New EU social security rules: what will employers need to change for cross-border work?
The European Parliament has approved changes to the rules of coordinating social security within the EU for posted workers. The aim of the amendment is to respond to the increase in cross-border mobility, define more clearly mobile workers’ rights to social security benefits, and strengthen cooperation between institutions as well as the fight against fraud and abuse of the system.
Although the new rules will only start to apply after the implementation period elapses, they already send an important signal to employers: posting policies, processes and related internal control mechanisms will need to be reset. One of the most significant changes is the introduction of stricter conditions for keeping posted workers in their home country’s social security system and obtaining the relevant A1 certificate for postings up to 24 months.
First, the minimum period of insurance in the home state before the posting will be extended from the current one month to three months. For HR and global mobility teams this means that postings will need to be planned further in advance.
To meet the conditions for a posting and obtaining the A1 certificate, the amendment introduces a mandatory two-month “cooling-off” period between two consecutive postings. While this mandatory break has so far applied only where an employee was posted repeatedly to the same state with the same employer, under the new rules it will have to be observed between any postings of the employee within EU member states. The aim is to prevent the chaining of short-term postings that make it possible to keep posted workers in their home social security system on a long-term basis.
Employers will therefore have to monitor each employee’s posting history across all states, which will require significantly more robust record-keeping and coordination between HR, project management teams and payroll function.
The amendment also clarifies that the conditions for a posting shall be met only if the replacement of one posted employee by another in the same position does not exceed 24 months in total for both workers.
More precise criteria for determining the relevant state
Another new feature will be the mandatory filing of an application for an A1 certificate before the start of the cross-border work or posting, while the home institution will have to confirm to the employer the receipt of the application. An exemption from this obligation will apply to very specifically defined business trips and to business trips of up to three days within a 30-day period; this exemption will not apply to the construction sector.
In practice, it will therefore be necessary to set up an internal system for monitoring the length and frequency of trips and to distinguish consistently between a short-term business trip and a posting.
The new rules also clarify the criteria for determining the relevant state for individuals working in two or more states. In practice, this may result in the employee belonging to the social security system of a different state than before.
At the same time, greater emphasis will be placed on where the employer has its actual place of business and on more detailed records of where, and to what extent, the employee physically performs work.
The amendment places greater emphasis on protecting the social rights of persons in cross-border situations, including unemployed and economically inactive persons, and newly defines long-term social care benefits. To avoid double coverage or exclusion from the social security, the rules clarify which state will be responsible for the social security of migrating persons.
More inspections expected
In order to better combat fraud, abuse of the rules, “social dumping” and “letterbox company” practices, the amendment clarifies the definition of fraud in the area of social security coordination and strengthens cooperation between member states, including faster electronic exchange of data through the EESSI system.
In practice, a higher level of scrutiny by social security institutions and faster sharing of information between member states can be expected. This increases the risk of sanctions where the declared situation does not correspond to the factual situation.
Although the implementation and application of the amended regulation will only take effect after the two-year transitional period, companies should start preparing now. A timely review of posting policies, the setting of HR processes relating to A1 certificates (in particular timely data gathering and monitoring of work performed abroad, including remote work/home office arrangements), and internal controls can significantly reduce the risk of future disputes, sanctions and costs.
If you are interested, we will be happy to help you review and set up internal processes or assess specific situations.