When an employee works in another country this can have all sorts of implications on their social security costs and benefits. It is important to first consider what these implications might be. This article gives an overview of what social security actually is, what you can expect when sending an employee to work in another country, as well as what you need to keep in mind so your company and employee are covered well.
What is social security?
Social security is a national or federal program that provides health insurance and income to local residents and employees in cases of, for example, sickness, maternity leave, retirement, disability, unemployment and other situations where support is needed. Coverage, how contributions are determined, and who benefits from the social security system vary from country to country.
What to expect when an employee works in another country?
In general, when an employee works in another country for a certain period, he or she is covered by the social security system of that country, even if he or she is not a local resident. In some cases the employee is able to continue his home country coverage. In special cases the employee can even be covered by both. Therefore it is important to check national legislation of both home and host countries and whether a bilateral treaty or EU regulation for social security is in place. This treaty or EU regulation for social security determines in which country the employee is covered. It is important to make sure that the employee is subject to at least one system and get acquainted with what the specific conditions and contributions are.
How are the different social security systems between countries aligned and regulated?
A lot of countries have bilateral social security treaties to regulate the alignment of social security coverage during temporary employment activities abroad. Employees usually prefer to continue participating in their home country’s social security system, as they are familiar with the system, and build up rights in a familiar and continuous way while preventing entitlement gaps.
Treaties between countries, and European legislation for EU Member states, have clear rules to coordinate social security in cases of cross border employment. Under these reaties and EU legislation it is determined that an employee is covered by the legislation of one country at a time. This means contributions are due in only one country. It is determined which country’s legislation applies to the employee and this allocation can be mandatory. Where you have the possibility to evoke a bilateral treaty, or not, under the EU legislation it is in principle not possible to choose one system over the other. However, choices in employment set up, can affect in which country the employee will be covered for social security.
Additionally, some countries offer a voluntary continuation of (part of) their social security program in case the employee is not covered under the home country system during a period abroad. Depending on the country and local legislation for voluntary insurances, strict rules may determine when an employee is eligible to apply for voluntary insurance(s). Please note that voluntary coverage in the home country social security program will usually not give an exemption in the host country. It will provide the employee’s level of coverage in the home country to continue and avoid gaps.
What are the most important things to keep in mind?
Social security legislation can be very complex. A few important things to keep in mind when sending an employee abroad are for example
- What are the entitlements after the end of the cross-border employment activities? For example, there may be a gap in the home country’s retirement benefits, or additional retirement entitlements may possibly be derived from the host country’s social security program.
- What are the consequences for the employee’s family members? In case of cross border employment, family members do not always have the same social security position as the employee.
- What needs to be arranged? Depending on international legislation, a Certificate of Coverage or an A1-cerficate may need to be applied for in the home country. Other registrations and notifications might also be required. Examples are the registration in the host country to be able to pay the employee’s and/or employers contributions and applications for a European Health Insurance Card (EHIC) and S1-certificate. In addition to the application, extensions and/or cancellations need to be monitored.
- Are there any unforeseen costs? Payment or reimbursement of employee social security contributions by the employer may affect the tax liability.
It is advisable to give social security coverage the attention it requires. When in doubt, make sure to get professional assistance!