UK and EU confirm Brexit Deal for social security

12/01/21

From 1 January 2021, the current EU coordination rules on social security will be replaced by the Trade and Cooperation agreement, which includes a Protocol on Social Security Coordination (the Protocol).

The Protocol ensures that individuals who move between the UK and the EU after 1 January 2021 will continue to have access to reciprocal healthcare cover and that cross-border workers and their employers are only liable to pay social security contributions in one state at a time. Generally, this will be in the country where work is undertaken. However, there are provisions governing multi-state workers and assignees posted for a period up to 24 months. Though, EU Member States have the opportunity to opt-out of these so-called ‘detached worker’ rules. According to the Protocol, it should be possible to obtain a certificate confirming the country of insurance for multi-state workers and detached workers (if applicable).

The Protocol also mandates that employers have the obligation to register with the relevant authorities to remit employee and employer contributions on a monthly basis according to domestic legislation.

The coordination rules from the Protocol are generally the same as the rules as laid down in the European Regulation on social security. There are however some important differences. Please find below more information regarding the coordination rules in the Protocol and the most important points of attention.

Scope

The rules in the Protocol only cover EU member states. The previous EU Social Security Regulations also covered Iceland, Liechtenstein, Norway and Switzerland. However, based on bilateral agreements still a social security statement can be obtained for the following scenarios:

Switzerland: A certificate can be obtained for detached workers for postings up to 24 months.
Norway: A certificate can be obtained for detached workers for postings up to 36 months.
Iceland: A certificate can be obtained for detached workers for postings up to 52 weeks for non-UK and non-EEA nationals. This can be extended by a further 52 weeks, but an agreement from HMRC and the Iceland social security institution is needed prior to the end of the first 52 weeks.

The type of benefits covered under the scope of the Protocol also slightly differs from the scope of the EU Regulation. The Netherlands have for example decided to exclude family benefits, such as child benefits. The Protocol will therefore not in all cases result in the same benefits compared to when the EU Regulation for social security would apply.

There has been uncertainty in the past on whether the Long-term Care Act (Wet langdurige zorg or “Wlz”) was covered under the Protocol. The Dutch tax authorities recently confirmed that the Long-term Care Act (Wet Langdurige Zorg or Wlz) is included under the scope of the Protocol as of 1 January 2021. In concrete terms, this means that if an employee is insured in the Netherlands on the basis of the Protocol, the employee must maintain his/her Dutch health insurance and that all of the Dutch national insurance contributions, Dutch employee insurance contributions and the income-related contribution for health care are due. In the reverse situation, if an employee is not socially insured in the Netherlands on the basis of the Protocol, then the employee is completely excluded from social security contributions in the Netherlands and the employee does not have to take out Dutch health insurance.

Detached workers – EU

The Protocol, which will affect the social security treatment for new assignments starting 1 January 2021 onwards, outlines the following general provisions.

UK workers who are sent by their employer to work temporarily in an EU Member State which has agreed to apply the ‘detached worker’ rules will remain liable to only pay social security contributions in the UK for the period of work in that EU Member State. Similarly, if an EU worker is sent by their employer to work temporarily in the UK from a Member State which has agreed to apply the ‘detached worker’ rules, they will remain liable to only pay contributions in that EU Member State. These rules are aligned to the ‘detached worker’ rules in the EU Regulations covering postings up to 24 months, such that similar conditions must be met.
An EU country must agree to apply the ‘detached worker’ rules by 1 February 2021 in order for them to continue to apply. Currently all 27 Member States have agreed to apply the detached workers rule (no country has ‘opted out’). This means that the detached workers rules apply for all EU-countries.

Multi-state workers

The Protocol also covers multi-state workers. Again, the rules are aligned to the existing rules for multi-state workers in the EU Regulations. However, in contrast to the ‘detached worker’ rules, the EU member states are all automatically covered by the rules and do not have the option to ‘opt out.’ This clause does not cover Iceland, Liechtenstein, Norway and Switzerland. However, such social security position for multi-state workers working in the UK and any of these countries would be determined in accordance with the bilateral social security agreement concluded between the UK and these countries (not applicable for Liechtenstein).

Other considerations

An exceptions clause is notably absent from the Protocol. Under the EU Regulations, this clause could be used to override the other Articles, provided the competent authorities in the home and host locations both agreed to do so. This was most commonly used to enable A1 certificates to be extended beyond 24 months for detached workers. It appears that this will not be an option for new moves commencing from 1 January 2021.

Arrangements that started prior to 31 December 2020 and continued beyond 1 January 2021 are expected to be grandfathered and will continue to be covered under the EU coordination rules.

What does this mean for you?

Employers should be prepared and start thinking about the actions required for new assignments between the UK and the EU starting on or after 1 January 2021:

Consider whether it is appropriate to limit UK assignments to 24 months to enable individuals to remain in home country social security;
Care is required for UK moves to/from Iceland, Liechtenstein, Norway and Switzerland as the Protocol does not cover these moves and the social security position may differ as a result; and

Re-assessment of cost implications for moves starting after 1 January 2021 where a certificate cannot be obtained and communication with the impacted business and employees.

It is important to note that the Protocol applies to assignments starting after 1 January 2021, or existing assignments that have changed sufficiently to no longer be covered under the A1 Certificate. All assignments to and from the UK which started pre-1 January 2021 can still be covered with an A1 Certificate so far as their working pattern does not change.