Predicting what will happen with Brexit seems destined to fail. But while all may have changed by the time you read this, a clearer picture is starting to emerge of the challenges affecting companies with employees overseas in the event of a no-deal Brexit
For employers that are sending UK employees out to Europe the most important factor will be to remember that in a no-deal scenario they will no longer be working with one set of rules, but will instead need to consider each of the remaining 27 member states’ rules individually, which will inevitably make life more complicated.
Many UK employees seconded to work in Europe have been able to maintain UK social security contributions via an A1 form, which has helped maintain their contribution record for access to the UK state pension and also helped them avoid having to fund the often more expensive social security contributions in their host country.
The UK hopes to maintain the existing arrangements that allow them to pay in just one social security system on a unilateral basis, but this will be down to each EU member state to consider whether to reciprocate the arrangements.
This has led to HMRC recently writing to all UK employees holding an A1 explaining that in the event of a no-deal Brexit, while they will need to continue to pay UK social security, they may no longer be exempt from paying social security in the country where they’re working. Rather than providing guidance on what position each country will take HMRC has suggested the employee contact the host authorities themselves.
Given that HMRC has not been able to confirm the position with these authorities it seems unlikely that individual employees will get a clear answer on whether they will have to pay additional social security contributions in their host countries. These can be up to 14% for the employee and 45% for the employer.
We have seen the member states reacting in a number of ways to this proposal, with some making no comment either way, some (including Spain, Italy, Belgium and Ireland) are being supportive, while some look likely to take a more hardline approach and treat UK employees like those from any country that has no social security agreement. The countries appearing more likely to take a hardline approach are France, Germany, Austria, Poland and the Netherlands. It’s worth noting that there may still be some domestic exemptions available in these countries so employees should seek advice.
Health coverage, passports, and immigration and work permits are other areas that employers and employees should be closely considering.
For UK nationals already living in the EU after Brexit that are continuing to pay UK social security the UK government has decided to fund healthcare benefits for six months. But for business or leisure travellers to Europe there will be no guarantee of free access to healthcare coverage for any trips that start after 1 November if there is a no-deal Brexit. This is the coverage that was previously provided under the European Health Insurance Card (EHIC).
Spain and Ireland have more generous provisions, with Spain applying a transitional period for healthcare until 31 December 2020 and for Ireland the arrangements will remain in place indefinitely.
In the event of no deal, from 31 October EU countries will be able to insist that British passports are:
- Valid for at least six months from the date of travel
- Were issued less than 10 years ago (even if the passport has six months or more validity remaining).
People should check the validity of their passports now, as new applications usually take around three weeks.
Going forward UK employees are unlikely to be able to rely on freedom of movement within the EU. For business travellers each EU country has its own list of permissible business traveller activities that can be carried out without the need for a work permit or immigration registration. Employees travelling in the EU will need to understand what these are for each location or risk being turned away at the border. Employers may also need to consider providing employees with a 'comfort' letter confirming the activities that will be undertaken during the visit to avoid any issues when crossing borders.
Employers should act now to understand their current population and who will be affected by a no-deal Brexit. They should ensure they have A1s in place for all current assignments and business travellers. Business stakeholders should be briefed and informed that possible changes are coming, including possible increased costs. It’s also important to communicate with employees and tell them how they will be supported through Brexit.Martin Muhleder is a global mobility partner at PwC