What is an A1 certificate?
With an increasing number of employees working abroad, either temporarily or permanently, attention needs to be paid not only to immigration requirements but also to compliance regarding social security.
Social security can be broadly defined as the financial contributions from work paid to national schemes that protect social events or interests, i.e., state pensions, health insurance, unemployment benefits, family benefits, etc. Each country has its own scope and conditions and offers benefits of its social security systems.
The general rule for payment of social security is that you 'pay where you work,' contributing to the government system of the country in which you are employed. When an employee travels abroad for business or is temporarily posted to another country, the question arises – where and how is social security paid?
The EU has introduced protections for workers to allow them to maintain social security benefits in their home country, as well as ensuring they are only subject to the social security of one member state if temporarily working abroad.
Within the EU, the 'home' employing country can issue an A1 certificate to evidence the employee's social security contributions and exempt them from paying it in the 'host' country where the employee is temporarily working. Outside of the EU, a Certificate of Coverage (CoC) may be issued where a (bilateral) social security agreement is in place.
A1 certificates and CoCs are required for a variety of workers including business travellers, employees and the self-employed on assignments or travelling for work. Depending on the agreement, these certificates can be valid for 12-60 months, after which employees may need to transfer to the host social security system.
Why is an A1 certificate important?
If a worker is posted to another member state, their employer can request an A1 certificate from the authorities in the employing country. Although it is possible to obtain A1 certificates retroactively, it is strongly recommended the A1 application is filed before the posting, as social security, immigration and posted worker notification compliance are closely connected.
The A1 certificate acts as proof of where the employee's social security contributions are paid. For some EU countries, an A1 certificate is required for immigration filings. In Austria, immigration applications outside the EU as well as Van Der Elst permits require an A1 certificate. In Germany, a strict approach is taken by the national authorities (who are known to exchange information) which would even require someone working abroad for a few hours to have an A1 certificate in place.
Even where no immigration permit is required, a posted worker notification (PWN) may still be required for the assignment. A PWN is often required when an employee is temporarily working in an EU country.
There is a strong link between social security and PWN compliance, as most EU countries require an A1 or CoC as part of the mandatory documents to be kept on the employee's file with their PWN. Some countries, such as Luxembourg, even require the A1/CoC to be submitted during the PWN application, so obtaining the A1 ahead of the assignment is crucial.
Significant financial penalties for failure to comply with this can be imposed. In France, for example, penalties for non-compliance with document retention requirements are up to 4,000 EUR per employee and 8,000 EUR for repeat offences (failure to file another notification within the next two years) up to a total of 500,000 EUR. Additionally, there is joint liability between the home (sending) and host (receiving) companies.
The need for A1 compliance is further highlighted by the increase in information sharing between different national labour, immigration and social security authorities. Although this data exchange is not formally regulated, it occurs always more often and non-compliance in one area can trigger inspections in other areas. We have seen during Spanish PWN inspections that the authorities have specifically asked for evidence of A1 compliance, on a very short-term basis.
The real-life impact of non-compliance can be severe. In some situations, employees may be denied access to the host entity or client worksite without an A1 certificate or PWN. This can have a knock-on effect not only on the employees themselves but also on businesses if they cannot deliver on client contracts or work deadlines.
The future of A1 compliance
The EU is currently working on modernising social security coordination through digitalisation.
This will be implemented at two levels: first, increasing data sharing between national authorities through the Electronic Exchange of Social Security Information (EESSI).
Second, streamlining procedures for citizens and businesses through the European Social Security Pass (ESSPASS) project. This will provide a simplified, digital solution to verify social security entitlements throughout the EU reducing administrative burdens for companies when sending their employees to temporarily work abroad.
How can Fragomen help?
The Fragomen Social Security team, thanks to a strong government strategies approach, is prepared to guide clients to optimise their social security programmes and ensure that A1 certificates are requested in accordance with the requirements of the EU Regulations, and make sure your company is compliant in immigration, posted workers and social security. This strategic approach will help you plan and ensure social security compliance from day one.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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