When working internationally as a remote employee, you are in principle socially insured in the country where you actually work, not where your employer is based. This basic principle applies both within and outside the EU, although specific rules within the European Union make the situation more nuanced. Below we answer the most frequently asked questions about social security in cross-border remote work.
In which country are you socially insured when working remotely from abroad (EU)?
When working remotely from abroad, you are in principle socially insured in the country where you actually perform your work. This applies regardless of where your employer is based. Within the EU, European Regulation (EC) 883/2004 determines which system applies, with the place of work as the starting point.
This means that an employee working from Spain for a Dutch employer is, in principle, subject to the Spanish social security system. The employer is then obliged to pay contributions in Spain, not in the Netherlands. This has direct consequences for labor costs, administrative obligations, and the employee’s entitlements to benefits such as sickness, unemployment, and pension.
The reality is more complex than it sounds. As soon as an employee structurally works from another country, social security can shift without the employer or employee having consciously chosen this. That makes it crucial to determine in advance, for every remote work arrangement, which country bears the social security obligation.
What are the consequences of the 25% rule for remote workers in the EU?
The 25% rule stipulates that an employee who works more than 25% of their working time in their country of residence becomes socially insured in that country of residence rather than the employer’s country. For remote workers in the EU, this is a critical threshold: as soon as someone structurally works more than one day per week from home in another EU country, social security can shift entirely.
Concretely: an employee who lives in Belgium and works for a Dutch employer, but works two or more days per week from home in Belgium, exceeds the 25% threshold. The consequence is that they are no longer subject to the Dutch, but to the Belgian social security system. The Dutch employer must then pay Belgian social contributions and register with the Belgian authorities.
This also has consequences for the employee themselves. The level of benefits, the accrual of pension rights, and access to healthcare differ per country. What is advantageous in one system can be disadvantageous in another. Employers and employees regularly underestimate this risk, especially with hybrid work arrangements where someone works partly from home and partly at the office.
What changes with the Framework Agreement for cross-border remote work?
The Framework Agreement on cross-border telework, which entered into force on 1 July 2023, offers a practical solution to the 25% rule. Based on this agreement, employers and employees can jointly request that social security remain in the employer’s country, even if the employee works more than 25% from their country of residence, provided certain conditions are met.
The agreement has been signed by a growing number of EU member states and some countries outside the EU, including the Netherlands. It is intended for situations where an employee partially works remotely from their country of residence, but the work is entirely performed for the foreign employer. Both countries must have signed the agreement in order to make use of it.
The practical operation is as follows: the employer requests a so-called A1 certificate from the competent authority in the country of establishment. With this certificate, the employee remains socially insured in the employer’s country, even if they structurally work more than 25% from their country of residence. The agreement applies exclusively to working from home and not to situations where the employee also works elsewhere in their country of residence for other clients. Also, less than 50% of working time may be spent working from home in the country of residence.
Not all EU member states have signed the agreement. It is therefore always necessary to verify whether both countries involved are parties before relying on it as a legal basis for the social security position.
Which social security rules apply outside the EU?
Outside the EU, European regulations do not apply. Social security rules are then determined by bilateral treaties between countries, or in the absence thereof by the national legislation of each country separately. This increases the risk of double contribution liability or, conversely, a situation where the employee is not insured anywhere.
The Netherlands has concluded a social security treaty with a limited number of countries outside the EU, including the United States, Canada, Australia, and several other countries. In those cases, the treaty determines in which country contributions are paid. If no treaty exists, the national rules of both countries apply, which may mean that the employee is liable for contributions in both countries.
For employers who allow employees to work remotely outside the EU, it is advisable to have the applicable obligations assessed per country. The risks are considerable: in addition to double contribution liability, tax obligations and obligations for local registration of the employer may also arise that the employer had not anticipated.
Does the employer need to arrange anything when an employee temporarily works remotely from abroad?
Yes, even with temporary remote work from abroad, the employer has obligations. The duration of the stay determines which rules apply, but even a short period of working from another country can have consequences for social security, taxation, and employment law. There is no universal threshold below which the rules do not apply.
For a short period, for example a few weeks, the risk of a shift in social security obligations is generally limited, especially if the employee already has an A1 certificate that establishes their social security position. But even then, local tax obligations may arise, depending on the country and the duration of the stay.
For a longer period, or for a structural arrangement where the employee regularly works from another country, a full assessment is necessary. The employer must then examine, among other things:
- Whether social security shifts to the employee’s country of work
- Whether a tax obligation arises for the employee or the employer in the other country
- Whether the employment law of the other country becomes applicable
- Whether there is a risk of a permanent establishment for the employer
- Whether the employee needs a work permit to be allowed to work in the other country at all
The absence of a policy around remote working is one of the most common compliance risks for international employers. A written arrangement, even for temporary situations, provides both the employer and the employee with clarity and protection.
What are the most common mistakes in international remote work arrangements?
The most common mistake is that employers and employees assume that temporary remote work from abroad has no legal consequences. In reality, even a few weeks of working from another country can lead to tax obligations, a shift in social security, or an obligation for the employer to register locally.
Other common mistakes are:
- Not applying for an A1 certificate: Without this certificate, there is no proof of the social security position, which leads to problems during an audit.
- Ignoring the 25% threshold: Employers who allow hybrid working without monitoring how much time an employee works in their country of residence risk social security shifting unnoticed.
- Not distinguishing between countries: The rules for an employee working from Germany are different from those for someone working from Thailand. A generic approach is not sufficient.
- Underestimating tax risks: Social security and taxation are two separate issues. A correct social security position does not automatically mean that the tax position is also correctly arranged.
- No written policy: Without a clear remote work policy, there is no basis for consistent decision-making and demonstrable compliance.
A well-considered approach starts with mapping out the situation per employee, including the country of residence, the duration of remote work, and the existence of treaties or agreements between the countries involved.
How Eastwing helps with social security and international remote work
Social security in international remote work is a complex interplay of European regulations, bilateral treaties, and national legislation. We help employers and employees assess this correctly and take the right steps, before problems arise.
What we can do for you:
- Assess in which country the social security obligation lies based on the specific work situation
- Apply for A1 certificates to establish the social security classification
- Advise on the application of the Framework Agreement for cross-border remote work
- Map out the tax and employment law consequences of remote work arrangements
- Draft or review a remote work policy that aligns with applicable laws and regulations
- Provide guidance on the use of an Employer of Record (EOR) when an employee structurally works from another country
Would you like to know what your specific situation means for the social security of your international employees? Get in touch and we will be happy to think along with you.
Frequently Asked Questions
Can an employee choose which country they want to be socially insured in?
No, the social security position cannot be freely chosen by the employee or employer. The applicable rules are determined by European regulations, bilateral treaties, or national legislation, depending on the countries involved. However, there are instruments, such as the Framework Agreement, with which you can request under certain conditions that social security remain in a specific country. This always requires a formal application and approval by the competent authorities.
What is an A1 certificate and when do you need one?
An A1 certificate is an official document that confirms in which country an employee is socially insured. It is issued by the competent authority of the country where contributions are paid and serves as proof to authorities in other countries. You need an A1 certificate as soon as an employee structurally or temporarily works in an EU country other than where the employer is based. Without this document, as an employer you risk additional assessments, fines, or double contribution liability during an audit.
What happens if social security has already shifted unnoticed without being formally arranged?
If social security has shifted unnoticed, this can be corrected retroactively by the competent authorities, which can lead to additional assessments of contributions, interest, and possibly fines in the country concerned. It is advisable to have the situation assessed and regularized as soon as possible, preferably with legal guidance. The sooner this is addressed, the more limited the financial and administrative consequences generally are.
Does a shift in social security also have consequences for the employee's tax position?
Social security and taxation are two legally separate issues, and a shift in one does not automatically have consequences for the other. It is entirely possible that an employee is socially insured in country A but liable for tax in country B, depending on the fiscal place of residence and any tax treaties. This makes it all the more important to have both aspects assessed separately and simultaneously in international remote work arrangements, so that no unexpected obligations arise.
What is an Employer of Record (EOR) and when is it useful to use one?
An Employer of Record (EOR) is an external party that formally acts as the employer in the country where the employee works, thereby taking on the local payroll, social security, and employment law obligations. This is particularly useful when an employee structurally works from a country where the employer has no local entity and does not plan to establish one. Through an EOR, the employer can remain compliant without having to register a local establishment themselves, saving both time and administrative burden.
How do you create a remote work policy that complies with international regulations?
A good remote work policy describes at a minimum which countries are permitted for remote work, what the maximum duration is, which approval procedure applies, and who is responsible for assessing social security and tax consequences. The policy must be tailored to the countries in which you operate as an employer and regularly updated based on changes in laws and regulations. Having the policy reviewed by a specialist in international employment law, taxation, and social security prevents you from drafting a document that offers insufficient legal protection.
