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Europe: Framework Agreement for social security affiliation of cross-border teleworkers – Do not miss the 30 June 2024 deadline!

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In brief

On 1 July 2023, a Framework Agreement entered into force to govern employees’ social security affiliation within the EU, the EEA and Switzerland. Based on this Agreement, cross-border teleworkers who work substantially from their home state can remain affiliated with the social security legislation of the state where their employer is established.

30 June 2024 marks the last day on which a request for maximum retroactive application (i.e., up to 12 months) of the Framework Agreement can be filed. As that deadline is swiftly approaching, this alert sets out the scope of and conditions for application of the Framework Agreement. It also explains whether, and under what circumstances, the maximum retroactive application can be obtained.

For further information on the applicability of this Framework Agreement in your jurisdiction, please refer to the link with the list of Baker McKenzie’s regional subject matter experts at the end / to the right of this alert.

In depth

Main rule

Employees working simultaneously in their state of residence and the state where their employer is established (i.e., their working state) are in principle affiliated with the social security legislation of their working state. They should then pay social security contributions in accordance with the social security scheme of said working state. However, if a substantial part of their work is performed in their home state, the social security legislation of the latter state will normally apply. 

The threshold for a ‘substantial part’ generally implies that the employees should perform at least 25% of their professional activities in the home state. This means that employees performing more than 75% of their activities in the working state should be affiliated with the social security legislation of that state. 

The Framework Agreement’s new rule

As of 1 July 2023, the abovementioned 75%-threshold is lowered to 50% for cross-border telework that falls within the scope of the Framework Agreement. This means that employees can work up to 49.99% in their state of residence, and still be affiliated to the social security legislation of their working state. To fall within scope of the Framework Agreement, the following (cumulative) conditions must be met:

  • The employee must be in a situation of simultaneous employment.
  • The simultaneous employment must be performed in two (and no more than two) different states within the EU, the EEA and Switzerland.
  • Both states must be signatories to the Framework Agreement (click here for a current overview of all signatory states).
  • One of the states must be the state of residence, and the other must be the working state.
  • The work must be performed only in the capacity of employee, as per the applicable legislation of both states involved.
  • The main part of the work (i.e. 50% or more) must be performed in the working state.
  • The work performed in the state of residence must be telework (i.e. work that can be performed from the employer’s premises in the working state, but is pursued from the state of residence via IT-infrastructure that enables the employee to remain connected to the employer’s working environment), without pursuing other activities than telework there
  • Both the employer and the employee concerned must agree to a request for application of the Framework Agreement being filed.

The above entails that i.e. the following situations are out of scope: 

  • Cross-border telework that is not structural, such as ‘workcations’
  • Cross-border telework that is not (only) structurally performed in the state of residence, but (also) in the state where the employee has a second dwelling
  • Simultaneous employment that is performed in the state of residence and in the state where the employer has a branch office (but not its registered seat, or place of business)

Procedure

The Framework Agreement does not apply automatically. Even if all conditions are met, a request for its application must still be submitted to the competent authority, or a body designated by that authority in the working state. In principle, the A1-statement that confirms the affiliation to the social security legislation of the working state, should be issued within 48 hours following filing of the request. As a general rule, the Framework Agreement does not cover requests relating to a period prior to the date on which the request was filed. However, a retroactive implementation is possible:

  • As of 1 July 2024, for a maximum period of three months prior to submitting the application request, provided that social security contributions were paid into the social security scheme of the working state during that period.
  • As of 1 July 2023 if (a) social security contributions were paid into the social security scheme of the working state since that date, and (b) the request for application of the Framework Agreement is introduced ultimately on 30 June 2024. 

The A1 issued in furtherance of the Framework Agreement, is valid for a renewable period of 3 years. The above rules apply on the condition that the envisaged situation falls within scope of the Framework Agreement for the duration of the A1 statement.

Key takeaways

Under the Framework Agreement, we recommend that employers with a mobile workforce consider:

  • Analyzing their workforce to identify any workers that may be impacted by the Framework Agreement
  • Assessing the countries involved to ascertain whether they are indeed signatories to the Framework Agreement (click here for a current overview)
  • Determining whether application of the Framework Agreement (i.e. affiliation to the social security legislation of the working state) is in fact desired
  • In such case, submitting a request for application of the Framework Agreement (bearing in mind the deadline of 30 June 2024 for the application of the maximum retroactive period, if this is desired)
  • Reviewing and, where needed, adjusting the company’s home-working and remote-working policies. 

If you have any questions or require further information regarding the impact of the Framework Agreement on your organization, please feel free to reach out to any of our key contacts for your country.

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Author

Don-Tobias Jol is a partner within the Amsterdam Tax practice with over 20 years of experience. He focuses on global compensation and benefits advisory, with particular emphasis on the so-called “three E’s”: executive, equity and expatriate compensation. Don-Tobias is a frequent author and speaker on a variety of international remuneration issues, and served on the Board of Directors of the Global Equity Organization (GEO) from 2018 to 2023. He has been on international assignments to South Africa (in 2005 and 2006) and Saudi Arabia (in 2012 and 2013) to serve clients of his respective employers at the time. Don-Tobias is a member of Baker McKenzie’s Global Employment & Compensation Practice Group, and heads the Firm’s Dutch Compensation & Benefits advisory team.

Author

Agnès Charpenet practices in the Tax Group of Baker McKenzie in Paris since December 1998.

Author

Veerle Lerut is a counsel in Baker McKenzie's Brussels Tax Practice Group. She started her career as a lawyer in 2008, after having obtained her Master in Law and Master in Taxation at KU Leuven.
Since the start of her career, Veerle has been focussing on all matters relating to professional income taxation and social security affiliation for individuals, with a particular focus on equity- based compensation and international employment situations. Her clients include individuals, SMEs, multinationals, university hospitals and educational as well as research institutions. Veerle joined the firm in 2023.

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