On the 24th of December 2020 the European Union and the United Kingdom have signed the “Trade and cooperation agreement between the European Union and the United Kingdom of Great Britain and Northern Ireland” regulating the future relationship starting from the 1st of January 2021, with an addendum of the Protocol for the social security coordination.
What does it change for Italian companies which receive detached workers or intend sending them to the UK from a social security point of view?
Starting from the 1st of January 2021, the social security rules of the Eu Regulation no. 883/2004 are entirely replaced by the new Agreement, with the Protocol on Social Security.
If during the transition period (from the 1st of February 2020 up to the 31st of December 2020) all the social security rules of Eu Reg. no. 883/2004 were applicable for the global mobility population from and for the UK, several of these rules remain applicable even with the Social Security Protocol signature between the European and the United Kingdom.
To be more specific, with the new Protocol are still applicable the principle of paying the social security contributions only in one Country, the principle of keeping the payments in the Home Country instead of the Country where the work activity is performed, the totalization principle once on retirement age and the chance to ask for a MultiState Certificate for individuals who perform their work activity in two o more Countries without temporary limitations.
The main points which need our attention from a social security perspective are basically two.
The first one involves the confirmation of the temporary limit of 24 months for the social security coverage in the Home Country, already provided in the European Regulation.
The Protocol – with few modifications compared to the previous Regulation provisions – has confirmed that the UK detached workers in Italy can continue paying their social security contributions only in the United Kingdom during the assignment in Italy for a maximum period of 24 months. The same rule applies to the workers leaving another EU Member State in order to work in the UK.
With an eye to this temporary limitation, the absence of the clause pursuant to art. 16 EU 883/2004 from the Protocol becomes a remarkable second point of attention.
Such clause of the EU Regulation allowed two or more European Countries to agree on specific exceptions to the general social security provisions for some individuals or categories of persons. Its absence in the Protocol with the United Kingdom denies the chance to extend the social security coverage in the Home Country further than the expected 24 months for the assignments started during 2021.
From a social security perspective, Brexit has had a clear impact on the extensions of the work assignments for more than two years, because beyond such period there is no chance of keeping the social security contributions only in the Home Country of the individual. The consequences of such provision are the SSC payment in the Host Country and the obligation for the employer to have a social security representative according to the foreign domestic law, with a needed evaluation on costs and bureaucracy of the operation.
The “detached workers” rule was an optional choice in the Protocol, to whom all the 27 EU Countries have decided to stick starting from the 1st of February 2021.
While for the assignments started since the 1st of January 2021 with the it will be possible to keep paying the social security contributions in the Home Country only for 24 months without any exception by specific agreements among the States, the scenario is different for the assignments already in progress at the 31st of december 2020.
Such assignments, if still in progress during 2021, are expected to be grandfathered and will continue to be covered under the EU coordination rules until their expected natural ending. With regard to this matter, it is useful to underline that the Italian Social Security Authority has changed its mind since the approach of February 2020, assuring that the “grandfather right” of the workers is granted (Inps message no. 4805 of the 22nd of december 2020), as explained in our last December note.
In conclusion, Italian employers with a work population on assignment from and to the United Kingdom should consider from a social security perspective:
- the different management between the workers already detached in the UK at the 31st of december 2020 and the ones detached there starting from the 1st of January 2021: while for the first ones the applicable provisions stay the same of EU Reg. no 883/2004, the applicable provisions for the new assignments are the ones provided by the social security Protocol;
- the planning of the new assignments’ duration in sight of the social security obligations in the United Kingdom after the first 24 months;
- the major flexibility allowed for the assignments in progress at the 31st of december 2020, with the chance to extend the social security coverage according to the previous European provisions;
- a possible restructuring of the Company policies with the inclusion of remote working activities, benefiting from the mechanisms provided for the individuals who perform their work activity in two or more Countries during the year;
- the risk that an A1 certificate could not be obtained in particular cases, like for example in the case of local employment contracts in the Host country while there is suspension of the local contract in the Home Country.
For a deeper discussion, please contact:
PwC TLS Avvocati e Commercialisti