Up to half of all new expatriate
assignments within Europe could be impacted by
changes to EU social security legislation according to analysis by Deloitte,
the business advisory firm.

Although the
legislation behind these changes was enacted a number of years ago, the
regulations which actually implement the new rules were only passed earlier
this month, beginning the six month process of launching the new legislation on
1 May 2010. This is the first major change to EU social security legislation
for more than 35 years, when the now well-established processes for obtaining
E101 certificates were introduced.

The
background to the changes is a desire to simplify the regulations by shortening
them – however it remains to be seen if this objective is actually met. Many
rules relating to specific employee types – for example aircrew and transport
workers – have been removed altogether, and the rules affecting new short-term
and long-term expatriates, as well as cross-border workers, will change substantially.
Short term assignees will have to keep contributing to their home countries if
they are assigned to work in another EU country for two years or less.

An important aspect of the new regulations is also their increased focus on
pan-European compliance. For the first time, foreign social security
authorities will be able to enforce liabilities via their UK counterparts, and
vice versa. New rules regarding the exchange of electronic data between
authorities will also support a general tightening up of cross-border
compliance, and the introduction of an EU-wide social security database
enhances the possibility of enforcement action being taken against those
companies who have – perhaps inadvertently – either not paid social security
contributions or have paid them in the wrong location.

Robert Hodkinson, lead partner on social security issues in the Global Employer
Services group at Deloitte, comments: “These changes will have a significant
impact on both UK employers sending assignees to work in other parts of the EU,
and on UK companies which host inbound assignees. Thousands of UK businesses
will need to act promptly to adapt to the new rules to ensure that they do not
inadvertently incur higher social security costs.”

30 November 2009