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Note: Hats off! has just moved to GenevaLunch and if you’ve been one of the regular readers at the Tribune de Geneva, welcome back. Hats off! is a blog I wrote from June 2006 to May 2007 for the Tribune as its only English-language journalist blogger. It is now moving to GenevaLunch to keep the editor’s life (mine) a little simpler, with my blogs in one place, using just one blogging platform (software). It’s written for all of you (us) who wear too many hats in life, or as I wrote last June, "Hats, in the metaphorical sense, are something most people I know have
too many of, and they spend a good deal of their lives trying to
balance them."  Balancing your hats: I take mine off to you for trying.

ON AVS: The first old-new blog post is for anyone who is a little fuzzy on AVS (Swiss social security) rules, which means anyone who employs people or who works but is not a fulltime employee of a company. You don’t have to be a company to be an employer: do you hire someone to clean your house? 

This is a busy time of year for my small company, with contracts to be signed before people disappear on vacation, car insurance and life insurance policies to be reviewed, summer schedules to sort out. The phone call from the AVS office saying I was due for an audit was not welcome news, even less welcome when the man said to set aside at least half a day. In Vaud, companies are audited every 4-5 years, he said. When he arrived he said that companies with at least three employees are more likely to be audited than those with just one or two people.

Happily it took less than two hours because my company’s books are in good shape; for once I am grateful for the money spent on an accountant. I learned a few things that you should know if you own a company or if you work as a consultant or freelance person. Here they are:

1. Every company, NGO and non-profit organization based in Switzerland is liable for AVS payments to Swiss residents who work for them, whether as salaried employees or freelance workers: this money must be deducted from payments.
2. Every person in Switzerland who hires a person resident in Switzerland is liable for AVS, whether the work is mowing the lawn or cleaning the house or putting your books in order.
3. The exception is work done by freelancers who have registered as such with their AVS office or if they live in France with the French social security system. The office will provide an attestation if asked, which is a letter certifying that this person pays his or her own AVS. Freelancers might choose to do this because of tax benefits as a self-employed person or because you can set aside a larger sum of money in a retirement fund that is not taxed until you touch it.
4. When a company uses a freelance person it should ask to see a copy of a recent AVS attestation. If it does not and the freelancer is in fact not registered, the company is liable later for back payments to cover the AVS. Worse, the company may be considered to have been this person’s employer, in which case unemployment insurance and other social charges will be billed, as well as interest for late payments.
5. To avoid these problems and to be sure everyone is clear about who is paying the AVS a letter should state clearly that a) the person undertaking the work is registered with the AVS office as an indépendant and will pay the AVS or b) the company will pay the AVS.
6. The line between freelance and salaried employee is arbitrary. It depends on how long and regularly the person has worked for you and the amount of money paid. The freelancer whose AVS you are not paying today may well be considered your employee by the AVS office in three years, at which point you the employer will have to pay all social charges, possibly for past work as well as future. Review the situation together regularly with anyone who works for you – or anyone you work for – on a recurring basis.
7. AVS and social charges come to about 15% of the salary or fees paid, so anyone who plans not to declare income – we’ll skip over the moral issues here – should keep in mind that they will have to settle for at least 15% less because the employer is running a potentially expensive risk and does not have the option of deducting the charges from the company’s books. Should the person be paid 15% more? Use the same logic you use for taxes: do we all get paid more because we’re expected to pay taxes after income? If you live in a country with a crazy super-high tax rate, employers sometimes try to soften the cushion, but this is not the case in Switzerland.
8. Do the tax people and AVS people talk to each other? Neither will give a clear answer to this, in my experience, but a tax audit or questions raised by irregular situations can lead to an AVS  audit. After my own routine audit this morning I spoke with one experienced manager who outsources work frequently. "We are so careful about everything now, every little bill for SFr50 because it is really a pain if once in a while you don’t bother to deduct it or you don’t ask people for their papers." Or make sure the papers are still valid.

A final thought: women, especially those who clean house, too often balk at AVS deductions, perhaps because they don’t want to declare and therefore pay taxes on the income, but often because they don’t understand that this is their state pension fund. No matter where they come from and what country they plan to retire in, they are usually better off the day they retire if they have a fund of their own and not just their husband’s.

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