Social security after EU Exit: A guide to the rules

23 February 2021

One of the most important provisions for employers in the UK’s Trade and Co-operation Agreement with the EU are the post-Brexit social security obligations. Oliver Davis, Grant Thornton, explains everything you need to know about the new Social Security Co-ordination Protocol.

The end of the Brexit transition period on 1 January 2021 changed all aspects of the UK’s relationship with the EU, but understanding the post-Brexit social security agreement and the new obligations for different categories of workers should be a priority for organisations in early 2021.

Nishant Mittal, Senior Vice President and General Manager, Topia, explained why 2021 is the year for organisations responding to Brexit:

“2020 brought a lot of uncertainty and curve-balls not just because of COVID but also the likely fallout of the finalities of Brexit. 2021 is likely to compel organizations into action to deal with the new normal of the post-Brexit, post-COVID remote working talent footprint, combined with higher audit rates as governments everywhere try and plug massive fiscal deficits”.

We explain below why employers will have a lot to interpret and understand in the context of their global mobility to ensure they remain compliant and the correct system covers their employees.

The Social Security Co-ordination Protocol

The Social Security Co-ordination Protocol protects an individual’s access to healthcare when working outside their home country between the EU and the UK. It follows the previous principle that social security should only be payable in one country at a time, and both employer and employee social security will be due.

These rules will apply to all new assignments, or for employees starting work in multiple locations which include the UK and at least one EU country from 1 January 2021. Importantly, any arrangements that began before 31 December 2020 will continue to be governed by the old EU social security regulations under the terms of the Brexit Withdrawal Agreement. This grandfathering will last for as long as the arrangement continues unchanged, but the definition of a change is broadly written, so it is a good idea to seek advice.

Employers will therefore need to understand two sets of rules, as well as the grandfathering provisions, and ensure that they fulfil their social security obligations in the relevant country.

The basic principle of the new rules is that social security obligations will normally be due in the country where the work is being carried out, but there are two main exceptions: for ‘multi-state workers’ and ‘detached workers’.

Social security after Brexit: exceptions to the rules

Social security obligations for detached workers

‘Detached workers’ are employees sent to work overseas in a single location for a temporary period.

Every EU country can opt in or out of the exception for detached workers, but all EU countries have now indicated that they will initially agree to apply it. Although there are some significant differences from the old EU regulations, this is still a positive move which provides some element of certainty and consistency for at least an initial period. Employees on assignment between the EU and the UK can remain in their home country’s social security for assignments of up to 24 months. In these circumstances, a Certificate of Coverage should be applied for in the home country before the start of the assignment.

It is important to note that, unlike the old EU regulations, there is no provision for extending a Certificate beyond the 24-month limit.  Therefore, it will be critical to effectively structure and track assignments to manage social security obligations and costs.

On top of this, every EU country can opt out of these rules at any time with just over a month’s notice. If an employee starts an assignment in a country after it has opted out, they will be required to pay social security in that country for the duration of their assignment. This could result in significant additional social security costs for employers and impact employees home country entitlement to state benefits.

Social security obligations for multi-state workers

Multi-state workers are employees working in the UK and at least one EU member state over the course of a year. Unlike the detached worker rules, the UK and all EU member states are automatically covered by the multi-state worker rules, which align to the previous EU Regulations for multi-state workers which are likely familiar.

Post-Brexit social security agreements with Non-EU member states

It should be noted that EEA Countries (Norway, Iceland, Liechtenstein, and Switzerland) outside the EU are not partners in the new social security protocol with the UK. Instead, new rules to coordinate social security obligations after Brexit will be based on the separate bilateral social security agreements between these countries and the UK. Liechtenstein is the only one of these countries that does not have an agreement with the UK meaning that employers will need to follow domestic rules in both locations, which does risk double social security obligations.

Fulfilling social security obligations: actions for employers

Employers should prepare for the impact of these changes to social security obligations on their business and globally mobile employees. Organisations should consider these actions:

  • Confirm accurate visibility and reporting of employees who are currently or potentially working outside of their home location
  • Check your current global mobility policy appropriately accounts for the new rules; e.g. should assignments be limited to 24 months so that employees can remain in home country social security
  • Assess the potential registration and compliance requirements of countries that opt out of the detached worker rules, or any country where an employee is on assignment for more than 24 months
  • Re-assess cost projections for assignments between the UK and the EU where host rather than home country social security is applicable
  • Expect an increase in scenario planning and financial re-forecasting as the regulatory landscape shifts
  • Prepare to update tools and technology as countries opt in or out of the new arrangements
  • Ensure that A1 certificates are in place for assignments that began under the old regulations, and plan for potential changes to arrangements in advance

It should be a top priority for 2021 to understand how the changing rules will impact your globally mobile workforce, especially with the increase in remote working and worker displacement due to the COVID-19 pandemic.

Written by Oliver Davis, Grant Thornton