EU-UK social security protocol: Update – detached workers

Fri 19 Feb 2021

On 24 December 2020, a draft protocol on social security co-ordination for EU-UK cross border working arrangements that start from 1 January 2021 was published.

Please click here for our previous blog post.

The draft protocol contained an article covering detached workers, i.e. employees who normally work in one EU member state/the UK who are sent to work in the UK/an EU member state from 1 January 2021.

As a transitional measure these employees and their employers paid social security contributions to the state the employees had been sent to work from, provided that they did not work in the destination country for more than 24 months.

EU states had until 1 February 2021 to decide whether they would apply the detached worker rule, or apply the general rules, i.e. where these employees pay social security contributions to the state they have been sent to work in, regardless of the length of their detachment.

The draft protocol provided EU member states with a deadline of 1 February 2021 to opt out of the detached worker rules with the transitional rules applying until this date.

Last week Mazars received written confirmation from HMRC that all EU member states had notified the EU of their intention to apply the detached worker article.

What does this mean?

Where employees are sent from/to the UK by their employers under a detachment, provided that:-

• It is anticipated that their detachment is for no more than 24 months;
• they have not been sent to replace another detached employee; and
• a certificate is obtained from the country they have been sent from to confirm liability to social security contributions in that state,

the detached worker and their employer will pay social security contributions to the state they have been posted from.

Where the detachment is for more than 24 months, they will pay social security contributions to the state they have been sent to work in.

However, it is unclear from what point employees will become liable to pay social security contributions to the state they have been sent to work in, where their detachment length is extended beyond the initial 24 months.

This could be:-

• after 24 months has elapsed;
• from the point their assignment was extended beyond 24 months;
• from the point it was anticipated their assignment would be extended beyond 24 months; or
• backdated to the start of the assignment

We have asked HMRC for clarification on this point and will update this blog once we receive their response.

What are the issues employers now need to consider in respect of detached workers?

• Adapt policies and processes to account for the new social security rules.
• Obtain certificates of coverage from the state employees have been sent from and track the 24-month coverage period.
• Put in place measures to deal with the payroll withholdings required.
• Consider limiting intra UK-EU postings to 24 months, and where this is not possible, consider social security equalisation agreements to compensate for any loss in social security benefits.
• Alternatively, employers may wish to implement social security planning to post employees to lower-cost social security countries for more than 24 months in order to reduce employer social security costs.     
• Consider pension provision and the use of international pension schemes.
• For UK-EU outbound detachments, check whether the “posted worker rules” apply under that country’s domestic law (in respect of employment law), together with any other non-tax regulatory compliance obligations such as immigration requirements.
• Obtain health insurance certificates, and/or private medical insurance for the detached worker.

For more information, please contact Robin Bailey, Global Mobility Senior Manager, at Robin.Bailey@mazars.co.uk