The long-awaited Framework Agreement on Cross-border Telework was recently published. This Framework Agreement allows employers and employees to agree to deviate from the usual social security coordination rules [1] in a cross-border telework set-up. Subject to certain requirements being met, the social security legislation of the state where the employer has its registered seat continues to apply provided the telework in the employee’s state of residence is less than 50% of the working time. Belgium has now confirmed that it will sign this Framework Agreement which will take effect as from when the current transition period comes to an end on 30 June 2023.
Recap: what are the standard rules for determining the applicable social security legislation in a cross-border telework set-up?
Under the normal conflict rules set out in Regulation n° 883/2004, an employee working at least 25% in a residence state [2] while the employer has its registered seat in another state will be subject to the social security legislation of the residence state.
During the pandemic, initiatives were taken to neutralise the impact of the applicable social security legislation following mandatory telework coming within the normal conflict rules. This was to avoid employers and employees suddenly facing a change in the applicable social security legislation. These measures will expire on 30 June 2023.
What are the rules under the framework agreement on cross-border telework?
An employee who carries out cross-border telework can remain subject to the social security legislation of the state where the employer has its registered seat provided the telework in the employee’s state of residence is less than 50% of the working time.
What is considered as telework?
Telework refers to a work activity that is location independent and so can be pursued from anywhere. It is based on information technology enabling an employee to remain connected to the employer’s business working environment to fulfil the employee’s assigned tasks.
The explanatory memorandum further clarifies that the digital connection between the teleworker and the employer must be normally and habitually present but not necessarily during 100% of the working time. Manual work falls outside the scope of the telework definition.
Does the Framework Agreement cover all possible cross-border telework set-ups?
No, the scope of the Framework Agreement is limited to the following situation:
- An employee is employed by one employer (or by several employers provided that they are situated in the same state);
- An employee performs telework in the state of residence;
- The telework is less than 50% of the working time. The remaining portion of the work is spent in the employer’s state where the employer has its registered seat.
Furthermore, the rules only apply if both the employee’s state of residence and the state where the employer has its registered seat do not follow the Framework Agreement. Belgium has confirmed its adherence to the Framework Agreement.
In any event, employers and employees falling outside the scope of the Framework Agreement maintain the option of applying for a “regular Article 16 request” to obtain a derogation from the normal conflict rules. Whether such a request will be accepted will be evaluated case-by-case.
Do the rules automatically apply?
No, the rules only apply if the employer and the employee agree on applying the Framework agreement and file a request.
If no such request is filed, then the normal conflict rules continue to apply.
How should such a request be filed?
The request to opt-in to the Framework Agreement must be filed with the social security administration of the state where the employer has its registered seat. Provided the conditions under the Framework Agreement are met, an A1-form will be delivered with a duration of a maximum of three years, but a time extension is possible. The social security administration of the employee’s state of residence is automatically informed.
Requests must in principle be made for the future and cannot cover past periods, apart from for some exceptions set out in the Framework Agreement.
What does this framework agreement mean for you as an employer?
As the transition period’s expiry is approaching, we recommend conducting a mapping exercise of your international work force and assessing for each of them:
- Whether the Framework Agreement could potentially apply;
- What the applicable social security legislation will be when an opt-in to the Framework Agreement is requested by the employer and the employee;
- What the applicable social security legislation will be if the employer and the employee agree not to apply the Framework Agreement.
Depending on the situation, it could be more beneficial to be subject to the social security legislation in the state where the employer has its registered seat or to the social security legislation of the employee’s state of residence. In this respect, it is worth noting that such an assessment must not be exclusively driven by the employer and employee contribution rates. Other aspects, such as possible reduction schemes, as they exist in Belgium, could affect this exercise as well.
If you have any specific questions or would like to obtain more detailed information about this subject, then the ALTIUS employment team is available to further assist you. We can assist with an overall assessment exercise, the application of A1-forms, the drafting of telework policies, immigration-related matters, etc. Furthermore, we can rely on our close alliance with the tax firm, Tiberghien, for any tax-related matters that could come along with cross-border employment set-ups.
[1] Regulation (EC) n° 883/2004 on the coordination of social security systems.
[2] When reference is made to “state”, the author refers to a “member state”.
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