Social Security Agreement United Kingdom and EU | Deloitte Netherlands

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Social Security Agreement United Kingdom and EU

The United Kingdom and the EU have reached an agreement on their future economic partnership, including a protocol on social security coordination. The highlights of the new rules have been set-out below.

7 January 2021

The United Kingdom and the EU have reached an agreement on their future economic partnership. The 1.250 paged Free Trade Agreement (FTA) includes a section on social security coordination, which broadly replicates the existing rules on social security coordination in EU Regulation 883/2004. As a result, social security payments will still only be due in one state at a time. It will, in general terms, still be possible for mobile workers to remain insured in their home country while working temporarily in the UK (or insured in the UK when working in the EU, as applicable). Benefit coordination provisions (old age pension, sickness benefits, etc.) are all provided for in some detail in the FTA, again largely mirroring current arrangements.

When determining which social security legislation is applicable to an employee in relation to the UK, a distinction will always have to be made between employees falling under the scope of the Withdrawal Agreement and employees falling under the scope of the FTA.

Scope of the Withdrawal Agreement

As a brief refresher of our previous news alerts, the Withdrawal Agreement applies to all existing cross border situations (on 31 December 2020) between an EU Member State and the UK as long as the individual remains to be in a cross border situation touching the UK. That means that the EU Regulations remain applicable until that cross-border situation between that EU Member State and the UK comes to an end. Extensions of expiring A1’s are likely to be possible as long as the individual’s situation remains unchanged.

Scope of the social security section in the Free Trade Agreement

Material scope

The material scope is almost identical to the scope of EU Reg. 883/2004, with a slight difference. Family benefits are not in the scope of this agreement. For the Netherlands this means that child benefits (Dutch: ‘AKW’ or ‘Algemene Kinderbijslagwet’) are excluded. Dutch Long Term Care (Dutch: ‘Wlz’ or ‘Wet Langdurige Zorg’) and Health Care (Dutch: ‘Zvw’ or ‘Zorgverzekeringswet’) are included but some limitation to receiving benefits may apply.

Coordination rules for cross-border workers from 1 January 2021

Under the social security section of the FTA, contributions will generally be payable in the country where activities are undertaken, with special provisions for multi-state and detached workers. Like EU Reg. 883/2004 these coordination rules only apply to the employee. Family members are excluded.


Multi-state workers

The rules for multi-state workers remain broadly the same. 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 this respect ‘substantial’ means 25% or more of an employee’s work activity.

Consequently it remains necessary to determine where someone is resident and where they perform substantive work activities. Individuals starting multi-state working after 1 January 2021 can apply for a certificate of coverage.


Detached workers

General

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 also 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 does not exceed 24 months and they are not replacing another detached worker. There is currently no provision that this 24 month period can be extended, in the way that it could be previously. This will lead to host country coverage for assignments exceeding 24 months.


Each EU Member State can choose to opt out

There is one striking difference though in this agreement, since the option of an ‘opt out’ has been given. Each EU Member State must individually agree to apply the detached worker rules at the latest by 1 February 2021. If they don’t, host country coverage will also arise from the first day of assignment. It is not known yet whether the Netherlands will opt-out.


No mutual consent procedure

Unlike EU reg. 883/2004 the FTA does not include an article for mutual consent. Therefore, it is not possible to deviate from the rules. This also means that assignments cannot be extended after 24 months continuing their home country social security coverage.


Certificate of coverage

Given that A1 certificates typically only can be issued by EU Member States and only in relation to work performed in EU Member States, they cannot be issued for cross border moves starting on or after 1 January 2021. Therefore, a certificate most likely similar to certificates of coverage (granted under bilateral agreements) will be issued.

Switzerland/Iceland/Liechtenstein/Norway

The FTA is applicable to the EU, and therefore only to EU Member States. Switzerland and the EEA countries are not (yet) included under this agreement. Either their current existing bilateral social security agreement with the UK or their domestic legislation should apply. None or double social security coverage could arise for mobile workers between these countries and the UK.

Child benefits excluded

As child benefits are excluded from the scope of the FTA, child benefits have to be obtained in either the UK and/or an EU Member State depending on domestic legislation. Even if a certificate of coverage would be granted (for detached workers or multi-state workers) this does not influence the entitlement to child benefit in any country.

Actions to be taken

Now that the details of the agreement are known, employers can consider actions as below:

  • Continue to apply for A1 certificates for already existing situations on 31 December 2020 under the rules of the EU Reg. 883/2004.
  • Consider whether new assignments to or from the UK can be limited to 24 months in first instance, to prevent host country coverage from the first day of assignment.
  • Consider whether new assignments planned between the UK and an EU Member State can start before 1 February 2021 so that the detached workers rule applies and they are not confronted with an opting-out country.
  • Pay attention to new moves from the UK to Switzerland/Iceland/Liechtenstein/Norway and vice versa as the social security section does not apply to these countries.
  • For new moves between the UK and EU Member States it has to be identified based on domestic legislation whether or not there are entitlements to home and/or host country child benefits.


Source: Trade and cooperation agreement between the European union and the European Atomic Energy Community, of the one part, and the United Kingdom of Great Britain and Northern Ireland, of the other part, PbEU 2020, L 444/14

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