Remote working has taken off in recent years, partly in response to the Covid pandemic and changes in work culture. This new way of working offers several advantages, both for employers and employees. However, the rise of flexible working also raises new questions and challenges for employers. For example, consider the situation where employees want to work wholly or partly from another country. In what cases can an employee claim this as a right? Which national law then applies to the employment contract? Which national court rules on labour disputes? And what about social security and taxes? In this blog series, we address these issues. In this third part, we discuss the implications in the field of social security.
When working remotely from abroad, European legislation and social security treaties must be taken into account for the payment of social contributions. The rules for levying contributions in situations where an employee performs work in at least two countries can be complicated. For this reason, it is wise to consult the SVB on how to pay social contributions. Three categories of countries can be distinguished:
- Countries where the European Social Security Regulation applies;
- Countries with which the Netherlands has concluded a social security treaty;
- Other countries: there, Dutch national legislation and the law of the country where the employee works determine where the employee is socially insured.
Working remotely from another EU country
Based on EU legislation, the main rule is that the employee is subject to the social security system of the member state where he works. In addition, an employee is fully subject to the social security system of the country of residence if he works at least 25% of the total working time in the country of residence. This can be unfavourable for employers, as the employer has to register in the relevant country of residence and maintain a (shadow) payroll. Moreover, the contributions payable in that other country may be higher.
There is an exception to the above. Indeed, a number of member states – including the Netherlands – have agreed on an arrangement whereby employees can work from home for up to 49% of total working time, without the social security system of the country of residence applying. In return, logically, at least 50% of the total working time must be physically worked in the Member State where the employer is established. For the new rule to apply, both the country of residence and the country of work must have signed the relevant framework agreement. Depending on the signatory member states, a lower percentage than 49% home working may be allowed. Thus, what percentage of total working time can be worked from home varies from one member state to another. To apply this 50% rule, employers or employees must first submit an application in the employer’s country. In the Netherlands, one can apply for a so-called A1 declaration from the SVB for this purpose. Such a declaration is valid for three years and can be extended if necessary. Without an application, the regular 25% rule applies.
All in all, it is therefore important for employers to have a good overview of their employees’ working days and make arrangements accordingly. After all, the moment the employee works 50% or more of the total working time in the Member State of residence, he is compulsorily insured in the country of residence. In addition, it is important that the employer applies for an A1 certificate. This way, additional costs related to social security can be avoided.
In case of temporary work from another EU country – i.e. less than two years – the employee can remain socially insured in the Netherlands. In such a case, the employer can apply for an A1 certificate as proof that the employee remains insured in the Netherlands.
Working remotely from a non-EU country
If the employee works from a non-EU country, he may be required by the national legislation of both countries to be socially insured in both countries. If this is the case, it will be necessary to investigate whether both countries may have concluded a (multi- or bilateral) treaty on this matter to avoid double insurance obligations.
When working remotely from abroad, it is important that employers pay attention to the applicable national social security law. Want to know more about this topic or other questions regarding remote working from abroad? If so, please feel free to contact Caroline Mehlem, lawyer Employment Law, Employee Participation and Pension.