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Brexit Briefing: Cross Border Employees and Social Security Contributions

  • United Kingdom
  • Brexit
  • Employment law
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1. Brexit Implications for Social Security Contributions

1.1 If the UK leaves the EU there may be social security implications for UK employers who have employees working in the EU, EEA or Switzerland. If there is a no deal Brexit then action will need to be taken swiftly by UK employers to ensure compliance with the social security laws in the countries where their employees work. If we leave with a deal then there will be a transitional period following which action may be required depending on the outcome of negotiations with the EU and its various member states during the transitional period.

2. The Existing Provisions

2.1 Currently the EU Regulation on the coordination of social security systems (Regulation (EC) 883/2004) (the “2004 Regulations”) is directly applicable in the UK. The basic principle under the 2004 Regulations is that employees and their employers only need to pay social security in the country where the employee is working. However, there are two main exceptions:

2.1.1 short term assignments intended to last less than 24 months; and

2.1.2 where the employee works in two or more member states.

Where the exceptions are available the employee and employer will continue to pay social security in their home state and will not be required to pay social security in the state in which they are actually working. Member states also have the power to agree further exceptions to the basic principle where they consider it to be in the best interests of the employee.

2.2 Where an exception is available HMRC will issue a Portable A1 Certificate which can be presented to the relevant authority in the state where the employee is working to prevent any liability for social security in that state arising.

3. The Situation After Brexit

3.1 In the event that the UK leaves the EU with a deal then pursuant to the Withdrawal Agreement the 2004 Regulations will continue to apply for the transitional period set out in the Withdrawal Agreement, which is the period commencing on the date of exit and ending on 31 December 2020 (“Transitional Period”).

3.2 During the Transitional Period UK employees and employers will continue to pay social security as normal. Existing A1 Certificates will remain valid and new certificates can be applied for. HMRC will be issuing a new form for this purpose but advise that the old forms will still be accepted.

3.3 At the end of the Transitional Period the action that employees and employers will need to take will depend on the outcome of negotiations between the UK and the EU and its member states as to the social security treatment of cross-border workers. It will be a case of ‘watch this space’ to see what happens. It is hoped that the UK Government and EU will agree new rules which will preserve the application of the 2004 Regulations following the Transitional Period.

3.4 In the event that the UK leaves the EU without a deal then the 2004 Regulations will cease to apply to UK employees following Brexit day. There will be no Transitional Period. Whilst the UK Government has made arrangements with some EU countries to protect the existing rights of cross-border workers post Brexit they have not yet done so with every EU member state.

3.5 The UK does have a number of historical social security reciprocal agreements with various members of the EU but it is still unclear as to whether these will have legal force when the EU Regulations cease to apply. In many cases they will no longer be adequate as they were adopted in the 1960’s and 70’s and so do not reflect the modern-day workforce and so will need updating.

3.6 New agreements have been entered into with Ireland and Switzerland which will take effect on Brexit day where there is no deal. The new Swiss agreement however is only applicable to existing cross border workers. The old 1968 reciprocal agreement between the UK and Switzerland will apply to employees who are posted after Brexit.

3.7 HMRC has recently issued a press release to clarify that where there is a no-deal Brexit existing A1 Certificates will remain valid in the UK which means that until the certificate expires the employee will need to continue paying UK social security. However, they may cease to be valid in the country in which the employee is working in which case the employee may become liable to pay social security in that country too.

3.8 Come Brexit, some cross-border workers may therefore find themselves in the situation where they are required to pay social security in two different countries at the same time.

4. Practical Steps to Take Now

4.1 Employers should conduct an audit of their cross border workforce to check who holds a valid A1 Certificate and when it expires.

4.2 Where the A1 Certificate goes beyond the exit date employers should make sure that UK social security contributions continue to be paid and get in touch with the relevant member state where the employee is posted and enquire as to the payment of social security contributions in that particular country where there is a no deal Brexit.

4.3 If social security contributions will need to be paid in the country where the employee is posted arrangements will need to be made to ensure that these payments are made. Employers will need to make sure that their employees are made aware, especially if it is their responsibility rather than the employers, to make the payments to the relevant authority.

4.4 Employers will need to budget for any additional liabilities that they may incur.

4.5 For EU employers the current Government advice is that EU, EEA or Swiss citizens working in the UK will not have to pay social security in the UK if they carry out limited work in the UK and meet certain conditions which will be published after Brexit.

4.6 The UK Government is seeking reciprocal arrangements with the various EU member states in relation to social security payments to maintain the existing social security coordination. Employers will need to keep an eye for these and act accordingly.