Impact of Brexit on the employment of your employees: social security
Part II: Social Security
As you know, the United Kingdom left the European Union on 31.01.2020 and a transition period applies until 31.12.2020, based on the so-called withdrawal agreement. For more information on the background of Brexit and the withdrawal agreement, we refer to our newsletter about the consequences of Brexit with regard to immigration.
Despite the fact that there is no certainty about the relationship between the UK and the EU yet, you need to prepare yourself as an employer for the impact of Brexit in terms of employment. In this newsletter, we would like to inform you about the consequences of Brexit regarding social security.
This newsletter reflects the state of affairs on 18.12.2020. We will inform you as soon as there is more information to share.
1. Current situation - transition period
In the European Union°, Regulation 883/2004 determines the coordination of social security in cross-border (employment) situations. During the transition period, the principles of this Regulation continue to apply.
In order to be clear and by way of comparison with the situation as from 01.01.2021, we reiterate very briefly the most important principles of the Regulation 883/2004:
- In a cross-border context, an individual falls under the scope of the social security law of one country and social security contributions are only paid in that one country.
The general principle is that an employee is subject to the social security scheme of the country where he works. Exceptions, such as posting and simultaneous employment in multiple countries, are determined in the Regulation.
- Equal treatment: an individual has the same rights and obligations as the citizens of the country in which he is insured.
- Aggregation of periods: previous periods during which a person was socially insured in another country, are taken into account to determine his social security rights if necessary (important for example for pensions).
- “Exportability”: if an individual is entitled to a certain benefit in one country, he should as a rule receive this also/continue to receive this if he lives in another country.
A practical example of these principles is that a UK national working in Belgium, was able to claim medical care in Belgium during the transition period (based on an S1-form/EHIC card).
2. As from 01.01.2021: Regulation 883/2004 no longer applicable in EU-UK cross-border context
As no deal has been concluded yet about the principles of social security in a cross-border EU-UK context, the above advantages of Reg 883/2004 no longer apply as from 01.01.2021.
Existing rights continue – ‘grandfather rights’
One important exception to this are the so-called ‘grandfather rights’. After all, the withdrawal agreement foresees that the social security rights determined under the Reg 883/2004, continue to apply to individuals who are in a particular EU-UK cross-border situation before or no later than on 31.12.2020 (‘existing situation’), and this for as long as they remain in that situation uninterruptedly.
Example: a Belgian employee resides in Belgium, works 75% in Belgium and 25% in the United Kingdom for one Belgian employer. He is subject to Belgian social security. His employer has applied for an A1-form with the Belgian NSSO (valid until 28.02.2021).
As from 01.01.2021, the employee will maintain his rights and remain subject to Belgian social security based on the withdrawal agreement.
In order to continue an existing EU-UK cross-border situation, it is highly recommended that this situation is also formally validated. In case of a simultaneous employment or posting, this means that it is best to formalise this situation before 31.12.2020 by applying for an A1-form.
New/changed situations as from 01.01.2021
If an individual finds himself in a new EU-UK cross-border situation as from 01.01.2021, the Reg 883/2004 does not apply under any circumstances. The EU considers UK citizens as third country nationals. In the absence of a bilateral social security treaty between the UK and Belgium (or with the EU as a whole), local social security law will determine which social security system applies.
The Belgian Social Security Act provides in particular that Belgian social security applies to all employees who are employed in Belgium by an employer established in Belgium or attached to a Belgian seat of business.
Concerning the posting of employees, the Belgian NSSO has clarified the following:
- If a UK employee is temporarily posted to Belgium by his UK employer, he will not be subject to Belgian social security. The Belgian NSSO can issue a so-called ‘article 3 declaration’ confirming this exemption. The employee may remain subject to UK social security for 12 months, provided that a number of UK conditions are met.
- If a Belgian employee is temporarily posted to the UK, he can remain subject to Belgian social security for a period of maximum 6 months, extendable with 6 months (= maximum 12 months in total). The NSSO can also issue a document proving this. An alternative solution is to insure the employee in the Overseas Social Security system.
The employee may be exempt from UK social security for maximum 12 months, provided that certain conditions are met.
If an employee works simultaneously in the UK and Belgium, this may mean that the employee is subject to both Belgian and UK social security law. For one employment situation, two social security systems are potentially applicable. Such situations must be examined on a case-by-case basis.
In each of the above situations, it is strongly recommended to take out an additional insurance for medical expenses abroad.
POINTS OF ATTENTION
! Map which of your employees are currently in a EU-UK cross-border context. If necessary, apply for an A1-form in order to formalise their situation.
! If you employ persons as from 01.01.2021 in an EU-UK cross-border context, make sure you check which social security system applies and which formalities you will have to comply with.
°In the framework of this newsletter, we mean: European Economic Area + Switzerland