Step 4 - Hybrid Work
The Framework Agreement provides a flexible solution, as well as significant administrative benefits, for cross-border employment arrangements. Under this agreement, employees can work remotely from their home country for up to 49.9% of their working time while maintaining social security coverage in their employer's country.
This is subject to several conditions:
Working more than 25% but less than 50% of the employee's total working time in their country of residence
The employee's country of residence and the employer's country of registered seat must both be signatories to the Framework Agreement.
The Framework Agreement exclusively applies to cross-border hybrid work carried out in the country of residence.
The employee is not permitted to habitually perform other activities in their country of residence, nor habitually work in any other country besides their country of residence or the employer's country of registered seat.
It does not apply to self-employed workers.
A formal or informal agreement (e.g., an addendum) between the employer and employee is required.
To utilize the option provided by the Framework Agreement, employers and employees must apply for an A1 certificate under Article 16 of European Regulation 883/2004.
This application should be submitted in the employer's member state to the competent government body for social security. That member state will verify that all conditions are met and then issue the certificate without requiring consent from the member state of residence.
Under the Framework Agreement, each participating country has the discretion to determine the validity period of A1 certificates, with a maximum duration of three years per issuance.
Timely submission is crucial, as applications cannot be made retroactively for more than three months. If social security contributions have not been paid in the employer’s country prior to applying for a Framework Agreement A1 certificate, the A1 certificate will only be issued for future periods (no retroactivity).
Elaboration
When a significant portion of this hybrid work (25% or more) is performed abroad in the employee's country of habitual residence, the Multi-state Worker regime may be triggered. This can lead to a shift in social security coverage from the employer's country to the country of residence, potentially impacting social insurance costs, payroll taxes, insurance coverage, and administrative burdens.
To offer greater flexibility, prevent unwanted social security shifts, and enhance predictability and transparency for employers and employees, a multilateral agreement was introduced: the Framework Agreement on Social Security for Cross-Border Telework. This agreement came into effect on July 1st, 2023.
Examples
Employee X, who lives in France, works for a Belgian branch of company A, which is registered in Germany.
Since A is not registered in Belgium (a branch is not an independent legal entity but merely an extension of the owning entity, which is company A), this acenario does not qualify for the Framework Agreement.
Caution
Timely Application for Framework Agreement A1 Certificate
Submit your application for the Framework Agreement A1 certificate promptly. Retroactive applications are generally not possible for periods exceeding three months, making timely submission crucial.
Tips & Best Practices
Monitoring
If an employee is working under the Framework Agreement, it is crucial to monitor their working days in third European countries.