Rapid globalization, rising cross-border business operations, diverse workforces and greater enforcement has caused complexities for organizations with regards to adherence to local labor laws. In the event of a possible non-compliance scenario or work permit breach, these laws may not only affect the employers locally or even internationally, but also other stakeholders such as customers, employees as well as management, who are the custodians within an organization.
Do Swiss businesses have checks and balances in place to mitigate labor law breaches?
Recently, there has been a spike in strict enforcement action by Swiss cantonal supervisory authorities with regard to regulations related to employment of foreign nationals in the country. Rising checks on organizations and employees alike shows a demand for more answerability, compliance with laws and quickly tackling instances of employment breaches. Here, the accountability lies surprisingly not just on the ‘illegal’ workers (i.e. without a valid work permit) and human resources (HR) departments that would typically hire them. It also lies on the top management, Board and even middle management, if they were involved in the decision making process that led to the employee working in Switzerland without a valid Swiss work permit. An illegal worker is any person/employee working in Switzerland for more than eight working days within a 12-month period without a valid Swiss work permit. Employees who regularly switch entities within a group from foreign company departments to Switzerland (e.g., employees from Germany working temporarily on a project in Switzerland) need to have a valid Swiss working permit. More than not, when employees from other offices move to Switzerland for a few days, weeks or even months, the HR department is often not involved at all and as the consequence, there is a high likelihood that the Swiss Foreign Nationals Act (AuG) will get violated.
Contrary to popular belief, “illegal” workers are therefore not only from the traditional thought off industries of construction, hospitality or cleaning but can be found in every single sector and type of business.
The Federal Council is promoting greater inter-agency co-operation and collaboration to combat issues around work permit breaches. As a result, many organizations have reportedly come under the scanner of the Swiss authorities and are compelled to enforce laws related to valid employment of foreign nationals in Switzerland. In principle, the responsibility for a work permit breach would typically be on,
- The employer (CEO, Board of Directors)
- Any employee with independent decision-making right in his area of responsibility
- Independent contractual partners in other countries
Steps to safeguard against work permit breaches
The severity and repercussions of non-compliance if these legal provisions are flouted can be substantial. This includes, possibility of administrative sanctions which may range from simple fines to multi-year bans on providing services to criminal sanctions. In extreme cases, the individuals responsible can also be imprisoned.
The onus of dealing with work permit breach or illegal or invalid employment of foreign nationals in Swiss organizations is not just an HR problem but can touch all the stakeholders involved in the organization. This calls for boardroom discussions on such HR breaches and in order to mitigate potential violations, organizations with global operations should conduct appropriate internal risk analyses and take any pre-emptive measures to diminish such threats.
For detailed information, please see EY Switzerland’s Fraud Newsletter.