KPMG represents client in a Swedish social insurance case in the Supreme Administrative Court

KPMG is representing in a case in the Supreme Administrative Court concerning certificates of social insurance affiliation in Sweden when employees are posted abroad for short term work outside Sweden. The decision to grant leave to appeal allows the Court to clarify the conditions for social insurance affiliation during short term job posting for seasonal business operations.

As the European labour market becomes increasingly integrated, the issue of social insurance affiliation in cross-border work has gained importance. A central legal question is under what conditions a person temporarily working in another EU country should continue to be covered by the social insurance system of their home country.

The main rule within the EU/EEA is that an employee is covered by the social insurance system of the country where they work. There is an exception, the so-called posting rule, which means that the employee remains in the home country's social insurance system during temporary work in another EU/EEA country. An A1 certificate issued by the Swedish Social Insurance Agency confirms the exception from the main rule. With this certificate, the employer pays social contributions in the home country, and neither the employer nor the employee needs to pay social contributions in the temporary work country.

For an exception to be granted, certain conditions must be met. Among other things, the work for the sending employer should last no more than 24 months. Furthermore, the sending employer should normally conduct its business in the country from which the posting is made. It is also a requirement that the person being sent out does not replace another person who has been assigned (the so-called replacement prohibition). The purpose of the replacement prohibition is to prevent abuse, such as continuously sending out individuals from a country with lower social insurance costs to maintain a position in a country with higher social security costs.

The current case (Supreme Administrative Court case no. 786-25) concerns a person who had a fixed-term employment as a tour guide and was to be assigned from Sweden to work temporarily in another EU country. The application for a posting certificate was denied because the Swedish Social Insurance Agency’s view was that the employer did not normally conduct business in Sweden and that the tour guide replaced another tour guide who had previously been posted.

In the appealed decision by the Administrative Court of Appeal, the court found that the employer normally conducted business in Sweden. Regarding the replacement prohibition, the court noted that the employer's business is seasonal, depending on natural variations in demand for the company's services. The court further considered that the tour guides perform the same service, even if some variations in tasks occur. In light of this, the court found that posted tour guides are practically continuously replaced by other posted tour guide for the same service, regardless of whether such posting includes breaks due to a foreseeable lack of work (seasonal break). The fact that there were undisputed breaks in the business abroad, usually of 9 months and at least 1.5 months, did not lead to a different assessment.

The Supreme Administrative Court has now decided to grant leave to appeal on the question of whether a person can be considered to have been posted to replace another employee when, due to the seasonal nature of the business, there have been breaks between assignments.

Significance and possible consequences

The issue of social insurance affiliation when posting workers is of great importance for both employees and employers. The question is particularly important in industries where seasonal work is common – such as agriculture, tourism, forestry, and construction. These employers often rely on being able to send staff to other EU countries during parts of the year.

It is also of great significance that the legal situation regarding social insurance affiliation is predictable. The Supreme Administrative Court's decision to grant leave to appeal in this matter is therefore welcome. The coming judgment should contribute to increased predictability for both employers and employees, thereby strengthening confidence in the Swedish social insurance system in an increasingly cross-border labour market.

It should be noted that changing social insurance affiliation often involves significant administrative work for authorities, employers (who must pay social contributions in another country), and individuals. Additionally, it must be considered that certain social insurance benefits, such as pensions, are earned over a long period, and changes in social insurance affiliation result in fragmented earnings, which can be disadvantageous for the individual. We hope that the Supreme Administrative Court takes this opportunity to confirm that seasonal breaks mean that it is not a matter of replacing labour and that assigned employees should thus remain in the Swedish social insurance system during temporary work abroad.

Feel free to contact us if you have questions or if you are curious about how your business might be affected by the case.

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Swedish version