During the transition period
Prior to leaving the Single Market on 31 December 2020, the UK followed the EU rules on social security coordination in relation to workers moving between the EU, Iceland, Liechtenstein, Norway and Switzerland (“the member states”). Those rules mean that social security contributions are payable in one member state only, which is normally the country in which the work is carried out.
The EU rules are of course more complex and cover various situations including cross-border workers (i.e. those who live in one member state and work in another), employees working simultaneously in more than one member state and workers posted to another member state temporarily.
One of the benefits of the social security coordination relates to employees who are sent to work temporarily in another member state who may be eligible to continue to pay home social security contributions if the period of secondment does not exceed 24 months. A UK worker could therefore continue to pay UK national insurance contributions when carrying out work in another member state, which could produce a significant cost saving for both the employer and the employee depending on the country the worker was posted.
In the absence of a reciprocal agreement being reached, there were concerns that the same rules would not apply to posted workers from 1 January 2021, and that social security contributions would be payable in the country where the work is carried out even in the case of temporary secondments. There was also speculation that social security contributions could potentially be payable in two or more jurisdictions at the same time.
From 1 January 2021
On 24 December 2020, the EU and the UK reached a trade and cooperation agreement, which includes a social security coordination protocol that has practical benefits for UK citizens, including reciprocal healthcare cover and uprated state pension.
The protocol also ensures that cross-border workers and their employers continue to only be liable to social security contributions in one member state at a time.
In addition, UK workers who are posted temporarily to a member state which has agreed to apply the “detached worker” rules will remain liable to UK national insurance contributions only. Similarly, if a worker is sent to work in the UK temporarily from an EU member state which has agreed to apply to the “detached worker” rules, they will remain liable to social security contributions in their home country.
In order to continue to pay home country social security contributions, an application must be made to the tax authorities in the home country for a certificate of coverage. As the UK has adopted the detached worker rules, UK workers sent to an EU country and Switzerland to work for up to 24 months can apply for a certificate.
The same apples to work of up to 12 months in Iceland and up to 36 months in Norway.
UK workers will qualify for the detached worker rules, broadly, if they started to work in the relevant member state before 1 January 2021 and have been working there since. The rules will also apply to persons with dual nationality, one of which is a member state.
The detached worker rules will also continue to be available if a UK worker is posted temporarily to:
- Iceland; and
- an EU country that has agreed by 1 February 2021 to apply the rules.
So far, Austria, Hungary, Portugal and Sweden have agreed to the detached worker rules. The remaining EU countries are yet to indicate whether or not they will apply the rules.
For those workers that do not qualify for a certificate of coverage, and for those working temporarily in an EU country which has not adopted the detached worker rules, social security contributions will be due in the country in which the work is undertaken.
The next step
For more information on the social security agreement between the UK and the EU, please get in touch with your usual UHY adviser or contact Helen Cowley at email@example.com.