Social Security Arrangements under a ‘No Deal’ Brexit
Under the current Regulations 883/2004, which apply to all EU and EEA members, if certain conditions are met, employees are able to work in another EU/EEA country for up to five years whilst continuing to pay social security in their home country. The Regulations also allow for ‘totalisation’ of benefits, to allow payments made in another European country to be considered when determining if the vesting criteria for receiving certain benefits has been met. If the UK leaves the EU under a ‘No Deal’ Brexit, these Regulations will no longer apply. However, the UK does still have a number of old bi-lateral social security agreements in place with EU/EEA countries, and, as these were never cancelled when the EU/EEA Regulations came in, the terms of these bi-lateral agreements will, once again, come into force in place of the current European Regulations.
The bi-lateral agreements are not currently in place with all EU countries and, in some cases, the current agreements have very restrictive terms and, therefore, would need to be renegotiated in order to provide similar coverage to the current EU Regulations. Negotiation of new agreements or renegotiation of the current restrictive agreements is likely to take some time, so in the interim period, mobile employees could be subject to social security payments in each country that they work in, potentially creating dual liabilities and inconsistent social security contribution records, as totalisation may no longer apply. This could have an adverse effect on entitlement to benefits for those impacted, especially as many countries have a minimum period of contributions before benefits can be accessed, meaning the employee will neither have a continued UK record nor entitlement to similar benefits in the host country.
Employers & Employees
Employers will also be affected as employer contributions could potentially be higher depending on the terms of the bi-lateral agreement in question. However, in some cases this could actually reduce the social security due if the agreement forces the employer to pay their contributions in the host country and their rates are lower than the UK. If the employer is then required to make social security payments outside the UK, this could trigger payroll reporting requirements that were not previously required, creating compliance issues if this issue is not handled swiftly. Employers may also need to revise their mobility policies to reflect how the new position will affect their mobile employees.
Interestingly, it has recently been announced that the UK and Switzerland have just concluded an agreement on citizens’ rights, entitled “Citizens’ Rights Following the Withdrawal of the United Kingdom from the European Union and the Free Movement of Persons Agreement” and this addresses some of the issues in the event of a No Deal. This agreement aims to protect the social security position for employees already covered by the existing EU Regulations and any existing rights they may have under the Freedom of Movement of Persons Act so Swiss employees already seconded to the UK and vice-versa will be covered by this new citzens’ rights agreement from 30 March 2019, the day after Brexit. However, future social security arrangements between the UK and Switzerland in the event of a No Deal for those employees being sent overseas to work after Brexit, are not yet clear.