More and more employees and employers have to deal with working internationally. Think of employees who work abroad partly from home, are regularly active in other European countries or perform work outside Europe. This raises the question: which social security law applies? Two recent judgments of the Court of Justice of the European Union provide important clarity on this issue.
Substantial part of the work
Within the EU (as well as the EEA and Switzerland), the general principle is that an employee is socially insured in his country of residence if a substantial part of the work is performed there. A substantial part is said to exist when at least 25% of the work takes place in that country. In the so-called Hakamp judgment last fall, the Court of Justice clarified which factors are decisive in this regard. For the question of where an employee performs his work, the working hours and/or remuneration are particularly important. Other circumstances, such as the employee's place of residence, the employer's place of business or administrative connections, do not play a role, the Court of Justice said. Furthermore, when assessing whether a person works 25% of his work in the state of residence, the expectation for the next 12 months should be considered.
Another question that the Court of Justice had to address concerned the situation where an employee performed part of his work outside the European Union. The Court of Justice confirmed that all work counts in the assessment, including work performed outside the European Union. What is decisive is the overall picture of a person's work, regardless of where it is performed. If the share in the country of residence falls below 25%, then there is no social security obligation in the country of residence, the Court freely translated concludes.
What does this mean for you?
For employees and employers operating internationally, this development may have direct consequences. The outcome emphasizes the importance of having a clear understanding of the work pattern of internationally active employees. Not only to determine in which country social contributions are due, but certainly also with a view to applicable benefit rights and other social benefits such as care.
The rulings of the Court of Justice give reason to take another close look at your international employee population and, in doing so, to assess whether the actual division of labor is still in line with the applicable rules.
In conclusion
Do you have questions about the consequences for your social security? Please feel free to contact your Govers contact person or the Payroll Tax focus group at loonheffingen@govers.nl.