Post-Brexit: Social security implications during and after the transition period
Now that the United Kingdom has withdrawn from the European Union, many questions arise in connection with the social security status of employees posted to/from the UK, or employees who regularly work in both the UK and Austria:
- In which state will social security obligations exist?
- Will A1 forms still be issued?
- What will change during and after the transition period and which measures can companies and employees already take?
- Will any entitlements to social security continue to exist and, if yes, in what circumstances?
On 29 January 2020, the Withdrawal Agreement between the United Kingdom and the European Union was ratified, thus making the much-discussed “Brexit deal” a possibility. As of 1 February 2020, the UK is no longer a Member State of the EU. What impact will Brexit have on social security and cross-border employee assignments?
Transition period until 31 December 2020 – nothing changes!
For the next eleven months, nothing will change due to the Withdrawal Agreement and the transition period stipulated within it, which lasts until 31 December 2020. Although the UK is no longer formally an EU Member State, it will be treated as such for the duration of the transition period. Until 31 December 2020, all EU laws and regulations will continue to apply between the EU and the UK. For social security, this includes in particular Regulation (EC) No 883/2004 and Regulation (EC) No 987/2009.
For employees whose cross-border activities in relation to the UK have already begun, or which will begin before 31 December 2020, EU laws and regulations on social security coverage will in any case continue to apply until the end of the transition period. Payments from the social security system in question (e.g. family support, health insurance) will continue to be made in accordance with EU law. Pension insurance periods will continue to be recognised.
All documents issued by the Austrian social insurance providers (especially A1 and S1 forms), as well as the European Health Insurance Card (EHIC), will remain valid. For employee assignments or activities in multiple Member States, which begin before 31 December 2020, applications for A1/S1 forms can continue to be made. According to the Austrian authorities, these will continue to be issued as per the application, without reference to the end of the transition period (i.e. beyond the transition period).
Lack of clarity beyond 1 January 2021 – What happens next?
For specific groups of individuals, the Withdrawal Agreement guarantees the continuation of prior rights. After the transition period expires, EU law will continue to apply to individuals who (“without interruption”) continue to work across borders in relation to the UK and an EU Member State.
For employee assignments of up to two years in duration, which begin on 31 December 2020 at the latest, it will therefore be possible to apply for A1 forms beyond the transition period and assignees may continue to claim social security entitlements in accordance with EU law. Currently, it is impossible to say with any certainty how activities in two or more countries should be treated (cases relating to so-called “multi-state workers”), particularly if a cross-border situation exists “without interruption”.
By the end of the transition period, further agreements between the UK and the EU, or the UK and individual Member States, should in any case have been negotiated. These negotiations will impact on those employees whose assignment or cross-border activities is supposed to begin on or after 1 January 2021.
As things stand, one of the following three scenarios will likely result:
- Agreement. The UK and the EU conclude agreements about whether and to what extent social security provisions will apply in future, particularly regarding the jurisdiction in which claims for social security entitlements may be made, or the extent to which previous insurance periods in another state may be taken into account.
- Extension. The transition period may be extended once until 31 December 2022 at the latest. For an extension to be possible, a decision by mutual consent must be taken before 1 July 2020.
- “No deal” Brexit. If no extension is agreed and no agreement on the future relationship between the UK and the EU is concluded, a “no deal” Brexit could still take place. If EU regulations in the area of social security cease to apply, this could result in issues with double insurance and problems in the recognition of pension insurance periods. If there has been an “interruption” in a given case, previously issued A1 forms would lose their legal basis and therefore their validity.
It remains to be seen how the legal situation after 1 January 2021 will develop, and this will primarily depend on the extent to which the future relationship between the UK and the EU can be agreed, and the extent to which social security rules are included within such agreements.
What we recommend
Our recommendation to you as an employer is to take precautionary measures for your cross-border employee assignments in relation to the UK and prepare your employees for the potential social security impacts. For current assignments, we recommend checking whether it is already possible to extend A1/S1 certificates. Please note that any interruption in activities could prevent the continuation of prior rights under EU law after 31 December 2020. PwC Austria would be glad to assist you with these measures.
We would also like to share a post published by PwC UK, which provides a summary from the UK perspective: >>PwC UK post<<