Monday

8th Mar 2021

Opinion

Commission social security rules hit cross-border workers

  • With no clear definition of a 'registered office', this rule has encouraged some companies to look for social premium paradise and has attracted so called 'letterbox companies' (Photo: Duncan Hull)

If you're a musician in an orchestra playing concerts in many European countries or have a PhD in physics and working on the Large Hadron Collider at CERN, you could wake up tomorrow in a different social security system.

What if you don't understand the language it's operated in? Is your home still in a smaller country located on the periphery of the European Union? Nobody cares.

Read and decide

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The mobility of workers in Europe is growing with the number of EU inhabitants living in another member state doubling in the last 20 years.

It is now estimated that this number now represents four percent of the entire EU population. The number of people who are always on the move, crossing borders regularly because of their job, has also significantly grown.

So it stands to reason that they need social security wherever they go.

Unfortunately, the European Commission's proposal to revise the rules on which social security system covers workers when they cross borders, originally intended for technical clarification of terminology and preventing the skirting of the law, has opened the floodgates for national interests to be put above workers' rights.

One of the profound achievements of the coordination of social security systems is the principle of the single applicable legislation.

An engineer servicing power plants all around Europe, a journalist working for a travel magazine, or a truck driver driving across the continent are subject to only one system.

When they get ill, they know where to apply for sickness benefit. When they retire they know from where to claim their pension. The protection of insured people is put above the interest of member states.

Unlike in the case of posted workers who work abroad on a temporary basis, the solution for highly-mobile workers is permanent. You don't change it every time they cross the border, you are covered by the social security legislation of the country where you reside or where your employer has a registered office.

Which registered office?

With no clear definition of a registered office, this rule has encouraged some companies to look for social premium paradise and has attracted so called letterbox companies.

They are registered in a country of lower contributions with no intention of running a business there.

In the process of working on the proposal, the parliament and the council have altered the original draft and made two criteria for registered offices the most important: the majority of turnover and the majority of time where work is carried out.

Admittedly, this will keep the 'letter boxes' away.

A side effect however would be to negate an effort to level out inequalities in the European Union, making cross border service mobility that much harder.

The criteria will push genuine companies' registration office out of their country of establishment to the country of their largest turnover.

Let's imagine that an IT company registered in the Czech Republic has won a contract to serve IT networks for a French client.

This client is so big that they will have to employ more specialists and send them regularly on-site.

The contract will generate most of the company's turnover, too.

According to the proposal this company's registered office will be in France, not in the Czech Republic. Contributions will go to France. If next year the same company wins a bigger contract in Germany, social security contributions will be shifted to Germany along with the "registered office".

This would also be the case for the workers in the French project.

There goes the certainty of legislation for employees

The negative effects of this provision include frequent changes of social security systems and a risk of being covered by the legislation of a member state on whose territory the worker has no ties with.

As vice president of the Labour Mobility Initiative Association (LMIA), a non-governmental think tank involved in the matters related to the freedom to provide services and intra-European work mobility, I'm deeply concerned by these proposals.

We should always put the interest of the insured person at the centre of regulation. The interests of employers, governments, and social security institutions should follow. Shifting applicable legislation should be avoided. We should also protect our freedoms – labour mobility, entrepreneurship and services.

In previous proposals regarding the legislation, most of the company's turnover and most of its workers' working time were only taken into consideration if there were doubts about a company's registered office.

They were also not treated as necessary conditions if other criteria were met.

We strongly recommend coming back to the commission's original proposal. European legislation should protect mobile workers from any potential fragmentation and weakening of their social security.

Author bio

Marek Benio is vice president of the Labour Mobility Initiative Association, the largest European think tank which promotes the rights of posted workers and their employers.

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

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