Business travellers have always posed mobility compliance issues, by the nature of their unplanned, frequent, and short-term trips. Many EU member states have special arrangements for business travellers, exempting them from formal immigration restrictions whilst performing business-related activities in their countries.
On 31 January 2020, the UK left the EU and entered an 11 month transition period, keeping the UK temporarily bound by EU rules through to 31 December 2020.
Whether UK-based employees will remain subject to posted worker and EU social security regulations after December 2020 depends on the outcome of the trade negotiations currently in progress. The focus from immigration, labor, and social security authorities (considering their increasingly sophisticated approach to data sharing) poses a significant compliance risk if employers fail to ensure their workers are compliant during business trips.
This article considers the various aspects employers should consider when planning employee mobility and business travellers from 1 January 2021.
Compliance framework for business travellers in the EU
The Posted Workers Directives and the Enforcement
The Posted Worker Directives (PWD) seek to protect workers’ rights and curb companies from profiting from more advantageous labour/social security settings (‘regime shopping’).
PWDs apply whenever an employee under an EU/EEA or Swiss employment contract (regardless of nationality) is assigned to work temporarily in another EU/EEA country or Switzerland, to provide services to local clients or affiliate companies on behalf of their home employer. PWDs provide visiting workers with the same employment conditions as local workers. In addition, certain EU member states have extended the application of PWDs to all employers, including those outside the EU, who post employees to the EU to provide services on their behalf.
PWDs outline minimum employment conditions employers must guarantee when sending employees on assignment abroad, namely:
i) maximum work periods and minimum rest periods;
ii) minimum paid annual leave;
iii) minimum rates of pay, including overtime rates;
iv) conditions of hiring out (Temporary worker placement work through staffing agencies );
v) health, safety and hygiene at work;
vi) protective measures for vulnerable employees;
In addition, they have introduced control measures and administrative requirements on employers, including:
i) filing a posted worker notification;
ii) appointing representatives in a host country to liaise with authorities and social partners;
iii) ensuring availability of assignment-related documents; and
iv) ensuring social security coverage throughout the posting, obtaining certificate of coverage/A1 certificate.
As of 30 July 2020, a third PWD was introduced promoting the principle of ‘equal pay for equal work’ for postings and assignments; introducing new requirements for employers including:
a uniform concept of ‘remuneration during posting’ – remuneration can only include allowances and expenses permissible under the new PWD;
the limitation of postings duration – employers must guarantee all host country employment law conditions to employees on long-term assignments (12/18 months+).
The PWD regulation is therefore inherent to compliance with employment law and social security requirements for relevant assignments and business travellers.
Application of PWD framework to EU business travellers
PWD legislation do not define ‘business travellers’– they only refer to ‘posted workers’. As such, business travellers are defined under the national laws of each member state.
The European Commission advised that workers who are sent temporarily to work in another member state, but who do not provide services there, are not deemed ‘posted workers’ under PWD legislation. ‘business travellers’ under this definition may therefore be exempt from PWD depending on:
- Home employment location
- Host country
- Duration of assignment
- Nature of activities
E.g. business travellers attending conferences, meetings, fairs, training etc where no services are provided.
As member states are currently free to determine what constitutes ‘work’ and ‘business activities’, some have introduced duration-based exemptions for business travellers (e.g. 3 consecutive days in Austria).
The below map identifies EU member states, such as Poland, who do not apply any exemptions for business travellers if their employer instructs them to travel and perform regular work activities (e.g. client meetings and negotiations). These activities would be considered as standard ‘work’ and therefore subject to PWDs.
Penalties for non-compliance differ significantly among EU member states, ranging from a few hundred euros to €500,000 per infraction. Countries without exemptions and those with limited-duration-based exemptions are likely to have a stronger focus on business travellers as well as standard assignments.
Penalties can be imposed for failing to notify authorities of business travellers, but also for not making relevant employment-related documents on employment conditions and social security available at the work site.
EU Social Security Coordination Regulations (883/2004 and 987/2009)
Under EU common rules, an individual (or indeed employer) is not liable to make social security contributions in more than one EU/EEA member state. This avoids multiple social security payments and simplifies the processing of a claim for benefits or at retirement. For most individuals this is straightforward as you “pay where you work”, but complexities arise where individuals have cross-border work activities.
Since 2010, EU regulations have required employers and employees to obtain approval from the social security authorities in the employment home country for cross-border work activities carried out in the EU/EEA. The resulting A1 certificate confirms which country’s social security legislation applies to the employee. The A1 requirement targets employees traveling for work in multiple EU/EEA member states, and those “posted” on a temporary basis to a different country; working for their employer, a 3rd party client under a contract for services, or hired out through a temporary agency.
Is an A1 certificate necessary for business travellers?
From a strict interpretation of the EU regulations, business travellers fall within the category of ‘posted’ or ‘sent’ workers, regardless of their status under immigration or labour law. As there is no ‘de minimis’ threshold under the regulations, business travellers and their employers should owe social security contributions from day one, unless a separate social security treaty is in place.
Given the above, employees (including business travellers) should be in possession of an A1 certificate each time they engage in cross-border work activities even in cases of a one-day business trip. Without an A1, business travellers could be denied access to a work site, be required to stop working, and/or be fined. However, enforcement depends on the local practice of the host country authorities. A country by country risk-based approach is best when considering if A1 certificates are required for short-term business trips.
In the past, many employers have not applied for A1 certificates, particularly for business travellers. However, authorities in a number of EU/EEA states have recently increased inspections, and if an employee travels without an A1 certificate, some authorities can impose fines of up to €10,000 euros (approximately $11,167 USD). In practice, however, fines are usually not imposed if employers can prove an A1 certificate has been applied for before or on the same day as the worker’s travel.
What can be expected by the proposed revision of the Social Security Coordination Regulations (883/2004 and 987/2009) (the proposed revised regulations)?
A fundamental right of EU citizens is to move and reside freely in any EU country. However, business travellers travelling on short-term business trips in the EU needs to be mindful that they can only exercise their social security rights during the business trip if they are covered by the social security system of their country of origin.
The proposed revised regulations seek to remove business travellers from the PWDs and provide a definition of a ‘business traveller’ as ‘a temporary activity related to the business interests of the employer, not including the provision of services or the delivery of goods, such as attending internal and external business meetings, attending conferences and seminars, negotiating business deals, undertaking sales or marketing activities, performing internal or client audits, exploring business opportunities, or attending and receiving training’.
The proposed revised regulations are still under negotiation, however some EU member states have begun to relax their rules regarding business travellers obtaining A1 certificates for trips of up to one week.
Brexit – The impact on UK-based employers
The social security provisions in the draft withdrawal agreement are based on current EU regulations, and provide that individuals should only be subject to the social security legislation of one member state at a time (no double contributions). The basic rule remains that contributions are paid where work is performed, with exceptions for posted workers. However, with changes to future social security co-ordination including stopping the export of child benefit, as announced in the 2020 UK budget, the UK may further seek to depart from EU law.
Trade agreement reached by 31 December 2020
If a trade agreement is negotiated between the UK and the EU, this may include requirements for the UK to implement certain employment and social security provisions to ensure adequate employee protections for UK workers posted in an EU/EEA member state.
The current withdrawal agreement suggests a framework that includes reciprocal provisions between the UK and the EU on intra-corporate transfers. This would allow companies to train and move staff between office locations, deploying expertise where required. This reciprocity would suggest that the updated PWD, including the provisions on remuneration, and the proposed revised regulations, defining business travellers, may also need to be observed by the UK post Brexit.
No trade agreement reached by 31 December 2020
If no trade agreement is reached, the UK would be treated as a non-EU country. Therefore, the obligation to implement and enforce PWDs may change considerably; e.g. filing a notification or appointing a local representative may not be required for UK employers in some Member States.
It is important to note, however, that even in member states where PWD requirements do not apply to non-EU/EEA/Swiss employers, compliance with employment law and immigration requirements will still need to be observed.
In addition, from a social security perspective, the UK may need to negotiate new social security agreements with each EU member state, as the EU regulations will no longer apply. This could potentially lead to 27 different regulations being in force, imposing a huge administrative burden on UK employers, and losing the possible exemption for short-term business travellers under the proposed revised regulations. This could mean UK business travellers may trigger social security contributions in host countries, or A1 certificate would be required for a one -day business trip.
Once the Brexit transition period ends, on 31 December 2020, UK based-employees and business travellers sent to EU/EEA member states will need to consider the following:
- Reviewing work activities depending on host member state rules. If activities are considered ‘business travel’, employers may be exempt from all employment law and administrative requirements under PWDs;
- If activities are considered ‘work activity’, posted worker notifications, employment law compliance, and administrative requirements apply if the host members state has extended these provisions to non-EU/EEA countries.
- Ensuring the business understands its social security and benefits policy for business travellers, so potential new compliance requirements can be met in line with the outcome of the negotiations;
- Budgeting for additional costs in the event dual liabilities arise for business travellers. Either as a result of additional social security liabilities or compensating employees for additional costs incurred;
- Preparing for additional reporting requirements in EU member states for business travellers and workers on ‘postings’.
Despite potential arrangements, allowing short-term UK business travellers to be exempt from immigration restrictions in the EU after 31 December 2020, UK employers will still need to ensure day one compliance is adhered to. As such an assessment of posted worker notifications and A1 certificate requirements in relevant member states will need to be undertaken to understand the impact on business operations and costs.