Social security and remote working: the new «Framework Agreement» explained

Stephen Turley Leader Employment Solutions, PwC Switzerland 09 Aug 2023

In recognition of the increase of remote work since the pandemic, the EU commission and the member states of the EU Reg. 883/2004 have been working on changes to the social security coordination rules for teleworkers to facilitate cross-border teleworking between the member states. The results of this work can be found in the new «Framework Agreement» that comes into force on 1st July 2023. Switzerland will opt-in to the Framework Agreement.

The new «Framework Agreement» for EU / EFTA countries allows cross-border teleworkers who work from home less than 50% of the time to remain in the social security system of the country of their formal employer. This is a new additional option to the current ”25%” rule as stated in Art. 13 para EU Reg. 883/2004 and Art. 14 para 8 EU Reg. 987 /2009. The «Framework Agreement» is a supplementary agreement stemming from the rights as stated under Art. 16 of EU Reg. No 883/2004.

The main points of the Framework Agreement are as follows:

Definition of Teleworking

Teleworking is defined as work-related activities that can be performed by a person either from the employer’s premises or at a different location and is based on information technology to remain connected to the employer’s or business’s working environment as well as stakeholders and clients in order to fulfil the employees’s tasks. Consequently, work that is exclusively manual in nature does not fall under this definition. Nor does it include visits to customers, for example, as these have to take place in person at a specific location.

Although the term «teleworking» was frequently used in the past, the Framework Agreement provides a useful definition of the term as it is to be understood in the application of the Framework Agreement and for EU Reg 883/2004 in general.

Signatory States and Opt-in Clause

In order for the «Framework Agreement» to be applicable, both member states must opt-in to the Framework Agreement. Switzerland Germany, Liechtenstein and Austria as well as many other countries have done so. Notable exception is the United Kingdom, with out countries like Spain and Italy still deliberating. In addition to our neighbouring countries, the following countries have also decided to opt-in: Belgium, Estonia, Finland, Hungary, Ireland, Lithuania, Luxembourg, Malta, the Netherlands, Slovakia, the Czech Republic and Norway.

Please find here the official list of countries that have opted-in (updated weekly).

Eligibility

The Framework Agreement only applies to employees. Also, for the agreement to apply the countries must also be signatories to the EU Regulation (or the EFTA Convention). From a Swiss perspective the employee’s nationality remains important. In addition, the employee must work at least 25% but less than 50% of their total working time in their country of residence and have only one employer (or multiple employers in the same member state), otherwise the normal provisions shall apply.

Application

In order for a person to be covered by the provisions of the «Framework Agreement», the person must meet the conditions as stated in Art. 16 EU Reg. 883/2004. In addition the person must meet the definition of an habitual cross-border teleworker in application of Art. 13 para 1 EU Reg. 883/2004, ie. the person must be an habitual cross-border teleworker with their personal residence in one signatory country of the Framework Agreement and their employer’s place of business or registered office in another signatory country. The Framework Agreement does not apply to persons pursuing other activities than habitual cross-border work between two countries and does not apply to self-employed persons.

Competent Authority

The A1 application must be submitted in the country in which the employer is domiciled resp with the competent authority of the member state of the social security regime the worker or person concerned wishes to be subject. This is different to the ordinary multi-state worker application rules and is explained through the reference to Art. 16 EU Reg. 883/2004.

Entry into Force and Transitional Rules

A1 application under the Framework Agreement can be applied for as per the date the Framework Agreement comes into force (for both signatory states) and should generally be applied for in advance, although it is possible to file an application up to three months later. Due to a transitional arrangement being in place up to and including 30 June 2024, the application can even be submitted retroactively for up to 12 months (up to the date of entry into force of the Framework Agreement), provided that no contributions have yet been paid in the other state.

The corresponding A1 certificate issued on the basis of the application is valid for a maximum of three years.

Conclusion

The new «Framework Agreement» offers greater flexibility for employers who would like to grant their cross-border workers the option to work from home. The Framework Agreement also poses challenges in terms of implementation due to the many different requirements associated with it.

The individual circumstances need to be taken into account – it is still not a «one-size-fits-all» solution. It should also be borne in mind that the Framework Agreement only refers to coordination rules on contributions and does not take other issues into account, such as taxation or benefits.

With our extensive experience in this area we can advise and support you with your specific requirements.

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Stephen Turley

Leader Employment Solutions, PwC Switzerland

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