As part of the EU-UK trade and co-operation agreement, a protocol on social security co-ordination applies from 1 January 2021 to all EU-UK cross border working arrangements that start from this date.
Any UK-EU cross border working arrangements that started before this date are subject to EU social security regulations, with impacted individuals' social security coverage and benefit entitlements protected under the withdrawal agreement.
Summary of the EU-UK social security protocol
The protocol largely replicates the EU social security co-ordination rules that applied to all EU-UK cross border working arrangements up to 31 December 2020.
It applies to all persons and their families who are or have been subject to the legislation of the UK, and/or an EU member state. This includes third-country nationals.
The key principle that workers pay social security contributions in the country they work in remains unless special rules on multistate and detached workers apply. Special rules also apply to flight and cabin crews and seafarers working on shipping vessels (the rules for these individuals are consistent with EU social security regulations).
The working arrangements covered by the agreement include employed and self-employed activities undertaken in the UK or an EU member state.
The protocol determines the country these workers pay social security contributions to, and the social security benefits they and their family receive.
This includes entitlement to healthcare in the country these employees work in, with the caveat that unlike under the old rules it will be necessary to present a document akin to an EHIC or S1 to receive medical treatment in a country the worker is working in (in the UK, global health insurance cards will replace EHIC’s).
It also takes into account that social security contributions made in all member states will be aggregated for the purpose of calculating state pension entitlement. The protocol also provides for an uprating of the UK state pension for UK nationals who retire to another member state.
Multistate workers (employees who work in two or more member states including the UK)
Where an employee undertakes at least 25% of their work in their country of residence, they pay social security contributions to that state. If this test is not met, then generally employees will pay social security contributions to the state their employer is situated.
Like the EU social security co-ordination rules, where an employee is employed to work in one member state (or the UK), and is posted to work in another member state (or the UK) for a period of up to 24 months, the employee will remain socially insured in their home state provided they are not replacing another detached worker.
However, unlike the EU social security co-ordination rules, there are not any provisions that allow social security coverage in the employee’s home state where the employee's posting is longer than 24 months, or their posting is extended beyond 24 months. These employees will be subject to social security contributions in the country they are posted to.
When the draft protocol was published, EU member states were given until 1 February to either opt in or out of the detached worker rules. All EU members states have since indicated that they will apply these rules. Nevertheless, an EU member still has the right to opt out of these rules in the future.
For UK and Irish nationals, when they have a UK/Irish cross border working arrangement, their social security coverage and benefits will be determined by the EU/UK social security protocol and the UK/Ireland social security agreement.
Together these agreements ensure that UK and Irish nationals that have a UK/Irish cross border working arrangement, receive the same social security coverage and benefits that applied pre 1 January 2021.
Norway, Switzerland, Iceland, and Liechtenstein
Unlike the old rules, the protocol does not apply to employees working between the UK, and Norway, Switzerland, Iceland, Liechtenstein.
The UK has separate social security agreements with Norway and Switzerland that cover postings of 3 and 2 years respectively. These agreements do not include explicit provisions for multistate workers, but they do provide for an exception to the general rules in determining which country the worker should pay social security contributions to where it is in the interest of the worker.
HMRC recently indicated in an expatriate forum Q&A that it is in the best interests for these workers to only pay into one country’s social security scheme at a time. Therefore, an application should be made to either the Norwegian, Swiss or UK authorities to confirm this.
Non-UK and non-EEA nationals who are employed and posted between the UK and Iceland for up to one year remain subject to their home social security system, with the scope to extend this by a further year. However, UK and Icelandic nationals involved in a UK/Icelandic working arrangement should pay social security contributions to the state they are working in (either the UK or Iceland).
There is no agreement with Liechtenstein. Hence, for postings between the UK and Liechtenstein, the 'first 52-week' rule will apply.
What are we still waiting for clarification on?
- How the process for obtaining health insurance certificates and certificates of social security coverage will work in practice;
- The outcome of the UK’s negotiations with EFTA countries on a new UK/EFTA social security agreement
- The position for multistate worker arrangements involving work between the UK and Iceland.
- Confirmation from HMRC on the position for remote workers – do detached worker or multi state worker provisions apply?
- Clarity on the social security position for detached workers social security positions where their assignments are extended beyond 24 months - at what point do they become liable to social security contributions in the state they have been posted to?
- after 24 months has elapsed;
- from the point their assignment was extended beyond 24 months;
- from the point it was anticipated their assignment would be extended beyond 24 months; or
- backdated to the start of the assignment?
What action should employers take?
- Adapt policies and processes to account for the new rules
- Obtain certificates of coverage for employees starting new intra EU-UK work arrangements that are covered under the protocol and integrate the new certification process into internal processes.
- Consider limiting intra UK-EU postings to 24 months, and where this is not possible, consider social security equalisation agreements to cover situations and compensation of any loss in social security benefits.
- Alternatively, employers may wish to implement social security planning to post employees to lower-cost social security countries for more than 24 months to reduce employer social security costs.
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