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EU Authorities Publish a New Approach to Brexit Withdrawal Agreement Conditions and the Grandfathering of Regulations After 31 December 2020

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EU Authorities Publish a New Approach to Brexit Withdrawal Agreement Conditions and the Grandfathering of Regulations After 31 December 2020 Insights from Global Mobility Services United Kingdom: EU authorities publish a new approach to Brexit withdrawal agreement conditions and the grandfathering of regulations after 31 December 2020 3 November 2020 In brief Following on from our insight on 29 January 2020 outlining the transitional rules agreed between the United Kingdom (UK) and the European Union (EU) for cross border-arrangements before and after 31 December 2020, the European Commission have since released further proposed guidance on the eligibility of the transitional rules on current intra-European arrangements. The content of this guidance suggests excluding a considerable population of workers from ongoing European coordination rules across social security and immigration. However, a number of major authorities around Europe have stated their disagreement with this. Furthermore, the UK authorities, Her Majesty's Revenue and Customs (HMRC), have subsequently issued guidance supporting the original interpretation of the transitional rules. While the European Commission’s comments should be acknowledged, it appears that they have little support from a technical nor practical point of view across Europe. In detail Transitional rules under the withdrawal agreement At the beginning of 2020, the UK House of Commons, House of Lords, the Queen and the EU parliament approved the withdrawal agreement and transitional guidance, that conveyed the message of continuing with the ‘status quo’ for social security/immigration coordination rules up to 31 December 2020. Such agreement meant that it would be possible to continue to utilise the existing regulations during the transition period and thereafter where the individual's situation continues without interruption into 2021. www.pwc.com Insights European Commission's latest guidance on the application of the withdrawal agreement The European Union and the UK are, at present, negotiating an agreement on a new partnership, providing notably for a free trade area. Agreement upon this area is expected to largely mirror the existing EU social security coordination rules. While favourable if an agreement can be met, it is not certain whether such an agreement will be concluded and will enter into force at the end of the transition period on 31 December 2020. The European Commission has since notified stakeholders and interested parties of the current legal situation applicable after the end of the transitional period, explaining the relevant separation provisions of the withdrawal agreement. What does the European Commission suggest for workers before and after 31 December 2020? The European Commission's guidance suggests to interested parties that the following approach for social security coordination rules would apply, unless the individual is within the limited exemption group: 1. Posting of worker starting from 1 January 2021 onwards – Commencing 1 January 2021, the national law of the EU Member State will apply (subject to any future UK/EU partnership agreement). 2. Posting of worker, where cross-border working began before 31 December 2020, but continues into 2021 – Where assignments have commenced prior to 1 January 2021, the guidance suggests that the national law of the EU Member State will apply (subject to any future UK/EU partnership agreement) from 1 January 2021; thus invalidating any A1 coverage held with the exception of intra-corporate transferees, whose duties overseas are for internal meetings/training and incidental to the home role. If the exemption does not apply, the guidance suggests A1’s will no longer be valid/obtainable from 31 December 2020. What have European Member State authorities said in response to this guidance? At present, on the face of the guidance, most working arrangements between the UK and the EU would not be covered under the coordination rules and withdrawal agreement. To date, an increasing number of EU authorities have commented on the guidance, stating that this goes against the withdrawal agreement, is technically incorrect and would not be applied in practice in the Member State. Additionally, HMRC have issued their own guidance on the withdrawal agreement which post-dates the European Commission comments. The impact of the guidance in practice would have a considerable impact on companies’ ability to obtain coverage for their globally mobile population across Europe, while these companies initially welcomed the withdrawal agreement between the UK and the EU. Posted Worker Directive The guidance provides that, as of 1 January 2021, the Posted Workers Directive (PWD) no longer applies to undertakings that are established within the UK and posting workers to the EU. However, the PWD protects workers within the EU. Thus, it ensures that Member States of the EU cannot give more favourable treatment to undertakings established in a third country (e.g. UK) than to those established in the EU. This means that workers posted from undertakings established in the UK (or any other Non-EU country) must be granted the same terms and conditions of employment as those workers posted from undertakings established in the EU. In practice, many Member States are operating this obligation by applying PWD compliance requirements through domestic legislation. Therefore, it will still be very relevant for undertakings established in the UK to review their population travelling to the EU from the UK from a PWD perspective as many Member States will still require notifications to be filed as well as obligations to grant salary and working conditions at an equal level in each EU Member State. 2 PwC Insights The takeaway The recent guidance from the European Commission suggests that posted workers and workers on multi-state arrangements within the EU will not be covered by the terms of the withdrawal agreement, outside of incidental training and meetings. This seemingly goes against the grandfathering/transitional rules outlined within the withdrawal agreement for arrangements before and after 31 December 2020, and there is significant support for the withdrawal agreement based on commentary from Member State social security authorities. It is important to ensure that companies have identified the affected assignees currently working between the UK and EU, as the inability to utilise the ongoing use of the EU regulations after 31 December 2020 will have a considerable impact on coverage, assignee benefit entitlement, assignment costs and compliance requirements. Let’s talk For a deeper discussion of how this impacts your business, please contact your Global Mobility Services engagement team or one of the following professionals: Global Mobility Services – United Kingdom Martin Muhleder, Global Social Security Leader [email protected] Gary Chandler, Director [email protected] Global Mobility Services – Global Leo Palazzuoli, Global Leader [email protected] Meet the Global Mobility Services global leadership team © 2020 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 158 countries with over 250,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com. 3 PwC .
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