Diving in Head First Without Using your Head is Unforgivable!
Here is the true account of a 'never to be repeated' situation which dented the pride and profit of a London-based, specialist SME recruitment agency.
The agency’s largest client has primarily operated in the UK with few business interests across the rest of Europe. A few months ago, that client informed the agency of plans to rapidly expand their small operation in Switzerland. This required onboarding many highly skilled contractors over the coming year. Around the same time and by pure coincidence, two smaller UK-based clients of the agency announced an imminent need for ‘temps’ and ‘perms’ in Switzerland.
Naturally wanting to see off competitive pitches, the agency’s sales director assured his clients a full local service within weeks. For his clients’ added comfort, he promised the agency’s Swiss service would mirror its existing service provision in the UK.
Having insufficient knowledge of how things work in Switzerland but driven by the best of intentions, the sales director instinctively rushed into leasing an office in Geneva and setting up a Swiss GmbH (an incorporated limited liability company). Whilst he understood the legal requirement to appoint a Swiss Resident Director to head the Swiss company, he failed to fully investigate the other requirements he would need to fulfil.
Conducting a DIY expansion outside an SME recruitment agency’s home country without engaging specialist knowledge and support is a very high-risk strategy.
Not only was the sales director struggling to find a reliable ‘local’ director, he also discovered the need for mandatory registrations and licences which were not cheap to obtain. Indeed, it would be a long and costly process to create the Swiss company, register it and obtain the necessary permissions.
Unfortunately, he appeared to be stumbling down a long and expensive blind alley, hoping for the best.
As it is impossible to encapsulate relevant copious Swiss laws and business practices into a few paragraphs, I will now highlight some key points subsequently shared with the agency’s directors.
- Application for a SECO Labour Leasing Licence to place contractors can only start when the agency has a permanent establishment (fixed local office) in Switzerland and a trusted, permanent, Swiss Resident Director in place. The Swiss office cannot trade until the Licence has been granted, which could take up to 4 months. The Licence is expensive and comes with onerous responsibilities.
- A significant bond of CHF 100,000 (circa GBP 78,500 or EUR 88,200) has to be lodged with a Swiss Bank which makes an annual charge for holding the bond. The cost of the bond increases according to the payroll liabilities (i.e. volume of business) involved.
- The agency needs Swiss payroll software which can be continually updated and set up to mirror the employment services model.
- It is the appointed Swiss Resident Director who holds the SECO Labour Leasing Licence. Therefore, he or she must be fully trusted and extremely competent because any errors normally attract enormously expensive, statutory penalties.
- The Swiss office has to be manned and in operation. A post box address is not acceptable.
- The business is subject to annual financial audits and regular processing audits by the Swiss authorities.
- The Swiss team must have a working knowledge of Swiss GAVs (Collective Labour Agreements) and how they affect business processes.
- Swiss payroll is highly-complex as are permit permissions.
- The office will need an ongoing, active relationship with a local lawyer to review and approve every contract. Each contract is subject to regular updates thereby ensuring it complies with ever-changing Swiss laws.
- Using a Swiss lawyer does not come cheap. He or she will prove to be one of the most expensive elements of the agency’s ‘investment’, set-up and operating costs in Switzerland.
- Overall, the agency is looking at an investment and running costs reaching many hundreds of thousands of pounds
Having committed to GmbH status, a leased office and a permanent Swiss Resident Director, what is the agency now doing to open up profitable, contactor-placement opportunities in Switzerland?
It was a fairly quick, easy process and relatively cheap for the agency to obtain a SECO Permanent Placement Licence which requires no bond to be lodged. This now grants the agency legal access to Swiss clients. It also allows the agency to advertise local positions on their website, on job boards and elsewhere. Armed only with a GmbH does not grant these rights.
The agency is now running all its permanent placements through the reliable, independent, SECO registered, fully-insured and fully-audited Swiss employment company which we introduced to them. Early 2019, the agency will expand to contractors and interims through the same Swiss employment company.
Instead of keeping everything in-house and meeting factoring costs exceeding 5% on invoices from Swiss clients, the agency is now receiving a fully-comprehensive, employment/payroll service, which includes credit for the payroll provision for just a little bit more. From a cost perspective and risk mitigation, the agency’s decision to switch to our partner in Switzerland was a 'no-brainer’. The agency can now operate on a ‘margin-only’ basis without the burden of financial and legal constraints.
All Swiss clients expect recruiters to work through a partner like ours. This is how many SME recruiters operate in Switzerland. As most Swiss clients are already contracted to our partner, the agency has the ongoing benefit of service continuity as it builds its client database and, perhaps, move their contractors to different assignments in Switzerland.
Everything in Switzerland seems to run on time. Swiss clients expect to pay high commissions for the right candidates and remain loyal to good agency service. In many ways, Switzerland is the perfect launch pad for entrepreneurial TEAM Members wanting to stretch their business beyond the UK.
As a TEAM Member wanting a pathway to business in Switzerland (or anywhere else), you have free access to the TEAM INTERNATIONAL HELPLINE where we can discuss how to release your potential for generating profitable placements overseas. Either email TEAM@itsinternational.ltd.uk or call 020 7477 2660 for a complimentary consultation on how to unlock opportunities you may have always presumed were beyond your reach. In less than 20 minutes we will uncover ways you can open up just one fresh and highly profitable placement overseas. You truly have nothing to lose.
Mike Phillips, Marketing Director
0207 477 2660