Working abroad and the issue of social security contributions

From this article, you will learn:

• How posting an employee to another country affects social security issues?
• In what situations the place of the employer's registered office influences the method of paying employee social security contributions?
• What the A1 certificate is for?

In order to make it easier for taxpayers to operate abroad, EU Member States have introduced into their legal systems provisions coordinating social security systems. These regulations primarily indicate how to determine the country in which an employee should pay social security contributions. When planning to delegate an employee to an EU country, it is worth familiarising yourself with the basic rules in this regard. 

The rules coordinating social security systems are common to all Member States of the European Union and the European Economic Area, as well as Switzerland – hereinafter collectively referred to as "Member States". Importantly, individual regulations regarding the functioning of national social security systems are regulated individually by each country.

As a general rule, social security contributions are payable in the country where work is performed. The exceptions are contributions of employees working in more than one Member State and posted employees. If a person works in several countries at the same time, they may be subject to social security only in one of these countries.

Where are employees working in more than one EU Member State subject to social security obligations?

In the case of employees working in more than one Member State of the European Union, the place of residence of the employee or the address of the registered office of their employer is of key importance in order to correctly indicate the country in which a given person will be subject to social security. 

A person who normally carries out work in several Member States is subject to the legislation of the country where they reside – provided that they carry out a significant part of the work (at least 1/4 of the work) in that country. In such a case, regardless of other circumstances, the employee will be subject to social security in the country of residence.

If an employee does not carry out a significant part of their work in the Member State of their residence, they are, in principle, subject to the legislation of the Member State in which their employer has their registered office. 

However, the rule allowing the use of the location of the employer's registered office may be limited – in particular when a given person is employed by at least two employers who are based in different Member States, none of which include the employee's country of residence. In such a situation, the employee is subject to the legislation of the Member State in which they reside.

When are posted workers subject to foreign social security?

The principle of being subject to social security in the country where work is performed is also limited in the case of employees temporarily posted to another Member State, sent there to perform work on behalf of a given employer.

In accordance with EU regulations, posted workers are still subject to the legislation of the sending country (country of employment) – however, provided that:

• the expected duration of their work abroad due to posting will not exceed 24 months and
• a given employee will not be sent abroad to replace another person posted earlier.

The period of being subject to the legislation of the sending state may be extended beyond 24 months provided that the insurance institutions of the sending state and the host state (the country of performing work) conclude an appropriate agreement in this regard.

What is the A1 certificate used for?

The key document confirming that a person is subject to social security in a specific Member State is the A1 certificate. Insured persons obtain this document from the appropriate insurance institution of the posting country (in the case of posting an employee) or the country of residence (in the case of persons performing work in more than one Member State).

Unfortunately, in practice, the issue of A1 certificates issued by the Polish Social Insurance Institution is neither simple nor clear. We have already written more about doubts related to A1 certificates here.

Proper settlement of social security when working abroad can be problematic

Obligations to pay social security contributions (and identify the country where the obligations exist) may prove to be complex and demanding, and any error or oversight in this respect may result in severe legal and financial consequences – both for the employer and the employee. For this reason, we encourage you to contact us to obtain personalised and professional support from our advisors.