Worth knowing: for a number of specific situations – such as the regimes applicable to cross-border work in France and Luxembourg – the tax authorities have declared the coronavirus crisis a case of force majeure. The impact on taxability will therefore be limited on those employees.
Payroll and HR admin in covid-19 times: serious repercussions and lack of uniformity across Europe
The coronavirus has brought our economy to a crawl. Internationally, governments are pulling out all the stops to support companies and citizens to reduce negative impact caused by this unprecedented crisis. This has serious repercussions for you as well as for your employees in terms of payroll and HR administration. These consequences have to do mainly with different tax and social law in the countries you operate.
1. Specific formalities
Coronavirus measures differ from country to country. For example, in some countries workers must have a certificate to be allowed to travel across the territory, like in Germany or Italy. You should therefore inform yourself fully to avoid unpleasant situations for you and your employees. Additionally, rules governing temporary unemployment also differ across national borders. It’s important to keep these in mind as an employer to mitigate risks and impacts on your business activities.
- In the UK and Ireland, if an employer can’t cover staff costs due to COVID-19, government support may be extended allowing employees to remain on the payroll, which is known as ‘furlough’. They can receive up to 80% of their usual wages through the Coronavirus Job Retention Scheme, with the bulk of employee costs covered by the state.
- In Belgium, temporary unemployment measures due to force majeure are currently in place, and workers are immediately entitled to unemployment benefits while remaining on their companies’ payrolls.
- Workers from France who work primarily in Belgium are not subject to the usual 30-day tax frontier work scheme and may work from home in France.
- Company cars may be reclaimed by the company for the temporary unemployment period.
- In the Netherlands, if an employee doesn’t have enough work due to the impacts of COVID-19, the employee must be paid as usual. However, the employer can apply for labour cost compensation if expected turnover loss is 20% or greater.
- In Germany, the federal government has made it easier for companies with at least 10% fewer working hours due to COVID-19 to access short-time work benefits and receive compensation.
2. Tax implications
People who work abroad are often also taxable in those countries. But now that their foreign assignments are temporarily on the back burner or even completely on hold, the tax regime to which your employees belong may also shift. For example, their net salaries may drop suddenly unless you guarantee them a minimum net salary. In those conditions, it is likely that the employer’s contribution to payroll costs will increase, as time worked abroad is reduced or interrupted.
3. Consequences in terms of social law
According to European regulations, if an employee spends at least 25% of their time working in their home country, the social security system of that country applies. In this case, too, the coronavirus crisis might throw a wrench in the works. Indeed, if the employee suddenly works more from home, a different regime may apply. It’s important to check if the countries you are active in aren’t applying temporary exemptions on this matter. If you’re not sure, turn to your payroll provider for help.
For example: a Dutch sales manager spends 80% of his time working in Belgium and 20% in his home country. He is therefore under Belgian social security. However, due to the protective measures against the coronavirus, he now temporarily works almost full-time from the Netherlands. In principle, he should switch to the Dutch social security regime, but this rule is not applied. He therefore remains within the Belgian social security system.