26 November 2020

What Impact Would A No-deal Brexit Have On Social Security Contributions?

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This article considers the likely effect of a no-deal Brexit on employers' and employees' liability for social security contributions where a UK employee is working in a European Economic Area country or Switzerland.
European Union Government, Public Sector
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This article considers the likely effect of a no-deal Brexit on employers' and employees' liability for social security contributions where a UK employee is working in a European Economic Area (EEA) country or Switzerland. It also provides a view from France, Germany, Italy and Belgium.

Background: EU social security rules

The relevant EU rules in this area provide a framework for protecting an individual's social security rights if the individual moves within the EEA countries and Switzerland. A fundamental principle underlying the framework is that an individual is subject to the laws of one country only. The rules prevent employers and employees paying social security contributions in two countries and ensure that those working in one country can enjoy the social security benefits of a permanent resident. The framework also ensures equality of treatment of EU nationals regardless of where they are in the EU.

The EU rules accordingly provide that the employee and employer shall pay social security contributions in only one country, which is generally the one in which the employee is physically working. There are two main exceptions to this:

  • Where an employee of one country is sent by their employer to work in a different EEA country or Switzerland for a temporary period of up to two years, it is possible for the employer and employee to continue to pay social security in the home country if certain conditions are satisfied.
  • Where an employee is working in two or more EEA member states/Switzerland (i.e. spending at least 5% of their working time in each member state), the rules are a little more complex. If the employee works more than 25% of their time (measured over a 12-month period) in the country in which they are resident for social security purposes, the employee and employer pay social security in that member state. If the employee works 25% or less of their time in their country of residence and only has one employer, social security is due in the country in which the employer is resident. There are further rules that apply if the employee has two or more employers.

In addition, if it is in the employee's interest to remain within their home country's social security system, it may be possible to apply for a special exception. This route is often used in the situation where an employee's posting is expected to last more than two years.

In terms of the practicalities, if a UK employer is sending a UK employee to work in a country covered by the EU rules, it should apply to HMRC for an A1 or E101 certificate.

If a UK employee is working in two or more countries covered by the EU rules, they should apply to HMRC for an A1 or E101 certificate or to the social security authorities in the country in which the employee is resident (if different).

In either case, the effect of the certificate is to confirm the country in which social security contributions should be paid and prevent double contributions.

The future position: deal or no deal?

The UK left the EU at the end of 2019, with the Withdrawal Agreement confirming that the current EU social security rules would continue to apply until the end of the transition period, which is 31 December 2020 (unless there is an extension).

Irrespective of whether the EU and UK agree a trade deal, the EU rules will continue to apply to UK nationals and their family members living or working in the EEA/Switzerland at the end of the transition period (and vice versa). Existing A1 and E101 certificates issued for individuals within the scope of the Withdrawal Agreement will therefore be honoured provided that the situation remains unchanged.

But what is the position in relation to new arrangements? HMRC, in its October 2020 Employer Bulletin, has indicated that for arrangements that begin after the end of transition period applications for A1 or E101 certificates should continue to be made. HMRC has, however, indicated that while negotiations are ongoing it will only be able to process applications for certain individuals, principally those within the scope of the Withdrawal Agreement.

HMRC has said further guidance will be issued in due course. The position is likely to depend on whether a deal is concluded between the EU and the UK before the end of the transition period.

Social security contributions after a no-deal Brexit

Apart from for Ireland, with which the UK has agreed a reciprocal contributions social security agreement under which the EU rules will continue to apply, the position is unclear.

Prior to the EU social security rules being implemented, the UK had negotiated reciprocal agreements dealing with social security contributions with some of the other EEA countries. However, the UK government considers that these agreements are no longer valid. We understand some EU countries share this view, while others do not.

If the old reciprocal social security agreements do not apply and a new bilateral agreement with the relevant country is not agreed, the position on contributions would be determined in accordance with the domestic law of each country. This could potentially result in a contributions liability in both the UK and the host country:

  • The UK: at least initially, the UK will continue to apply the EU rules unilaterally in accordance with regulations made under the European Union (Withdrawal) Act 2018. The government, however, has power to amend these regulations to remove barriers and support labour mobility between countries. This means there is considerable uncertainty as to what degree of co-ordination there might be in the long term after the transition period ends and a 'no deal' becomes permanent.
  • The host country: whether the host country will be able to enforce any employer social security liability against a UK business will, however, depend on the circumstances.

Social security position if a deal is agreed

The UK government and the European Commission have each published draft treaty texts on social security co-ordination. Both sides have included reciprocal provisions to prevent social security contributions being due in both the home and host countries so, from this perspective, there does not appear to be much difference between the parties. The more contentious issue relates to the 'exportability' of benefits, an issue which is politically important and so may delay any deal on social security contributions.

What steps should businesses take now?

UK businesses with employees who are likely to be working in the EEA or Switzerland after 31 December 2020 should review the position as soon as possible and consider:

  • Whether an A1 or E101 certificate has already been granted and, if so, its expiry date.
  • Whether any proposed secondments within the scope of the Withdrawal Agreement should be brought forward to begin before 31 December 2020 so that a certificate can be applied for before the end of the year.
  • Whether to seek social security advice in the host country for any arrangements entered into on or after 1 January 2021 or for any existing arrangements where the circumstances change.
  • If a dual contributions liability is likely to arise, whether the business or the individual should bear the increased costs.

HMRC's October Bulletin sought to reassure employers and individuals that the government is working with the EU to establish 'practical, reciprocal provisions on social security co-ordination...including preventing dual concurrent social security contributions liabilities'. Pending such an agreement being reached, this remains an area in which businesses face considerable uncertainty and a potential increase in costs.

The situation in other countries


The Belgian Social Security Authorities have also issued Brexit guidance, contained in a newsletter of 18 November 2020. In accordance with the Withdrawal Agreement, cross-border situations such as secondments, working in several member states involving the UK and an EU Member State prior to 31 December 2020 will continue to be governed by the current European rules as long as there is an uninterrupted cross-border situation.

The Authorities have clarified that any interruption ends these 'grandfather rights', although some situations such as e.g. sickness and annual holidays will be considered not to constitute an interruption.

As far as new situations in the absence of a deal are concerned, the Belgian Social Security Authorities consider the Belgian-UK social security treaty can no longer be applied and these situations will be governed by the Belgian rules. Under Belgian rules, employees seconded to Belgium will not be subject to Belgian social security if the employment relationship remains exclusively with a UK employer during the employment in Belgium regardless of its duration.

An 'article 3 certificate' must be applied for from the Belgian Social Security Authorities. Conversely, an employee seconded from Belgium to the UK will be able to continue to be insured in Belgium for a period of six months, which can be extended by a maximum of a further six months. A document (K/TM 138ter) is issued to that end.   

As far as personal tax charges are concerned, Brexit will not have consequences on the tax situation of Belgian-UK cross-border workers since this is ruled and will continue to be ruled by the treaty for avoidance of double taxation between Belgium and the UK. Where a worker is taxed in Belgium and covered by Belgian social security, there might be an additional special social security contribution, however, for seconded workers who, under applicable conditions before Brexit, could be exempted from Belgian social security in the past. This is capped at EUR 731.28 per household


In the event of a no-deal Brexit, the following principles will apply:

  • For employees seconded to France before 1 January 2021, the secondment may continue and A1 certificates issued on or before 31 December 2020 will remain valid until the end of the assignment mentioned on the form.
  • Employees sent on assignment in France on or after 1 January 2021 must meet the conditions for legal residence and contribute to the French social security system. If a foreign company does not have an establishment in France, it must pay employer and employee contributions for its employees in France to the National Center for Foreign Enterprises (Centre National des Firmes Etrangères, CNFE).
  • For an employee working both in France and the United Kingdom before 1 January 2021, the employee will continue to be enrolled in the social security system of his or her country of residence provided that employment continues in both states after 31 December 2020. If the employment in France begins on or after 1 January 2021, contributions will be due in France for the activity carried out in France.
  • An employee seconded to the United Kingdom on or after 1 January 2021 may voluntarily remain enrolled with the French social security system for a maximum of 3 years, renewable, but in this case, contributions will be payable in both France and the United Kingdom.


There are two possible scenarios in Germany, set out below.

The Social Security Agreement of 1960: In the event of a no-deal Brexit, from a German legal perspective, the Social Security Agreement (SSA) between Germany and the UK of 1960 was never terminated and would therefore be likely to apply again after the Regulations ((EC) 883/2004 and 987/2009) cease to apply. However, the scope of the SSA is fairly limited compared to the current EU rules on social security coordination. Moreover, as the UK considers it no longer applicable, it is unclear whether the SSA would actually apply in the event of a no-deal Brexit.

German Social Security Law: if the SSA does not apply, German social security applies as set out below.

If an employee is posted to Germany from the UK, UK social security continues to apply while German social security does not apply, if the posting:

  • is contractually limited in time in advance, or
  • is limited in time due to the nature of the posting, such as within the framework of a project (s5 paragraph 1 of the German Social Code IV, Einstrahlung).

If an employee is posted to the UK from Germany, German social security continues to apply, if the posting:

  • is contractually limited in time in advance; or
  • is limited in time due to the nature of the posting, such as within the framework of a project (s4 paragraph 1 of the German Social Code IV, Ausstrahlung).

However, whether UK social security applies in additional to German social security must be assessed under the applicable local law in the UK.

This means, the legal situation after a no-deal Brexit is also currently unclear from a German legal perspective. However, employers who do not correctly pay social security contributions in Germany when they are required to do so face, among other risks, fines of up to EUR 25,000 for an administrative offence and, in extreme cases, even criminal liability.

Therefore, employers who post employees from the UK to Germany and vice versa should carefully monitor Brexit developments and determine which country's social security applies after a no-deal Brexit.


In Italy, a Decree Law (n. 22 of 25 March 2019) states that the EU Regulation on Social Security Coordination (884/2004) applies up to 31 December 2020.

Following the Withdrawal Agreement, on 4 February 2020 The Italian National Social Security Body (INPS) issued a Circular (n. 16), which provides operating instructions with reference to social security to be applied until the end of the transition period.

In particular, INPS confirmed that the fundamental EU social security principle of the aggregation of insurance periods needed to achieve the requirement for social security benefits will continue to apply.

In addition, the Circular specified that with reference to retirement, family, unemployment, sickness, maternity and paternity, secondment and recovery of undue benefits and contributions, all benefits due are granted up to 31 December 2020, both for applications submitted before that date and under examination and for applications submitted after that date but which referred to prior situations.

The Italian Government has not yet taken a decision concerning the rules to be applied after the end of the transition period.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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