In principle, social insurance is compulsory in the country in which the activity is carried out (principle of territoriality according to Art. 11 para. 3 lit a Regulation (EC) 883/2004). In the case of cross-border work, social insurance cannot be compulsory in several countries (principle of single insurance). In this case, the competent state for social insurance must be determined. The following basic rules apply:
- Self-employed activity in several states for one (several) employer(s) with substantial activity (>25%) in the Member State of residence -> legal provisions for SI purposes of the Member State of residence apply
- Self-employed activity for an employer without (substantial) activity in the Member State of residence -> legal provisions of the employer’s State are applicable
- Self-employed activity for several employers with registered office in a Member State without substantial activity in the Member State of residence.
- Variant 1: the undertakings have their registered office in only one State -> legislation of the State of residence applies
- Variant 2: two undertakings have their registered office in different States, one of which is the Member State of residence -> legislation of the State in which the undertaking or employer has its registered office outside the Member State of residence applies
- Variant 3: three employers established in three different States, one of which is the Member State of residence -> legislation of the Member State of residence is applicable.
If one wishes to deviate from the above-mentioned basic rules, since 1.7.2023 there is the possibility of continued insurance in the employer’s country under certain conditions, even if one performs a substantial activity in the home office, between 25% and 50% of the working time. This is a multilateral agreement. At the time of writing, the following countries have signed the agreement:
- Czech Republic
The following example shall illustrate the new regulation:
An employee, resident in Germany, concludes an employment contract with an Austrian employer. It is agreed that the employee will work from the German home office on average 2 days per week.
In principle, Germany is therefore responsible for social security, as the employee performs a substantial activity (>25% of the total working time) in the home office. After 30 June 2023, the employee can apply for an exemption from social security responsibility in Austria as long as he works less than 50% from the home office. This requires an application to be submitted. The application for exemption must be submitted individually in the employer’s country (in Austria to the umbrella organisation of social insurance institutions) and is voluntary. If this is not used, the 25% threshold continues to apply.
Requirements for eligibility:
- Application (application for exemption is only possible if both employer state and member state of residence are contracting states)
- Regular, alternating work in the home office state and the employer state
- Using information technology
- Activity is the same as that usually performed in the office
- An agreement is concluded between the employer and the employee (multiple employers in the same state are not harmful).
- Activity of less than 50% in the home office state
The exception request cannot be made in the following cases:
- In the case of self-employment
- In the case of alternating employment in the Member State of residence and in a State in which the employer has an establishment other than that in which the registered office of the company is situated.
- For activities as a sales representative or for activities at the customer’s headquarters
- In the case of regular work not carried out in the employer’s Member State or in the Member State of residence
The application for exemption must in principle be made for the future, but applications can be made 3 months retroactively in the employer’s
country, provided that social security contributions were paid during this period. In the first year (1.7.2023-30.6.2024), a retroactive period of up to 12 months applies. The prerequisite, however, is that both states have already acceded as signatory states at the time the derogation begins.
The exemption can be applied for a maximum of 3 years, an extension is possible.
Shortly before the multilateral agreement was concluded, bilateral agreements came into force with Germany (from 1.1.2023), Slovakia (from 1.6.2023) and the Czech Republic (from 1.4.2023), according to which up to 40% can be worked from the home office, while at the same time social security responsibility remains in the employer state, if this is desired. However, these are now de facto obsolete due to the multilateral agreement, especially since both Austria and the three states mentioned above have signed the multilateral agreement.
Any requests for exemption submitted on the basis of the bilateral agreements will remain valid, even after 30.6.2023.
Employees who would like to continue to work more (up to 50% of the working time) in a foreign home office after the pandemic can do so under certain conditions since 1 July 2023 without a change of social security responsibility to the Member State of residence. However, this must not be a self-employed activity or an external service activity. In this case, the social security responsibility would remain in the employer’s state. This requires an application in the employer state (whose legislation is to continue to be applied).
According to the basic rules of Regulation (EC) 883/2004, there would be a change of social security responsibility if at least 25% of the total activity is carried out in the country of residence.
The derogation enables employees to organise their work more flexibly and prevents unnecessary administrative work for the employer (e.g. registration for social security purposes in the Member State of residence). It is therefore very welcome.
We would be happy to advise you on this topic (email@example.com).
PS: Please note, that we are no native speakers and that our blogposts were translated with the help of google translate.