Flexible working time models have become increasingly popular in recent years – remote work and workation are on the rise. However, when it comes to long-term cross-border activities, special considerations must be made regarding social security law. The temporary special regulations implemented during the Covid-19 pandemic expired on June 30, 2023. Until now, several bilateral agreements have been concluded with neighboring countries, such as Austria and the Czech Republic.
On July 1, 2023, a multilateral framework agreement came into force based on Regulation (EC) 883/04 on social security, which regulates social security obligations in cross-border teleworking. According to this regulation, cross-border teleworking refers to activities that can be performed independently of location and could be carried out either at the employer’s premises or at their registered office, but are:
- performed in a member state other than the one in which the employer is based, and
- rely on information technology to maintain contact with the employer’s work environment and stakeholders/customers to fulfill tasks assigned by the employer.
EU and EFTA countries have the option to join the framework agreement. So far, Austria, Belgium, Croatia, the Czech Republic, Finland, France, Germany, Liechtenstein, Luxembourg, Malta, the Netherlands, Norway, Poland, Portugal, Slovakia, Spain, Sweden, and Switzerland and have ratified the framework agreement.
Under the general rules of Regulation (EC) No. 883/2004, cross-border workers are subject to the social security legislation of the state where their employer is based, provided they perform less than 25 percent of their professional activities in their country of residence. The new agreement introduces some relaxations. If teleworking in the country of residence exceeds 25 percent but is less than 49.99 percent of working time, an exemption agreement for social security obligations in the state of the employer can be requested.
Such an exemption agreement can be requested since July 1, 2023. However, exceptionally, the application may have retroactive effect if:
- the requested period does not exceed three months before the application is submitted, or
- the application is submitted no later than June 30, 2024, for a period of up to 12 months prior to the date of application.
The exemption agreement is initially valid for three years and can be extended upon renewed application. In Germany, the application must be submitted to the National Association of Statutory Health Insurance Funds – German Liaison Office for Health Insurance Abroad (GKV Spitzenverband – Deutsche Verbindungsstelle Krankenversicherung Ausland – DVKA).
The advantage for employers is that they can avoid the obligation to pay social security for their employees in another member state.
The agreement initially serves as a transitional provision for a period of five years. At the end of this period, it is to be automatically extended once for a further five years. Within this period, an examination is to take place as to whether Regulation (EC) 883/04 will receive its own new regulation on teleworking.
This new agreement is ultimately only relevant to cross-border workers who perform more than 25 (but less than 50) percent of telework in their country of residence. Employees with identical residence and employer locations, who seek social security coverage for workations, home office in holiday homes, or mobile work while traveling within Europe, are not covered by this regulation.
The multilateral framework agreement is a positive step towards gradually standardizing cross-border teleworking issues. However, there is still a lack of a unified European solution, especially in the area of tax handling. It would be desirable to have a comprehensive European solution that also covers other cross-border employment relationships.
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