A comparison between Payrolling and the status of an Independent/Self-Employed
- 11m ago
Payrolling or the status of an Independent/Self-Employed. What is better and why?
When someone chooses to become self-employed, the question of the legal status arises as one has to start invoicing one or more clients. Is it better to become self-employed or to work using a payroll or umbrella company?
In order to choose between payrolling and self-employed status, it is essential to be familiar with the specific characteristics of both statuses. In this article we summarise their main characteristics and provide an advanced comparison table which is also available in .pdf.
1. Independent or self-employed status in Switzerland
In Switzerland a person is obliged to have his status recognised by the cantonal compensation office.
The compensation office checks whether the status of self-employed person can be granted according to the criteria of the Federal Law on Old Age and Survivors’ Insurance (OASI), the directives of the Federal Social Insurance Office (FSIO) and the case law of the Federal Court (FC).
The AHV/IV Information Centre provides a list of compensation offices. In Geneva, for example, the main AHV compensation office is the OCAS. It is this office that can recognise your self-employed status.
The particularities and difficulties are as follows:
- To obtain the status, you have to provide a whole set of documents and prove that you have at least 3 clients
- One of the particularities in Switzerland is that you must have already started your activity
- The process takes several weeks and the status is not necessarily granted
- You cannot be insured for unemployment
- If you are granted the status, you have to contract by yourself:
- An accident insurance covering occupational and non-occupational accidents and occupational diseases
- A loss of earnings insurance which allows you to receive your salary in the event of illness
- A professional liability insurance, which covers material and physical damage caused to third parties in the course of professional activity
- Depending on the activity carried out, some insurance policies are compulsory (civil liability, fire insurance), others optional (legal protection, theft, etc.)
- You can use your 2nd pillar and withdraw it, but you must withdraw it in its entirety. If you are married, your spouse must approve the withdrawal
- You must keep accounts for the annual tax return and are subject to VAT on sales over CHF 100,000
2. Payrolling over an umbrella company in Switzerland
The particularities and advantages are as follows:
- Payrolling involves a three-way contractual relationship:
- You, the Consultant
- Your client company
- The payroll or umbrella company, such as Thalent SA
- 2 contracts are established:
- A permanent employment contract between you, the employee and the payroll company
- A service contract between the client company and the payroll company
The big advantage of Thalent is that you receive a permanent contract, as opposed to other companies that establish payrolling contracts. Contact us to find out more.
- You are fully covered by social security: unemployment, AVS pension, 2nd pillar LPP
- All accident insurance, maternity allowance are included
- You benefit from paid holidays
- You can start your activity directly if you have only one client, for example, once you have signed the 2 contracts mentioned above
- You do not have to worry about administrative tasks such as invoicing, reminders, work permits
- You don’t have to do any accounting
- A company like Thalent will help you to optimise your tax returns
- The payroll company charges you of course a fee for these services
Our opinion and our comparison table
If you don’t know how to go about it and how the independent status works, payrolling is undoubtedly the most effective solution. Moreover, you can start directly and if you work with Thalent without any start-up costs.
In our opinion, it is better to start your activity as an independent, self-employed only once you have the necessary know-how and number of clients, to become so.
The fact that you cannot benefit from unemployment insurance will not change if you are self employed in Switzerland.
Our experience :
At Thalent some of our consultants who started out as payroll Consultants have gone on to become self-employed or have set up a company, only to return later again to payrolling because it was not worth it for them. It all depends on your situation, your needs, the way you work, the type and number of your clients and whether you want to take care of the administration or not.
Now go straight to the:
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