The UK-EU Trade and Co-operation Agreement has now been published in full containing the details of the Social Security rules to be applied between the EU states and the UK from 1 January 2021.
Cross-border Social Security from 1 January 2021
This agreement includes the Protocol on Social Security Coordination which is to apply to persons and their families who are, or have been, subject to the legislation of the UK and/or one or more of the EU States. Unlike previously, the rules are nationality blind and therefore also apply to non-UK and non-EU nationals in cross-border situations involving both the UK and an EU state.
The agreement largely replicates the current EU social security coordination regulations. Therefore, individuals will be subject to the social security legislation of one country only and the scenario of compulsory payment of social security contributions on earnings in more than one country will not arise. Contributions will generally be payable in the country where activities are undertaken, with special provisions for multi-state and detached workers.
The rules for multi-state workers are to remain broadly the same, retaining the need to determine where someone is habitually resident and where they perform substantive work duties. Multi-state workers will be covered by the legislation of the State of residence if they carry out a substantial part of their activity in that State. If this is not the case, then generally the social security liability will fall under the legislation of the country in which the employer is situated. In the absence of new guidance, we are assuming for the time being that ‘substantial’ means 25% or more of an employee’s work activity.
Therefore, we would expect the vast majority of multi-state worker A1 certificates in existence to continue to be valid and individuals should continue to apply for these as necessary.
The detached worker rules apply to individuals seconded/assigned by an employer to work in the UK or an EU territory. The rules for detached workers are also to remain broadly the same. An employee sent temporarily by their employer to perform work in another state will continue to be subject to the social security legislation of their home country provided that the duration of the posting doesn’t exceed 24 months and they are not replacing another detached worker. It has been confirmed that this 24 month period cannot be extended, in the way that it could be previously. This will have ramifications including for UK employers sending international assignees to higher social security regimes such as Belgium, France and Italy for longer than 2 years.
One big difference in the agreement was the option of an ‘opt out’ of the detached worker rules. Each EU country had to individually agree to apply the detached worker rules by 1 February 2021 in order for them to continue to apply. We can now confirm that all EU states have agreed to apply the detached worker rules. Secondments starting from 1 January 2021 will all therefore be covered by the new Protocol.
Please note that there are special rules for posting between the UK and the EFTA countries (Norway, Switzerland, Iceland and Liechtenstein) which started post 31 December 2020:
- Norway: employees remain within home country legislation for temporary postings of up to 3 years (must apply within 4 months of the start of the posting)
- Switzerland: employees remain within home country legislation for temporary postings of up to 2 years
- Iceland: individuals remain within home country legislation for temporary postings of up to 1 year if you’re employed and a non-UK and non-EEA national (can be extended by a further year with agreement before the end of the first year)
- Liechtenstein: there are no special rules and there is the possibility of double contributions. Postings from the UK will need to continue paying UK National Insurance contributions for the first 52 weeks.
The UK is seeking to conclude a new, comprehensive EEA-EFTA wide agreement on social security coordination, including healthcare with the EEA-EFTA States and new reciprocal agreement with Switzerland as soon as possible in 2021. However until then the rules will apply as above and are based on the existing old bilateral agreements in place. This also has implications for multi-state workers as they are not necessarily accounted for in these old agreements.
Where the new Protocol applies, employers should continue to apply to the home country social security office for A1’s on behalf of the employee going to work in the EU or the UK. This will exempt any host country social security contributions. The process for applying for these in the UK has remained the same albeit HMRC has added some additional questions to the online form.
However, where individuals become liable to the host social security legislation then the employer will be required to register and pay employer social security contributions in that jurisdiction and, potentially, facilitate the withholding of employee social security contributions. Please note that if the employer has no place of business in that jurisdiction then the employee may, by mutual agreement, take on the responsibility for the employer contributions. While relatively common in other European countries, historically, HMRC have not endorsed employees making contributions on their employers’ behalf.
Working abroad since 2020
Workers posted between the UK and the EU States, Norway, Switzerland, Iceland and Liechtenstein prior to 1 January 2021 should be protected by the Withdrawal Agreement or equivalent agreements. The Withdrawal Agreement states that individuals “shall be covered for as long as they continue without interruption to be in one of the situations…involving both a Member State and the United Kingdom”.
What this effectively means is that a posted worker with a valid A1 certificate who remains on their posting will continue to covered by that A1 and the EU social security coordination regulations, i.e. social security will remain payable in the home country and not the host country.
For help and advice on any international social security issue please contact Kate Marking.