A framework Agreement concerning cross border telework within the EU/EEA/Switzerland came into force 1 July 2023.
This agreement is relevant for cross border commuters who regularly telework in their residence country. Under this new agreement cross boarder workers can remain socially insured in the country where their employer is situated, while working to a larger extent in their residence country, as long as the majority (51%) of the work is performed in the employer country. This ensures that the amount of time an employee can work in their country of residence increases, without creating social security obligations in that country for the employer. This is a welcome agreement, but it only applies for certain situations and specific conditions must be fulfilled. Employers should identify and review the social security position of their cross-border teleworkers.
Background
The framework agreement is an outcome of the exemption rules that applied during the covid-19 pandemic. During the covid-19 Pandemic there were adopted Guidance on the legislation applicable to telework, recommending that telework in a Member State other than the competent (“usual”) Member State of employment, due to covid-19, should not lead to a change of applicable legislation. The ‘no impact’ concessionary treatment was only ever intended to be temporary and was extended several times to 30 June 2023. In the meanwhile, an Administrative Commission ad hoc working group, was formed to create a more structured solution for cross border telework going forward.
The Framework agreement
According to the main rule for multi-state working in the EU regulation 883/2004, work in the residence country of 25% or more results in that the employee be affiliate in the residence country’s social security system, and consequently social contributions are to be paid in that state. According to the new framework agreement employees will, from 1 July 2023, be able to work remote in the home country up to 49% during a twelvemonths period if the other part of the work is carried out where the employer is situated.
Please note that it is not mandatory to apply in accordance with the framework agreement, it is voluntary, and both employee and employer must agree to apply.
The framework agreement implies that the member states that have signed the framework agreement undertake to grant exemptions from the main rule in cases where the employee works remote in the home country up to 49%. Sweden has signed the agreement. Note that the agreement only applies if both countries involved have signed the agreement.
Öresund region
Denmark is one of the countries that have not yet signed the framework agreement. However, for Sweden and Denmark there is already an agreement in place for cross border workers since several years. This “Öresund agreement” is similar to the framework agreement.
According to said agreement the employee can remain in the social security system where the employer is situated in case:
- the employee works at least 50% in the country where the employer is situated during each three months period, and
- the remaining part of the work is performed from home or on business trips of occasional character.
When can the framework agreement not be applied?
- When an employee works in the residence country for other reasons than remote working.
- When an employee habitually works in a country other than the residence country and the country where the employer has its registered office. (There is yet no further guidance how much work that can be carried out in third countries, but it is assumed that the possibility will be limited).
- When the employee has more than one employer and they are situated in different countries.
- Temporary remote work from residence country or other country. In those situations, instead an application for posting can be applied for (normally 100% of the work should then be performed in the home/other country.
Application
When an employer and employee want to apply in accordance with the framework agreement, the application (for exemption from main multi-state rule) should be filed in the country where the employer is situated. The application must be made in consent between the employer and the employee, i.e., both should sign the application. It is also possible to apply for a group of employees.
Please note that it is not possible to apply in accordance with the framework agreement for a period before 1 July 2023. It should also be noted that certain rules apply for application that regards a retroactive period (after 1 July 2023).
Actions
We recommend that employers identify the facts and circumstances of the employees who are teleworking in their residence countries, to determine if they fulfil the specific conditions of the framework agreement and whether the framework agreement is an option for a group of employees. Any decisions should of course be taken within the context of risk concerning cross border remote working, such as permanent establishment risk, income/wage tax and employment law. You are most welcome to reach out to us for more details and guidance how this agreement gives employees and employers a greater flexibility when it comes to remote work from the residence country.
Authors:
- Sevim Güven - Partner - Global Mobility - 072-230 95 20
- Karolina Engström - Senior Manager - Global Mobility - 076-853 23 78
- Cecilia Arrhenius - Senior Manager - Global Mobility - 070-290 13 34
