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New framework agreement for telework within EU/EEA

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Norway has recently concluded two important agreements that affect the social security rights of persons who work or live within the EU/EEA area. One of the agreements concerns a new framework agreement for telework, which aims to provide more flexibility to workers and employers who wish to use this option. The other agreement concerns social security coordination with the United Kingdom, which aims to ensure that persons who are affected by Brexit do not lose their social security rights. In this blog post, we will explain what these agreements entail and who they apply to.

Remote work, or telework, is work that can be performed independently of the workplace by using IT. In the wake of covid-19, it has become popular for employees to work from home, even when the home is located in a different country than the employer. This raises questions, however, about which country's social security legislation applies to such workers, and how they are protected with regards to illness, unemployment, pension and other social benefits. It also raises questions about where the employer should report and pay employer contributions, among other things.

To accommodate the new reality, Norway and several other EU/EEA countries have negotiated a new framework agreement, which will provide greater flexibility to workers and employers who want to use remote work across national borders. The new rules entail that the limit of 25 percent of total work time in the country of residence is raised to 50 percent. This means that a worker who has residence in a country that has joined the agreement, can work up to 50 percent (that is, 49.9 percent) in the country of residence, and still be covered by the social security legislation in the employer jurisdiction. It is important to note, however, that the agreement only applies to workers who perform remote work in the country of residence, and not to other forms of work or stay in other countries.

Social security affiliation based on the above rule and the effects of this presuppose that the worker and the employer both choose such a solution, and that they enter into an individual agreement on remote work. It is also necessary to apply for an A1 certificate that confirms which country's legislation applies, in order to avoid payment of social security contributions in several countries. It is also important to inform the worker about the framework for the agreement, and to monitor the work pattern, to avoid exceeding the limit of 50 percent.

The new framework agreement came into effect on 1 July this year for the countries that have joined the agreement. So far, Austria, Belgium, Croatia, Czech Republic, Finland, France, Germany, Liechtenstein, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Slovakia, Spain, Sweden, and Switzerland have joined the agreement.

Employers who have or plan to have employees working remotely in these countries, should consider what room for action the increased flexibility provides.

New agreement on social security coordination with the United Kingdom

As is well known, the United Kingdom is no longer part of the EU/EEA area, and thus not of the common rules on social security coordination that apply within this area. This means that people who have worked or lived in the United Kingdom, or who have plans to do so, may risk losing their social security rights or having to pay social security contributions in several countries. This also poses a risk for employers, who normally have to report and pay employer's contributions to the country where the employee is a member.

To avoid this, Norway and the United Kingdom have entered into a new agreement on social security coordination, which shall ensure that people who are affected by Brexit do not lose their social security rights. The agreement was signed by the EEA/EFTA states (Iceland, Liechtenstein and Norway) and the United Kingdom on 30 June this year, and will enter into force after the parties have ratified it.

The agreement is based on the same principles as the EU/EEA rules, but with some adjustments and simplifications. The agreement applies to people who are citizens of Norway or the United Kingdom, or who have residence or work in one of these countries, and who have had or will have a connection to the social security systems in both countries.

The agreement entails, among other things, that people who work in one country shall be covered by the social security legislation of this country, regardless of residency or citizenship. This means that Norwegian employees who work in the United Kingdom, shall pay social security contributions and have the right to social security benefits in the United Kingdom, and vice versa. The same applies to self-employed and public employees. There are, however, some exceptions for people who work in both countries, or who are posted to the other country for a limited period. In such cases, an A1 form must be applied for from the Norwegian authorities (NAV), which confirms which country's social security legislation applies.

The agreement also entails that people who have accrued social security rights in one country, shall be able to transfer the rights to the other country, or to a third country within the EU/EEA area. This applies, for example, to sickness benefits, unemployment benefits, pension, child benefit and family allowances. There are, however, some differences in the calculation and payment of these benefits, depending on which country is responsible. It is therefore important to contact the relevant social security authorities in each country to get information about one's rights and obligations.

In this way, there are no big changes compared to the previous agreement, but the fact that we now have a final agreement will provide security and predictability for both businesses and individuals who move between Norway and the United Kingdom, and will ensure to maintain a close cooperation on social security issues between the two countries.

Employers who have, or plan to have employees working across the border, should assess the implications of the rules in the new agreement for their operations.

The content of the blog is intended as general information, and should not be considered legal advice. The content is often simplified and is not adapted to the recipient's specific situation. In addition, there may have been changes after the blog was published that are not reflected. We therefore recommend that professional assistance is sought. PwC does not take responsibility for any errors or omissions in the blog, including decisions that are wholly or partly based on the content.

Mats Seeberg Berggreen

Mats Seeberg Berggreen

Mats is a tax lawyer and Senior Manager at PwC Norway, Tax and Legal Services, with several years of experience in the field of Employment Tax. He has assisted a wide range of Norwegian and international companies with tax, social security and immigration matters in connection with cross-border activities.

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