Brexit deal from a Global Mobility perspective. The effects on social security coverage.
Right before Christmas eve, the agreement between the European Union and the United Kingdom was published. While the deal does not answer all relevant questions from a global mobility perspective, social security coverage is addressed. It does so in Heading Four of Part Two of the deal and the Protocol on Social Security Coordination. In this contribution, we will outline a number of the most important consequences from a contribution perspective.
This content is especially relevant for UK-residents working in the EU or EU-residents working in the UK, or planning to do so.
Coordination Social Security Contribution for Cross border work
One of the main issues to be addressed with social security is coordination. Having no treaty in place will generally lead to double payment when cross border work is being done. With Brexit, the United Kingdom also stepped out of the EU Regulation (EC) 883/2004, which dealt with such coordination across the EU. The good news is that the agreement recognizes this issue, but the assessment in which State the contributions are due has become more complicated.
The coordination rules of the Protocol to the Brexit agreement
The first general rule, and an important one, is that persons to whom the Protocol applies will be subject to the legislation of one State only. No double contributions should therefore occur.
The coordination in the Protocol rules mostly follow the same principles as EU Regulation (EC) 883/2004, although there are differences.
The main rule
The main rule for employees is that they fall under the social security coverage of the State where the work is being performed. This is similar to the existing rule under the EU Regulation.
The assignment exemption for detached workers
Specific rules apply to detached workers, also is the case in the EU Regulation. The transitional measure in relation to the pre-deal situation concerns the following. A continuation of the contributions in the state where the activities are normally carried out will take place when an
- employee is assigned by his or her employer for a period of up to 24 months; and
- the employee is not sent to replace another detached worker.
The latter approach (24 months and not replacing another worker) is similar to EU Regulation (EC) 883/2004.
The Protocol to the Brexit agreement refers to EU-Member States of Category A, B and C, as indicated on Annex SSC-8. The agreement published on 24 December still contains a blank Annex SSC-8. The notification which category applies to the EU-Member States will need to be done by the date of entry into force of the agreement.
The categorization is as follows:
- Member States A wish to derogate from the main rule;
- Member States B do not wish to derogate from the main rule;
- Member States C have not indicated either preference.
The full assignment exemption only applies to Member States mentioned in Category A of Annex SSC-8, although several transitional measures also apply to Category C.
For Member States in Category C, the assignment exemption shall apply as though that Member State was listed in Category A for one month after the date of entry into force of the Agreement. This means that after this month the main rule applies again.
Also where a person is in an assignment situation involving a Category C Member State before the publication of the updated Annex SSC-8, the assignment exemption shall continue to apply to that person for the duration of their activities.
Activities in two or more States
The Protocol to the Brexit agreement contains a tie breaker when activities are pursued in two or more States. Article SSC.12 of the Protocol bears more than a striking resemblance to Article 13 of Regulation (EC) 883/2004.
The most well-known and often most relevant tie breaker is kept intact: a person who normally pursues an activity as an employed person in one or more EU Member States as well as the United Kingdom shall be subject to the legislation of the State of residence if that person pursues a substantial part of their activity in that State. Similar to Regulation (EC) 987/2009, a share of less than 25% shall be an indicator that a substantial part of the activities is not being pursued in the relevant State.
Different rules for different EU Member States
It is, without any doubt, a good thing that the Brexit agreement contains a protocol on the coordination of social security between the European Union and the United Kingdom. Unsurprisingly, a lot of inspiration has been drawn from EU Regulation (EC) 883/2004. It is to be noted, however, that the protocol contains several details that need to be assessed, as different rules apply to different (categories of) Member States, especially for assignments.
For further advice on social security aspects before and after the agreement between the European Union and the United Kingdom, please get in touch with the Global Mobility specialists at Crowe Peak or your local Crowe global mobility expert.