Currently EU Social Security Coordination rules ensure that, if you are a UK employer, with employees working in the EU, EEA or Switzerland, employees and employers are only subject to the social security regime of a single member state, in order to prevent any double charges on the same income. Regardless of where the employer is based, the contributions should be paid where the work is done. However, for those working outside their home country for temporary periods, or for those working in more than one country at the same time, there are special rules. For example, if you employ workers in more than one EU or EEA country, or Switzerland, at the same time, you and your employee must pay social security in the country in which they live, provided they spend a substantial amount of time there.
If an employee of yours moves to the EU, EEA or Switzerland for short period, they can be classed as a posted worker, provided they meet the certain conditions related to the assignment. In this case neither you or your employee would pay social security contributions in the country where the work is performed.
Posted Worker Rules
Under a posted worker agreement the assignee remains in the home scheme as long as; the assignment does not exceed two years, the employee continues to be employed by their home country employer and does not replace another employee who is returning from a posting. Employees must apply for an A1 certificate from HM Revenue and Customs before the assignment commences. This is issued by the home country authority, as proof of payment of contributions to the home scheme.
Once the employees two year period has finished, it may be possible for the employee to remain within the UK social security system for longer. However, the employee would have to show that they have specialist knowledge or skills or have specific objectives in the host country, which their services are needed for. There also needs to be an agreement from the authorities in both countries.
What are the current rules?
Under European regulations, moves within the European Economic Area (EEA) are covered by a multilateral social security agreement. The EEA consists of EU and the four countries which make up the European Free Trade Area (EFTA): Iceland, Liechtenstein, Norway and Switzerland.
During the current transition period, the EU Social Security Coordination rules, as previously mentioned in this article, have continued to apply. It is understood that UK employers and employees who are currently working under a posted worker arrangement, or enter in to one before 1 January 2020, may continue to rely on the EU rules and A1 forms, even if their arrangement extends beyond 1 January 2020.
However, the UK regulations to formalise this have yet to take effect and if the transition period ends without any further agreement between the UK and EU, the EU social security coordination rules will now longer apply to new cross-border arrangements between UK employers and employees. The social security arrangement will be arranged on a country-by-country basis.
Does the UK have any bilateral agreements with countries in the EU, EEA, or Switzerland?
The UK and Ireland negotiated a revised agreement, which mirrors the existing EU regulations and is expected to be signed into law following Brexit. The UK has also entered into agreements with the European Free Trade Area (EFTA): Iceland, Liechtenstein, Norway and Switzerland to preserve some social security rights.
The UK has legacy agreements with a number of EU countries, such as Germany, France and Spain that pre-date the current EU rules. However in the case of a ‘no-deal’, the UK will most likely be forced to fall back on existing bilateral agreements which may not still be fit for purpose, considering that amount of time that has passed since they were originally signed. It is anticipated that new agreements will need to be negotiated, however global mobility professionals should be aware that the prospect of dual social liabilities, and therefore increased assignment costs, is possible.
Impact on British Contractors
Despite continued uncertainty, the immigration (European Economic Area) Regulations 2016, which currently implement free movement in UK law, will be repealed. Freedom of movement is crucial for contractors and a no-deal Brexit could see British contractors, who were previously able to work freely across Europe, find more difficulty and complication in working, living and receiving payments while working in Europe. At present, employees have the opportunity to remain in their home country social security system while on assignment and be exempt from local social security contributions, but this may not be the case in the future.
How TCP can help
TCP is a European Professional Employer Organisation and compliance specialist with over 25 years’ experience. Our expertise lies in the employment of skilled temporary/contract workers on behalf of clients. TCP operate in 8 countries across Europe, with partners worldwide. Take a look at the countries we operate in here.
We are always aware of changes in legislations in all countries we operate, meaning we can provide the most suitable solutions per contractor. We are closely monitoring the Brexit situation and will be able to help regardless of the outcome of negotiations. Would you like to know more? Get in touch with a member of our sales team on +44 (0) 208 5 800 800 or send us a message via our contact page.