A Swiss court has ruled that a company must cover a portion of its remote worker’s rent. What are the implications?

A year ago in Switzerland, a Federal Supreme Court ruling about whether companies should help pay remote workers’ rent passed largely unnoticed. 

In its decision on 23 April 2019, the nation’s highest court ruled that if an employee is required to work from home, the company must pay a share of the rent. In the case, the part-time employee didn’t have to rent a bigger apartment or incur other additional costs by working remotely, but was entitled to a monthly rent reimbursement of CHF150 ($157, £127) because the company was able to save on office rent. 

“The employer has to compensate for the business use of your apartment, if you don’t have a suitable workplace,” explains Martin Müller, a partner and head of employment at Pestalozzi law firm in Switzerland. He compares it to companies reimbursing employees who use their personal car for business purposes. “The employee pays the car insurance, etc., but the law says the employer has to take over a share.”   

Although the decision mostly flew under the radar, it’s found renewed relevance in light of Covid-19. With much of Switzerland’s labour force working from home during the pandemic, the ruling has sparked considerable debate. Does it mean that every employee now working from their kitchen table due to Covid-19 should expect to receive a subsidy? 

‘Proportional to salary’ 

Not exactly, says Müller. The ruling does not automatically entitle everyone who works from home to compensation, he explains. A deciding factor is whether an employee has to work remotely or chooses to do so; if you could also work from the office then your rent would not be reimbursed.

Zurich office rents per employee can amount to between $3,148 - $5,247 annually, one business body suggests

Zurich office rents per employee can amount to between $3,148 - $5,247 annually, one business body suggests

In Zürich, a company can expect to pay between CHF3,000 and CHF5,000 ($3,148 - $5,247; £2,553 - £4,255 ) in office rent per employee per year, the Zürich branch of the Swiss Tenants Association estimates. But Müller says it is not the cost of office space that decides the amount of compensation for the home-working employee, but rather their salary. He’s drawn up contracts containing rent reimbursements in the past (including before the ruling), often for foreign companies who hire employees in Switzerland but don’t have an office there. 

“It needs to be somewhat proportional to the salary or you run the risk of the tax authorities requalifying the compensation as income,” he says. “For a full-time employee, that usually lies between CHF250 and CHF500.”

The general consensus in the legal community is that the ruling does not apply to the current unique situation

Although many Swiss workers had no choice but to set up a home office when the nation went into lockdown, Müller says the general consensus in the legal community is that the ruling does not apply to the current unique situation. “In the case of Covid-19, the employers kept their offices and their employee’s workplace,” he says. “The employer didn’t save money by not providing an office.” It was also in people’s own interests in terms of safety to work remotely, he adds. 

Possible downsides 

Fredy Greuter, spokesperson for the Swiss Employers Confederation, says that although media reports about the ruling initially made companies concerned about its immediate implications, that worry has subsided. But he adds many companies are exploring the concept of rent compensation as part of defining what regular working from home might look like after Covid-19. 

He points out that rent compensation could come with a downside; it may not always be financially beneficial for the employee. “It could mean that other standard allowances, such as for food or commuting, fall away,” he says. Permanent home work, even with a partial rental payment, could also potentially mean less money if salaries pegged to living in expensive cities fall when remote workers are based in areas with lower living costs, as Facebook CEO Mark Zuckerberg has suggested in the US.

A significant proportion of Switzerland's labour force has worked from home during Covid-19

A significant proportion of Switzerland's labour force has worked from home during Covid-19

And while Greuter expects home working to become more prevalent, he doesn't think companies will be rushing to scale down office facilities in the near future. A transition could come when companies next relocate or renovate their spaces, he thinks, but for now “employers are figuring out how to safely bring people back to the office”. 

Choosing your home 

Yet others believe that rent reimbursements are likely to become more common because of the changes caused by Covid-19.“Many employers saw that the home office works well and that not all employees always have to be present,” says Thomas Geiser, a law professor at the University of St Gallen. Although it is too soon to see any impact on the real estate market, he believes that a shift to remote work could well affect how people choose their accommodation. 

Some of these signs are already there. Digital manager Céline Zemp, 24, took the increased likelihood of working from home into consideration when selecting a flat to share with her sister from July onward. The pair had planned on moving into a two-bedroom apartment close to Zürich, but ended up signing a lease on one with an extra bedroom which they intend to use as a home office. Instead of upping their budget, they compromised on location. “Because of the additional room, we extended our radius from a 10-minute to a 20-minute commute,” says Zemp. 

While Zemp’s company has offices and she isn’t expecting them to contribute to her rent, the fact that she’s factoring future home working into her choice of apartment is significant. And, as companies assess their post-coronavirus futures armed with new knowledge about what’s possible in terms of remote working, the Supreme Court’s ruling will likely play a role in their planning. 

Geiser predicts that it will become the norm for employers to cover a portion of their remote workers’ rent. “I assume it will become very widespread, especially as the case received so much attention in the press.”