Post-Brexit and Social Security Coordination: Where Are We Now?

The Withdrawal Agreement (WA) by which the UK left the European Union on 31 January 2020 introduced a transition period confirming that, from both an immigration and social security perspective, there will be no real changes for cross-border workers moving between the UK and EU Member States until 31 December 2020.   

In practice, this means that the coordination of social security—for example the issuance of A1 forms and the aggregation of insurance, work or residence periods—continues to operate as it did prior to Brexit for workers who find themselves in a cross-border situation between the UK and one or more EU Member States as per 31 December 2020. 

 

Draft UK/EU Social Security Coordination Agreement

Ahead of the fourth round of negotiations between the UK and the EU on the future Trade Agreement, held between 2 and 5 June 2020, the UK shared draft negotiating documents that now form the basis for the discussions on the future relationship. This included a draft working text for a Social Security Coordination Agreement. 

It seems unlikely that the UK will ask for an extension of the current transition period before the end of June 2020 for mainly political reasons.

The draft Coordination Agreement tends to mirror the provisions on the applicable legislation from the existing EU Coordination Regulations—for example, allowing posted workers to maintain home country social security coverage for up to 24 months (subject to further extension) and setting conflict rules for workers pursuing activities in both the UK and the EU, or in two or more EU Member States (and not the UK). 

Should both parties agree on the proposed draft text in the coming months, cross-border moves between the UK and the EU starting 1 January 2021 would be ruled by the new Social Security Coordination Agreement. This would provide businesses with legal certainty and limit the impact on future moves between the UK and the EU.

However, EU leaders have acknowledged that the discussions are proceeding very slowly and no substantial progress was made during the last round of negotiations. There is now a serious risk that the final text of the agreement will not be ready by the end of October 2020.  If the agreement is not ready at this time, there will not be enough time to enact the legislation before 1 January 2021. 

 

What happens after 31 December 2020?

If the Coordination Agreement is not approved by 31 December 2020, a distinction will have to be made between “ongoing” and “new” cross-border situations from a social security perspective—assuming work and residence conditions are fulfilled.

After 31 December 2020, ongoing cross-border moves between the UK and EU will continue to be ruled by the current EU social security rules and, for example, existing A1 forms will maintain their validity. If an A1 form then needs extension beyond 24 months, it will depend on which approach the involved host country will take.

For new posting situations from 1 January 2021, the UK and EU Member States will determine on the basis of domestic law whether—and under which conditions—a posted worker, for example, will maintain home country coverage, which means that there is a serious risk of double social contribution costs. 

At this stage, it is not likely that old bilateral agreements between UK and some EU Member States will be revived, or that some countries will negotiate separate social security rules with the UK. 

Nevertheless, the risk remains that very complex situations for business travelers and multi-state workers with compliance requirements differing from country to country, and a high risk of double contribution costs, will arise.

With respect to the totalisation of insurance, work or residence periods, it has been confirmed that periods completed both before and after the end of the transition period will be taken into account.

 

The way forward for businesses

Considering that the end of the transition period is only slightly more than six months away, and with the current stage of the negotiations, it is now important that employers begin thinking about effective strategic planning for cross-border moves, multi-State work activities and business travel, and their social security implications beyond 31 December 2020. 

This includes applying for A1 forms where possible before year-end, budgeting for potentially higher contribution costs and devising strategies to deal with differing social security rules across the EU Member States.

If you have questions regarding the matters described in this blog—including the immigration and social security compliance aspects of the Brexit transition period, and how the position taken by social security authorities of the various Member States in absence of a new Coordination Agreement could impact your business—please do not hesitate to contact your Fragomen immigration professional or Wim Cocquyt, at [email protected], or Kristine Zaiceva, at [email protected]. 

This blog was released on June 10, and due to the circumstances, there are frequent changes. To keep current with all the latest updates on global immigration, please visit our COVID-19 microsite and subscribe to our alerts. You may also follow our LinkedIn account.