Post-Brexit social security changes

Many companies are prepared for Britain’s departure from the EU at the end of 2020. But the UK and EU have yet to agree what will be in place when EU regulations no longer apply to the UK from January 2021.

Post-Brexit, internationally mobile employees could face problems with healthcare coverage, and there is a serious risk of double social security contribution costs. Employers face potentially increased administrative burdens of new compliance requirements differing from country to country.

Planning for the potential impact of a no-deal Brexit involves looking at some of the social security and healthcare arrangements that UK employers often take for granted.

Social security costs

Social security is often one of the most misunderstood aspects of global mobility planning. Under the current arrangements, each country has its own independent social security system. To prevent double contributions, the A1 programme allows the employee to elect to contribute to the home country system for the first 24 months of an assignment. Subject to further conditions, the period can be extended to a total of five years.

The EU social security regulations also provide for simple coordination of the member country’s social security systems. Under these provisions, amounts paid into a foreign country system will still be counted for matters such as state pension contribution histories and local benefit entitlements.

If the UK and the EU are unable to agree reciprocal arrangements post-Brexit, UK nationals working in an EU member state will, in effect, be treated as third-country nationals. This will create significant additional costs in terms of dual contributions and benefit ineligibility, making many budgets inadequate and tax equalisation policies more expensive.

Access to healthcare

Any planning should also include the cost of the possible loss of access for seconded employees to healthcare in EU member states. This primarily revolves around the European health insurance card (EHIC) and the S1 reciprocal schemes. The EHIC provides access to healthcare services across the EU for a period of fewer than three months. The S1 scheme allows individuals to receive ongoing health and social care in another country with the costs met by the state. It is in part targeted at individuals temporarily posted by their employers for periods of two years or less.

Loss of access or reduced access to healthcare for those working abroad could lead to increased costs in health or travel insurances, or a need to bring employees home earlier than planned, which would result in associated costs and repatriation challenges.

UK citizens working within the EEA and EEA citizens working in the UK, or their employers, may also need to purchase their own travel or health insurance should access to reciprocal arrangements be lost. This may lead to EEA visitors and residents in the UK becoming liable to pay the IHS (immigration heath surcharge) or individual fees for the care they receive. Many secondment policies and the related assignment agreements may need to be revised accordingly.

UK-EU future relationship negotiations: social security coordination

The UK government introduced the Immigration and Social Security Coordination (EU Withdrawal) Bill in the House of Commons on 5 March 2020. The purpose of this bill was to address how to coordinate access to social security for individuals moving between the EEA states (and Switzerland).

A proposed revision of the EU legislation on social security coordination is currently being discussed by the UK and European parliaments and the council of the EU. The EU rules aim to protect an individual’s social security rights when moving within the EU. The rules on social security coordination will not replace national systems with a single European one.

From the UK perspective, any new agreement should be similar in kind to agreements the UK already has with countries outside the EU and respect the UK’s autonomy to set its own social security rules. However, there is ongoing disagreement over entitlement to receive a cash benefit from one country when living in a different country.

Time is running out

Our specialist Global Mobility team can help you evaluate how best to approach planning for social security changes for employees moving between the UK and EU member states. We can help you ensure you comply with the new administrative system requirements and are prepared for any potential impact on the costing for these secondments after 31 December 2020.

Get in touch with us for a free no-obligation consultation and to find out more information.