Definition: Freelancer
In Switzerland, the term “freelancer” or “freelancing” is not uniformly defined and does not appear in legislation. According to the common translation, “freelancer” means “self-employed professional.”
Freelancers are usually self-employed individuals who perform freelance work. They find their own freelance projects and clients. They manage their own schedules and often work independently from home. Their work may be carried out on a commission basis, under a contract for services, or even as an employee.
Freelancers—or freelancing—are becoming increasingly important and popular in today’s workplace. Hiring a freelancer is particularly well-suited for companies working on IT projects and web-related tasks. This allows companies to access specialists with expertise who may not necessarily want to be permanently employed. They can be brought in on a project-by-project basis as needed.
Freelance projects can be found worldwide—and especially in Switzerland—on freelance platforms or through personal contacts. Portals such as freelancermap.ch offer opportunities to find projects in the IT sector. Companies specifically seek IT specialists (programmers, designers, consultants, developers, etc.). Many see freelancing as an opportunity for self-fulfillment and pursue it alongside a regular job.
Legal Basis / Legal Status of the Freelancer
Since Swiss law does not specifically address the status of freelancers, a freelancer must first consider how to invoice clients in a manner that complies with the law. There are various options available for this. The freelancer must be able to bill for their work or project in a legally compliant manner.
Sole Proprietorship / Self-Employment
A sole proprietorship can be established without start-up capital or significant effort. It is important to register with the AHV compensation fund. For the AHV to approve self-employment status, the freelancer must have at least three clients and must not be financially dependent on any of them. For more information, see our article on “Becoming Self-Employed” and the federal government’s website.
It should be noted that many companies in Switzerland are not fond of—or even completely reject—invoicing from sole proprietorships. This is due to the risk of so-called “bogus self-employment.” For more information on this topic, please see our article on bogus self-employment.
The Problem of Bogus Self-Employment
The issue of false self-employment can be very costly for companies if, when billing a project or contract with a freelancer, the freelancer’s status as a self-employed individual has not been confirmed by the compensation fund. False self-employment can have serious legal and financial consequences for the company.
A situation of bogus self-employment arises when the criteria for self-employment are not (or no longer) met. A good example of this is when a freelancer works exclusively for a single client; this constitutes economic dependence, and the client must pay the freelancer’s social security contributions. The client thus becomes the employer, and the freelancer becomes the employee.
AG/GmbH
Freelancers can also establish an AG or GmbH to issue invoices to their clients. This is a common invoicing practice and is accepted without issue by all companies in Switzerland. To establish one of these legal entities, a minimum of CHF 20,000 (GmbH) in start-up capital is required.
Payroll Provider/Umbrella Company
Anyone who doesn’t want to deal with the hassle and costs of starting a business can also use the services of a so-called payroll provider, such as payroll+ AG, to handle billing for their projects.
The invoice for the freelancer’s work is issued in the payroll provider’s name. This means the client—that is, the invoice recipient—never faces the issue of bogus self-employment. The freelancer receives an employment contract from the payroll provider for each assignment. In addition, the freelancer is automatically covered by insurance for sick pay, accident coverage, and retirement benefits. The payroll provider handles the calculation and payment of social security contributions. The freelancer does not have to worry about anything else and receives a wage statement once a year for tax purposes. Further information
In the spring of 2020 in particular, during the COVID-19 crisis, it became clear just how important it is for freelancers to address the issue of social security.
Unfortunately, the choice of legal structure is still relevant
Be careful when choosing the legal structure that might be right for you. Freelancers want to work on their projects and advance their businesses. During the COVID-19 crisis in April 2020, it became clear that there are significant differences in potential KAE/EO compensation claims regarding social security in the event of a crisis. Once the COVID-19 regulations imposed under emergency law are lifted, business owners in Switzerland, for example, will once again find themselves without entitlement to compensation, particularly in the event of unemployment.
This discrepancy should no longer be an issue in today’s workforce, since everyone who works should have social security coverage; however, it will still be a long time before the necessary legislative changes are enacted.
Benefits of using a payroll service like payroll+
payroll+ AG is a leader in the development of new employment models designed to provide social security for all workers and has over 30 years of experience in the fast-paced world of work.
As specialists in payroll, we see our mission as not only advocating for “social security for all,” but also living by that principle and acting accordingly. Our work and services go far beyond traditional payroll. Among the major benefits is that freelancers do not have to worry about payroll and social insurance. By using our service, they are automatically enrolled in our group insurance plans, which offer better insurance terms than those available through individual policies.