EU/EEA update their Social Security Regulations
It is good to see that the EU – or rather several EU / EEA states rather than all member states – have agreed updated rules for cross-border teleworking arrangements in our post-Covid world.
The updated regulations will apply to 18 EEA member states at present, namely Austria, Belgium, Croatia, Czech Republic, Finland, France, Germany, Liechtenstein, Luxembourg, Malta, Holland, Norway, Poland, Portugal, Slovakia, Spain, Sweden, and Switzerland.
Specifically, the new arrangements will allow cross-border workers to remain covered by the social security regime of their employer, providing that they undertake less than 50% of their duties in their country of residence. In contrast, the regular EU regulations would require the employer to arrange for social security in the country of residence, where a worker spends 25% or more of their time working in their home jurisdiction.
However, as one would expect, the new easement is subject to some specific T&Cs. These include:
- It only applies for cases from 1 July 2023 onwards
- Both states involved will have to have signed up to these new arrangements
- It is only designed to cover arrangements between two countries (i.e., rather than people working in 3 or more member states)
- The framework / easement is specifically designed to cover teleworking / digital working arrangements (so not construction workers, for example)
- It should not apply where someone is simply working at a branch of the employer in the employee’s home country (which could be interesting in practice, given that there are some possibilities of a home office potentially creating a branch for corporate tax purposes)
- As these rules are an easement of the core regulations, A1 Certificates would need to be obtained in all cases (and these shouldn’t really be retrospective, for example), and
- There needs to be some type of formal agreement to the arrangement from both the employer and the employee.
In addition, the easement will only impact employers / employees and will not apply to anyone who is self-employed.
While I would suggest these changes should be welcomed by employers (and employees), as with any changes, they also create challenges and obligations for the employer. It is therefore important that employers know which employees will be impacted by these changes with clear arrangements in place for considering the social security options which apply for those individuals and the relevant costs of employer or home country social security, for example. Otherwise, it is quite possible for employers to be caught out and potentially face the worst of both worlds – e.g., higher social security costs and / or the risk of compliance failures and the costs that these bring.
Would you like to know more?
If you would like to discuss any of the above in more detail, please get in touch with your usual Blick Rothenberg contact, or Robert Salter using the form below.