22 October 2019 - Reading time: 4 Minutes
What will Brexit mean for the social security rights of UK nationals currently working in other EU states, and of nationals of the remaining 27 member states now in the UK? Will these cross-channel workers benefit, for example, from state pension contributions they made in the UK and vice versa if they return to their countries of origin?
These are questions that HR and payroll teams are likely to be asked more and more often as the UK’s departure from the EU, though still not certain, approaches. Like much else surrounding Brexit, the answers are still shrouded in uncertainty. But no business can afford to wait and see what Brexit finally looks like before starting to prepare for it.
“You need to plan for all contingencies, including the possibility that the imminent loss of social security entitlements leads to multiple resignations,” says Elke Brees Senior Consultant, International Employment, SD Worx. “If that happens and you have plans in place to improve retention or attract talent from new sources, for instance, you’ll be able to maintain business continuity.”
The EU’s current social security co-ordination regulations require member states to give each other’s nationals equal treatment when it comes to access to pensions, unemployment and other benefits. The regulations also allow insurance accumulated in different countries to be aggregated, and enable some benefits to be “exported”.
Under the withdrawal agreement reached between the UK and the EU in November 2018, these principles would continue to apply during a transition period ending on 31 December 2020. But if the UK Parliament continues to reject the agreement, there will be no transition period, and current social security rules will cease to apply from the moment the UK exits the EU.
However, the European Commissions recently published a proposed regulation that aims to safeguard the social security entitlements of people moving between the UK and the EU under a no-deal scenario. This measure would ensure that member states continue to take account of periods of insurance, employment, self-employment or residence in the United Kingdom before Brexit when calculating social security benefits such as pensions.
With the regulation, the Commission stressed that it “by no means replicates the significant advantages” of the withdrawal agreement. It does not cover any rights that individuals accumulate after Brexit day, and nor does it mean that cash benefits, such as child benefit, will continue to be exportable. Intended to be a temporary measure, it was adopted unilaterally by the EU.
Some individual EU states are making their own plans to protect social security rights from the negative impact of a no-deal Brexit.
In Germany, the federal government hopes to negotiate a new bilateral agreement with the UK. In the meantime it has approved a draft bill ensuring that existing social security rights continue to apply and that national insurance contributions paid until Brexit and for five years after Brexit would be taken into account. “as if the UK were still a member of the EU”.
Similarly, Belgium has said it would continue to apply existing European regulations on social security to resident Britons until 31 December 2020.
Other countries with plans to protect social security rights after a no-deal Brexit include France, the Netherlands and Sweden. But in most cases, governments have said that they would only implement these plans if the UK did the same for their nationals living and working in Britain.The UK government has said it is exploring options to protect past social security contributions made in the EU and the UK, and reciprocal healthcare arrangements in the event of a no-deal scenario.
Social security rights are important for employees. For those working cross-channel the risk of losing these rights after Brexit could influence decisions on whether to join or remain with employers.
Continuing uncertainty about what could happen to these rights may tempt some HR teams to wait for more clarity before taking action. But this is not the best way forward. “Instead,” as the CIPD’s guide to Brexit workforce planning says, “it may be more appropriate to recognise from the outset that plans need to be adapted over time in response to how the future actually unfolds.”
Whatever the future brings, SD Worx can help your business navigate the complexities of Brexit and make sure it has the skills and talent needed for success in a transformed European employment landscape.
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