"They convert the salaries into euros calculating them with a fantasy exchange rate," Hans Hartmann at Unia, the largest Swiss trade union told The Local on Monday.
The move will affect around half of Farnair's 144 employees with those living in Switzerland retaining the same salaries. Unions have reacted angrily to the move and Hartmann called the practice of differential pay rates illegal, arguing that it violated bilateral agreements with the EU.
He added that while there have been a few cases of companies paying their cross-border workers in euros in response to the recent appreciation of the franc, he denied press reports that it is a "growing problem".
Farnair announced the measures in an October 4th email sent by chief executive, Guy Girard.
The airline, based in Allschwill in northern Switzerland, justified targeting workers living in France and Germany by arguing that cross-border commuters possess greater purchasing power than their co-workers living in Switzerland.
To support its arguments, Farnair cited a study conducted by the UBS bank entitled "Wealth management research, prices and earnings". First published in 2009 and updated in August 2011, the report says living expenses in Switzerland are currently 30 percent higher than in neighbouring European countries.
But trade unions and employment experts said Farnair’s decision to cut the salaries of cross-border workers was discriminatory and against the law.
“This is illegal by all means because it is discriminating,” Thomas Geiser, professor of labour law at Sankt Gallen University, told The Local, explaining that "bilateral agreements with the European Union do not allow Swiss companies to pay European workers less than Swiss workers.”
This view is supported by René Zurin, head of the VOPD union's civil aviation sector. “What counts is the place of work, not where people live,” he said.
Francisca van der Meer, head of Shared Services at Farnair Europe, however disagreed that the firm had done anything wrong.
“We did not want to cut everyone’s salary by 10 percent without looking into their buying power, because that would be unfair,” she told The Local.
To have done so would have been "discriminatory to our Swiss people or the people living in Switzerland, because they did not get a raise in their buying power of 20 percent [like the ones residing in other European countries],” she said.
One of the company workers affected by the new wage conditions, who asked to remain anonymous, however called the decision “unfair” and “ridiculous” and argued that some of her colleagues living in Switzerland "can, and actually do, buy in Germany or France, therefore also enjoying an increase in their buying power".
"People should not be penalised for where they choose to live,” she told The Local.
“Why don't employers think of paying them less in this case? It is absolutely the same thing, I don’t see a difference."
“I think this is xenophobia, and you have a lot of that in Switzerland,” he said.
Three months after the company’s notice, cross-border employees are set to see their salaries cut by 10 percent and converted into euro using a fixed exchange rate of 1.21 francs per euro.
“It is either this, or we have to leave Switzerland and then everybody loses his or her job,” warned van der Meer, who said that 99 percent of the company’s income is in euros whereas 95 percent of outgoings are in francs.
The letter states that "Farnair assumes full currency risk" so "employees receiving their wages in euro do not have to fear any currency-related loss of buying power in the future should the position of the Swiss franc weaken.”
Those not willing to sign up to the new conditions will lose their jobs.
While experts concur that cutting the salary of only part of the workforce based on their place of residence is illegal, there is no such clear agreement when it comes to paying in euros instead of Swiss francs.
Geiser said it was legally permissible, but the unions are continuing to fight against a measure being considered by several firms that point to the superior purchasing power of cross-border workers.
Over the summer, Unia handed over a petition to the government asking it to forbid the payment of salaries in euros, having collecting 18,000 signatures in previous weeks.
But on September 16th the Federal Council decided not to ban the practice, although the final word will be reserved for the courts.
“It is just the Council’s opinion, because it is the courts that have to decide the matter,” said Ewald Ackermann, spokesperson for the Federation of Swiss Unions (USS).