Beyond Brexit: Social Security Implications

Upon the UK and EU’s ratification of the Withdrawal Agreement (WA), the UK left the EU with a Deal on 31 January 2020.

The WA introduced a transition period, confirming that there will be no practical changes to the UK and EU’s relationship until 31 December 2020.

But what does WA mean, from a social security perspective, for cross-border workers moving between the UK and the EU?

During the transition period

For the next 11 months, the coordination of social security continues to operate in the same way for workers who find themselves in a cross-border situation between the UK and one or more EU Member States. 

An employee currently on a temporary assignment from the UK to an EU Member State, which began before Brexit, can continue to rely on their existing A1 Certificate to maintain home country social security coverage in the UK.

Additionally, employees who travel for business from the EU to the UK between 1 February 2020 and 31 December 2020, will be able to apply for an A1 Certificate in their EU home country. They will also be able to apply for an extension of their A1 Certificate for up to 24 months from its start date.

Less certain are scenarios where a UK employee has to extend beyond this 24-month period and the extension request requires the agreement of the EU host country where the employee is working. Each EU Member State may take a different approach in this situation.

For an individual starting cross-border work before 31 December 2020, the aggregation of insurance, work or residence periods also continue to operate in its current form. This allows the individual with a cross-border working record to obtain entitlement to cash benefits in their country of residence (either the UK or the EU).

After the transition period

After 31 December 2020, a distinction will have to be made between “new” cross-border situations and “existing” situations.

It will depend on the negotiations during the next 11 months, whether “new” cross-border moves, starting from 1 January 2021, will be ruled by new social security rules between the UK and the EU.

If new social security rules between the UK and the EU as a whole cannot be concluded by 31 December 2020, the impact on cross-border workers will be same as a “No Deal” Brexit scenario.

Alternatively, we could be in a scenario where some individual EU Member States have negotiated separate social security rules with the UK, while others have not. This could give rise to very complex situations for business travellers and multi-state workers with compliance requirements differing from country to country, and a high risk of double contribution costs.

The WA offers some form of protection for “existing” cross-border workers. It states that individuals in existing cross-border scenarios by the end of the transition period shall remain covered by current EU social security rules; as long as their cross-border work situation continues “without interruption.” However, this is not a fully defined term, and so it will have to be seen how the UK and EU Member States will interpret this transition rule.

For example, it’s possible that some Member States will accept that a cross-border worker, who started work before 31 December 2020 and who will continue to work cross-borders beyond this period of time, could even change employers or countries in which they work and still be considered to be working cross-borders “without interruption,” They would then be eligible to apply for an A1 Certificate under the current EU social security rules.

Further clarification on the interpretation of cross-border work “without interruption” is expected from the competent authorities in the coming months. 

With respect to the totalization of insurance, work or residence periods, it is confirmed that periods completed both before and after the end of the transition period shall be considered.

Way forward for the business

Although the transition period under the WA seems to offer companies some extra time to relax, it is important that employers start thinking about effective strategies for post-Brexit management of social security compliance, until 31 December 2020 and beyond. This includes budgeting for potentially higher contribution costs and devising strategies to deal with differing social security rules across the EU Member States.

Fragomen can assist with your preparation by partnering with you to monitor the approach taken by social security authorities and outlining the impact on your business. Our government strategies approach means we can help you through the Brexit transition period both from an immigration and a social security perspective. We can review your current social security compliance processes and help plan how your employees can still benefit from EU social security rules once the transition period ends.

For more information on the above-discussed topic, please contact Wim Cocquyt or Harry Goldstraw or visit our microsite for timely updates.