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In which country should an employee be subject to social security when working remotely abroad?

Remote working affects a number of employment-related aspects that an employer should consider when deciding to introduce such an employee benefit in the company. Issues of social security affiliation are governed both by each country’s domestic law and by EU rules on the coordination of social security systems harmonizing issues at international level. Although EU regulations do no refer to the issue of remote working and insurance standards, it cannot be ruled out that in some cases there will be an obligation to report to the local social security system in a given country when providing work in this form by an employee, which may involve the obligation to pay contributions on different terms than in Poland.

Remote working abroad and the state of insurance – rules of affiliation

As mentioned in the introduction, individual countries have their own insurance regulations and therefore different systems may apply, which may differ significantly from Polish standards. Therefore, it is crucial to check the law of the country of residence regarding the obligation to pay insurance contributions in the relevant country each time one decides to work remotely abroad.

The basic assumption is that an employee is only subject to social security in the country where he/she actually performs works. This applies even if the employee is actually involved and performs work in several of the countries.

The foreign counterparts of the Social Security Administration may consider that the employee will be responsible for insurance in that country. As a result, the company may be obliged to register in that state and pay the employee’s insurance contributions. In order to assess such a situation, it is necessary to analyze EU or international rules on the coordination of social security systems, the social security systems of the country concerned or local insurance rules. Although it is possible for an employee to still be subject to Polish social security under certain circumstances (if the relevant conditions are fulfilled), it cannot be ruled out that these conclusions will apply in every situations.

An important document in determining the place of insurance coverage in the case of work performed outside the area of residence is Regulation (EC) No 883/2004 of the European Parliament and of the Council of 29th April 2004 on the coordination of social security systems (hereinafter: ‘the Regulation’), which determines the issue of contributory conditions. Thus, for example, pursuant to Article 12 of the Regulation, an employee posted to another country may, after fulfilling the relevant conditions, continue to be subject to social security in Poland, ‘provided that the anticipated duration of such work does not exceed 24 months and that the person is not sent to replace another posted person’.

By virtue of the above, it would therefore first need to be recognized whether an employee performing  remote work can be considered a posted person or not – depending on what the purpose of performing such work is. If the remote work abroad is related to the posting of the employee, then this will not give rise to an insurance obligation at the place where it is carried out if it does not exceed a set period of time under the Regulation. Otherwise, other provisions will apply – including Article 13 of the mentioned document.

Substantial part of the work within the EU

Under Article 13 of the Regulation, a person who pursues an activity as an employed person in two or more Member States shall be subject to the legislation of the Member State of residence if he/she pursues a substantial part of his/her activity in that State.

A substantial part of the activity as an employed or self-employed person is defined in quantitative terms, without this necessarily being the largest part of the activity. In salaried work, either working time or remuneration is determined and as a general  rule, at least 25% of the employee’s working time and remuneration in that country must be indicated for coverage in that country. The Social Security practice has also adopts this ratio to determine the fulfilment of the quantitative requirement of the employee’s working time and salary in that country.

If the proportion of work performed in a Member State, is less than 25%, a significant proportion of the work must be considered not to be performed in that country. Consequently, it will not be possible to be covered by social security in this country. If this is not the case, i.e. working of more than 25% or remuneration to that amount, a deeper analysis of social insurance coverage in that country would have to be made. Then, it is recommended to apply for an A1 certificate, which will confirm that you are subject to the social security system of the country that issued such a document, and to apply to the ZUS (or other foreign counterpart) to determine the proper jurisdiction of social insurance coverage (i.e. to exclude or confirm Polish jurisdiction).

From a practical point of view, if social insurance will be paid in a place other than Poland, it would, in principle, be necessary to exclude at the same time the employee’s coverage under such insurance in the country in which he/she will perform remote work.

When deciding which insurance jurisdictions an employee performing remote work should be subject to, it would have to be decided whether the employee has been posted by the company to provide services or not. For example, if the issue of the employee’s posting to work in Poland were to be considered, it is possible that the employee would remain under the foreign counterpart of the social security system (the same situation applies to a Polish employee sent to work abroad). In other case, it would be necessary to recognize the employee’s subjection to social insurance in Poland due to the fact that a significant part of the work is performed in this territory (if this ratio exceeded 25% of working time and remuneration).

On 29th June 2023, Poland signed an EU framework agreement on cross-border remote work setting out new social security rules. It provides, i.a. that the legislation of the country where the employer’s registered office is located may still apply if the remote work is carried out up to 50% of the working time in the country of residence. However, it should be borne in mind that not all countries have committed to sign it. Consequently, for some countries, the rules referred to in this article would still need to be applied.