Changing the rules of posting within the european union

Regulation (EC) No 883/2004 on the coordination of social security systems entered into force on 1st May, 2010. This regulation changed, among others, the rules of posting within the European Union. In this newsletter, we briefly inform you of the new rules.

Under the main rule, social security contribution is payable in the country where the work is performed. However, in the case of posting, if certain conditions are fulfilled, the laws of the posting country still apply to the posted employee for social security purposes and social security contribution is payable in the posting country.

According to Sándor Hegedüs, our tax partner: "The purpose of the new coordination regulation was the modernization and simplification of previous rules. At this point, it is unclear to what extent this purpose was fulfilled in respect to the whole of the regulation. However, in terms of posting it is by all means favourable as the one-year term of posting was changed to two years."

Term of posting

Under the previous rules, the term of posting during which the employee was subject to the law of the posting country lasted 12 months by default, which could be extended by another 12 months. Based on the new regulation, the term of posting changed from 12 months to 24 months, however, the option of extension was eliminated. However, the maximum term of five years was not changed.

Conditions of posting

• The posted employee may remain subject to the social security system of the posting country if all of the following conditions are fulfilled:
• the expected term of the posting does not exceed 24 months,
• the purpose of the employee’s posting is not the replacement of another person,
• the employee has been insured in the posting country for a continuous period of at least one month prior to the posting,
• the work serves the posting employer and there is constant contact during the time of the posting between the posting employer and the posted employee,
• the posted employee may not be provided to a third enterprise,
• the posting employer performs material activity on a regular basis in the posting state.

Form used for the certification of posting

Previously, the forms marked with E (forms E101 and E102) served the certification of posting. The “E” forms will be replaced by paper-based versions of the structured electronic documents. Member states received a 24-month grace period in respect of the introduction of these forms. During this transitional period, the “E” form may still be applied.

The E101 certificates issued in relation to postings commenced before 1st May, 2010 did not become void and were not withdrawn with the entry into force of the new regulation. If the forms expire while the posting is still in progress, a new form must be issued, which is valid for a period of up to 24 months from the starting date of the posting.

 

 

The Newsletter contains general information. Therefore, the content of the Newsletter may not be regarded as professional advice or comprehensive information for decision-making. This information – due to its nature – may not address all details, especially all circumstances of a certain transaction. Although we used every effort for our Newsletter to be comprehensive, we cannot assume liability for the outlining and interpretation of the relevant regulations.