Common misunderstandings and pitfalls regarding international employment: be aware!
28 Feb 2020
In the case of cross-border employment in the EEA, it is important that certain social security and employment law related formalities are fulfilled with a view to compliance with both Belgian and European legislation. However, in practice, we see that these formalities are not always completed even though sanctions may be imposed or benefits may be lost out on. Below we recall the most important documents that have to be obtained or have to be prepared, as well as some points of attention regarding their content.
A1 form
In the case of cross-border employment in the EEA, an A1 form has to be obtained. This document attests the subjection of an individual (the employee) to the social security scheme of a certain member state and, on the basis of this document, both the employee and the employer are exempted from having to pay social security contributions in other member states. This formality is preferably completed before the actual start of the international employment situation.
Where this formality is well-known in the case of long-term assignments or formal split employment, we have found that it is less known that it also applies for short-term business travellers, or employees working simultaneously in several countries due to a European role they have in the company without having a formal split employment.
Indeed, in principle, an A1 has to be in place from day 1 of the cross-border employment. In practice, we see that the authorities of several member states have become increasingly stringent on the interpretation of this condition. Also, in cases where the A1 determines that the Belgian social security scheme is applicable, the Belgian National Social Security Office changed its practice to decide what type of social security contributions are due. In the past, Belgian practice consisted in following the classification of the activities that was given in accordance with the foreign legislation. However, since 1 October 2018, the activities will be classified as if they were performed on Belgian territory. This may in particular be relevant where income of foreign mandates may be subject to social security contributions for self-employed workers rather than to employee social security contributions.
S1 form
An S1 form is specifically applicable to employees subject to the social security scheme of a certain member state but residing in another member state (e.g. in the case of secondment or frontier workers) who want to avail themselves of reimbursement of health costs in their state of residence. On the basis of this document, the individual concerned can namely benefit from sickness benefits in kind in his residence state, next to this entitlement in the state where he is subject to the social security scheme, each time following such conditions and tariffs as set out by the legislation of the country concerned.
The individual concerned has to affiliate with a health insurance fund in both his residence state and the competent state. The health insurance fund of the competent state will then deliver an S1 form, which has to be provided to the health insurance fund in the residence state. In this regard, on the one hand, it is important that, depending on the country concerned, it may not be possible to affiliate with a health insurance fund of the individual’s own choice (e.g. Belgian frontier workers subject to Dutch social security have to affiliate with CZ Zorgverzekeringen in the Netherlands). On the other hand, in countries where the statutory health insurance is only applicable for employees earning up to a certain income (e.g. Germany), it is possible that an S1 form can only be obtained in the case of voluntary affiliation to the statutory health insurance (and thus not in the case of private insurance). Often, such affiliation needs to be made within certain deadlines and cannot be completed retroactively.
Limosa notification
A foreign undertaking employing a worker temporarily or partly in Belgium is required to give notice of the employment (and its anticipated length) via the website of the Belgian National Social Security Office (RSZ/ONSS) before the employee actually starts to perform activities in Belgium. This notification also exempts the employer from having to create certain employment documents (among which personnel register and work regulations) for 12 months. In addition, a foreign employer has to appoint a designated contact person to liaise with the appropriate inspectorate services, and has to provide the latter, upon request, with all information and documentation related to the employment of the individuals posted to Belgium.
The Posted Workers Enforcement Directive has introduced this notification obligation within the EU. In Belgium, the implementation of this Directive did not lead to large changes because the Limosa notification was already in place. Nevertheless, in other countries, we now see similar (new) notification obligations aimed at compliance with this Posted Workers Directive (e.g. SIPSI in France, and the new notification obligation in the Netherlands), sometimes entailing severe sanctions if not adhered to.
This formality requires that it is known where employees work and that a solid process to ensure timely registration is in place, which may pose challenges for companies, especially where short-term business travellers are concerned.
Assignment letter
When assigning an employee from Belgium to another country for longer than one month, it is obligatory to draft an assignment letter in accordance with article 20bis of the Belgian Employment Act. This document should include the following provisions:
duration of the employment abroad;
currency in which the salary will be paid;
potential benefits associated with the employment abroad;
if applicable, the conditions regarding the return of the employee to his home country.
In the case of an inbound assignment to Belgium, such legal obligation does not exist. However, it is recommended to also draft an assignment letter in such a case in order to set down the terms and conditions applicable to the international employment situation of the employee concerned. Where it concerns a third-country national requiring a work permit or single permit, this is a document that the immigration authorities will require.
Taking the above into account, it is important to duly verify whether the required formalities are complied with in the case of international employment situations. Of course, PwC Legal will be happy to assist with applying for the documents mentioned above, as well as with reviewing or drafting the assignment letter.
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