The new Regulation (EC) N° 883/2004 of the European Parliament and the Council of 29 April 2004 on the coordination of social security schemes (hereafter ‘Regulation 883/2004’) is expected to be applied on 1 March 2010. This may have a significant impact on the social security situation of your mobile employees.
Regulation (EC) N° 883/2004
Regulation 883/2004 and its implementing regulation (to be published in September 2009) will be replacing Regulation (EC) N° 1408/71 (hereafter: ‘Regulation 1408/71’) as of 1 May 2010.
As a result, the EU regime for the coordination of social security schemes will be affected. Some of the major changes are briefly outlined below.
Major changes
- Assignments
Currently, i.e. under Regulation 1408/71, the period during which an employee can remain eligible for the social security scheme of his/her country of residence while he/she is on assignment abroad, based on the general assignment article, is equal to 12 months. Under the new regulation this period has been extended to 24 months. This means that the application for a 24 month assignment will no longer require the intervention from the social security authorities of the host country.
The possibility to apply for a longer period (based on article 17 - generally up to 5 years – for which intervention from the authorities of the host country is required) will however remain in place. Also, the main conditions for assignment remain unchanged.
- Simultaneous employment
Under Regulation 1408/71, in the case of simultaneous employment in several states for one and the same employer, a person is subject to the social security scheme of his/her country of residence if he/she pursues part of his/her activities in the country of residence (in many countries 1 day per month on average is sufficient in this respect). Under Regulation 883/2004, an employee will only be subject to the social security scheme of his/her country of residence, in a similar situation, given that he/she performs a substantial part of his/her activities in the country of residence. ‘Substantial' activities are defined as 25% or more of the working time, remuneration or turnover. This definition could change the social security situation for a number of mobile employees who are working in several countries and who are currently subject to the social security scheme of their country of residence.
In addition, under the new regime, the so-called ‘Annex VII situations’, whereby a person may exceptionally be subject to two different social security schemes, has been abolished. In the future, a person, who works as an employee as well as a self-employed person in several countries at the same time, will automatically be subject to the social security scheme for self-employed persons of the state which is already competent for the employed activities (with regard to the totality of his activities).
Benefits
Certain changes will occur with regard to the provisions relating to specific branches of social security benefits. For instance, exportation of unemployment benefits will now become possible during a period of 6 months instead of 3 months under Regulation 1408/71.
Transitory rules
During a transitory period (10 years), the provisions of Regulation 1408/71 will continue to apply to existing situations as long as the factual elements of the existing situation have not changed, unless the employee explicitly requests that the new Regulation is applied.
It is important to note that the provisions of Regulation 1408/71 will continue to apply with regard to third country nationals, as the new regulation will only apply to them once the EU Members States have agreed to enlarge the scope of application to that extent. The provisions of Regulation 1408/71 will also continue to apply in relation to Norway, Iceland, Lichtenstein and Switzerland, as agreements with those countries still have to be concluded with regard to the application of Regulation 883/2004 for workers moving within the EEA and Switzerland.
How will this affect your business?
The application of Regulation 883/2004 may require you to revise the social security situation of your mobile employees.
You may be required to adapt expat policies and compliance processes and to restructure employment relationships.
The implementation of Regulation 883/2004 could have financial consequences. As one or the other social security regimes may prove to be more advantageous from a cost perspective, the introduction of Regulation 883/2004 could also create certain optimisation opportunities.
Finally, the fact that the employee could explicitly request that the new Regulation is applied will require careful consideration and management.
