Labor laws in Spain, News

Updates for Regular Cross-Border Telecommuting: An Opportunity for International Companies

September 29, 2023

Introduction

In today’s ever-changing work environment, telecommuting has become the norm for many international companies.

For those employing workers in different countries within the European Union (EU), the European Economic Area, and Switzerland, recent developments in the realm of regular cross-border telecommuting present an exciting opportunity and a series of challenges.

In this article, we will explore the new Multilateral Framework Agreement that impacts the social security contributions of cross-border telecommuters, its implications, and how companies can benefit from this exception.

The Multilateral Framework Agreement: An Exception for Cross-Border Telecommuters

On August 4, 2023, the Official State Gazette (BOE) published the Multilateral Framework Agreement concerning the possibility of opting for a new exception for cross-border telecommuters.

This agreement allows employees engaged in telecommuting to maintain their social security contributions in the country where their company is based, pursuant to Article 16.1 in relation to 13.1(a) of Regulation (EC) 883/2004.

This is particularly relevant for those workers who routinely engage in cross-border telecommuting among EU countries, the European Economic Area, and Switzerland.

How Social Security Coordination Regulations Work

Before delving into the details of the agreement, it is essential to grasp some key concepts. There is no single EU-wide social security system; instead, each country has its own system with internal regulations and specificities.

The EU has established coordination regulations for social security systems, such as the “Base Regulation” (Regulation (EC) 883/2004) and the “Application Regulation” (Regulation 987/2009), to facilitate coordination between these systems.

Article 11 of the Base Regulation establishes the general rule of contributions in the place of work (lex loci laboris).

However, Article 12 provides a significant exception: it allows workers to continue contributing in their home country, even when temporarily working in another country. To do so, they must obtain a certificate of coverage.

The Impact of the Pandemic and the "No Impact Due to Covid-19 Agreement"

During the Covid-19 pandemic, the so-called “No Impact Due to Covid-19 Agreement” was applied to coordinate social security systems among EU member states.

This agreement temporarily suspended the criteria outlined in Article 13, which governs the applicable legislation for workers providing services in more than one EU country.

The goal was to avoid changes in applicable legislation for cross-border workers who were required or advised to telecommute from their residence to prevent the virus’s spread.

The New Pact for Cross-Border Telecommuters

Article 13.1(a) of Regulation 883/2004 introduces the concept of a “substantial part of their activity.” This means that a person who normally engages in dependent employment in two or more EU member states is subject to the legislation of the member state of residence if they perform a substantial part of their activity in that state.

However, the framework agreement allows parties to negotiate the place of contribution, even if Article 13.1(a) remains in force. This applies to workers who telecommute from their home (place of residence) for less than 50% of their time and maintain a significant digital connection during their work.

Who Can Benefit from the Framework Agreement?

Cross-border employees can now telecommute from their homes (country of residence) while maintaining the social security system of the country where their employer is located. This is possible if the following cumulative criteria are met:

The employee’s country of residence is different from the country where the employer’s registered office or place of business is located.
Both the employee’s country of residence and the country where the employer has its registered office or place of business are signatories of the framework agreement.
The application must be submitted by either the employee or the employer.
The proportion of work in the country

Conclusion

As cross-border telecommuting continues to gain prominence, it is imperative to stay well-informed about the latest developments and regulations governing this practice.

At Employing In Spain, we understand the challenges faced by international companies with employees in Spain in the realm of cross-border telecommuting.

Our team of experts in labor and tax advisory is here to help you navigate this evolving landscape and ensure compliance with all relevant regulations.