider, including Deel:

1. Which Swiss legal entity will employ the worker?
2. Does that entity hold a cantonal staff-leasing licence, and which authority issued it?
3. Does it hold a SECO licence for leasing abroad that covers Germany or Austria?
4. Which collective agreement applies to the worker, and how is it reflected in the cost?
5. What are the transfer terms if we hire the worker ourselves?
6. Can the provider support the permit route for a candidate who does not yet have the right to work in Switzerland?

If an EOR fits your case after that check, ask Deel how it would set up a Swiss EOR hire and which licences apply (opens in a new tab) and compare the written answers with your direct-employment alternative.

Key terms

Key terms

Employer of Record (EOR)

A third-party provider that legally employs a worker on behalf of a client company in a country where the client has no local entity, handling local payroll, contracts and compliance.

Employee

A worker engaged under a local employment contract, with the employer responsible for payroll, social security contributions and compliance with local labour law.

Contractor

A self-employed individual or business engaged for specific services under a commercial contract, without the employment protections or payroll obligations that apply to employees.

Misclassification

Treating a worker as a contractor when, based on the actual working relationship, local law would classify them as an employee, which can create back taxes, penalties and employment claims.

Permanent establishment

A tax concept describing a fixed place of business or sufficient business activity in a country that can trigger local corporate tax obligations for a foreign company.

Checklist for an EOR hire in Switzerland

• Confirm the role is employment and that your team will direct the work.
• Get the name of the Swiss entity that will employ the worker.
• Check the SECO register for the leasing licence and cross-border activity, and the SECO licence itself for your country.
• Reject any staffing set-up that employs the worker from a non-Swiss entity.
• Check that both contracts are in writing and contain the content the AVG requires.
• Ask which collective agreement applies and what it means for cost.
• Agree transfer terms that respect Art. 22 AVG.
• Compare direct foreign-employer registration and a Swiss entity on the same facts.
• Keep Swiss permits, social security, tax and permanent establishment as separate reviews.
• If the EOR fits, discuss a Swiss EOR hire with Deel (opens in a new tab) and keep the licence evidence with your hiring file.