Jump to: Context | Social Security Rules between U.K. and Switzerland: New Social Security Agreement Signed | Practical Examples Based on New Agreement | Which Are the Applicable Social Security Rules Between the U.K. and Switzerland Starting 1 January 2021 Until the New Bilateral Agreement Is Ratified?
A new bilateral social security agreement has now been signed by the governments of the United Kingdom and Switzerland. It is expected to enter into force by the end of 2021.
With the transitional rules for Brexit that ended on 31 December 2020, the Free Movement of Persons Agreement (FMOPA) and Ord. 883/2004 and Ord. 987/2009 on social security no longer apply between Switzerland and the United Kingdom. (For prior coverage of FMOPA, see GMS Flash Alert 2019-035, 26 February 2019.)
WHY THIS MATTERS
The provisions included apply to persons legally resident in Switzerland or in the U.K. and they grant insured persons largely equal treatment and facilitate access to social security benefits. The agreement avoids over-insurance and insurance gaps for people who meet the social security systems of both states, and it also facilitates the temporary deployment of workers in the other state.
With the U.K. no longer a European Union (EU) member state and Switzerland not a European Union (EU) member state, the current international social security rules between Switzerland and the U.K. ending on 31 December 2020, and the social security rules for cross-border workers between the two countries, must be revised.
To regulate social security relations in a comprehensive and systematic manner, the two countries have negotiated a new bilateral agreement which has recently been approved by the Swiss and U.K. governments. This agreement is important to help ensure the coordination of social security legislation throughout both states in a most effective way.
Among other implications of the 2016 vote of the United Kingdom to leave the EU, the consequences in regards to social security coordination rules have to be taken into consideration when working in Switzerland and the United Kingdom. Previously the social security coordination rules between Switzerland and the U.K. were governed by the Free Movement of Persons Agreement (FMOPA) Annex II (social security coordination) with the EU. (For related coverage, see the following issues of GMS Flash Alert: 2021-038 (25 January 2021) and 2020-494 (14 December 2020).)
Social Security Rules between U.K. and Switzerland: New Social Security Agreement Signed
The new social security agreement between Switzerland and the U.K. has been signed and published1 and there is the intention to apply the agreement provisionally from 1 November 2021, subject to the approval of the U.K. competent authorities. The agreement itself largely corresponds to the coordination of social security systems within the new trade and cooperation agreement between the EU and the U.K.,2 and it is based on the principles of the EU coordination law which Switzerland applies under the FMOPA.
The recently published non-official publication shows the following coverage:
- United Kingdom nationals;
- Persons legally residing in Switzerland or the United Kingdom;
- Stateless persons and refugees, in each case who are or have been subject to the legislation of either or both of the states.
- United Kingdom incl. Gibraltar
- Sickness benefits;
Under the new social security agreement, the following applies:
- Posted workers3 between Switzerland and the U.K. can remain in their home social security system. Irrespective of nationality, it is possible to apply for a Certificate of Coverage to remain in the home social security system for a period of 24 months.
- Multi-state workers4 will be subject to social security in their country of residence if they pursue a substantial part of their activity there. In case an individual does not meet the latter requirement, the country where the employer(s) have their registered office(s) will be considered to determine where social security contributions are due. The term “substantial” is defined as 25 percent in respect of working time or remuneration (employment) or turnover, working time, income, or number of services rendered (self-employment).5
- Exceptions can be applied for under Art. 17 of the new social security agreement. This also includes prolonged postings of workers exceeding 24 months (expected maximum period of six years).
- Employers are obliged to make social security contributions according to the applicable legislation of the country where its employees are working, even if the employer is not registered or does not have its place of business in that country. In this case, it is also possible for the employees to fulfil the employer’s obligations on its behalf, if the two parts so agree.6
- Swiss social security contributions for Pillar 2, as well as voluntary insurance or optional continued insurance, are not covered by the new agreement.
The new social security agreement between Switzerland and the U.K. is not in force yet, as approval by the parliaments of both countries has yet to be granted7. The agreement is not expected to be valid retroactively.
Practical Examples Based on New Agreement
A U.S. national who works for a U.K. company and legally resides in the U.K. has been assigned to work in Switzerland as of 1 December 2021, and is expected to remain in Switzerland until 30 November 2023. During the assignment in Switzerland, the employee will continue to receive renumeration and hold a contract with the U.K. company. At the end of the assignment this employee is expected to return to the United Kingdom. However, an extension of the assignment for additional one year might be required.
Social Security Impact: As a U.S. national who legally resides in the U.K., this employee will be covered under the new Social Security agreement. The assignment is intended to last less than 24 months and the rules for detached workers would apply. The individual will be entitled to a Certificate of Coverage and the social security contributions in the U.K. would be due, but exemption of the Swiss social security contributions would apply for the duration of the assignment period in Switzerland. Under the exceptional provisions of the new social security agreement, an extension the Certificate of Coverage can be agreed by the competed authorities in the U.K. and Switzerland, in case the assignment is extended through to November 2024.
An EU national is employed by the U.K. company and is required to work in the U.K., three days per week. The worker is habitually resident in Switzerland and will perform a substantial part of her duties in Switzerland. The U.K. company does not have presence in Switzerland and the working arrangements are on permanent basis.
Social Security Impact: The working arrangements would be performed in two countries, which would indicate that the provisions for the multi-state worker would apply. As a multi-state worker, performing 25% of the work duties in the country of habitual residence, the social security legislation of the country of habitual residence would apply, which in this case is Switzerland. If the U.K. employer does not have presence in Switzerland, the worker may agree to fulfil the employer’s obligations on its behalf as regards the payment of contributions. The U.K. employer would be required to send notice of such an arrangement to the Swiss competent authorities. A Certificate of Coverage can be obtained while the working arrangements are in place.
A U.K. national who works for a U.K. employer would be required to work two days per week in Switzerland and one day per week in France. The worker is habitually resident and performs a substantial part of the duties in the United Kingdom.
Social Security Impact: The provisions for the multi-state worker would indicate that the U.K. social security would be due in respect of the U.K. and Swiss working arrangements, and the Certificate of Coverage should be obtained from the competent authorities in the United Kingdom. Further review should be considered concerning the work-days in France, due to the fact that the EU member states are not covered under the territorial scope of the new social security agreement.
Which Are the Applicable Social Security Rules Between the U.K. and Switzerland Starting 1 January 2021 Until the New Bilateral Agreement Is Ratified?
Since 1 January 2021, the EU regulations Ord. 883/2004 and Ord. 987/2009 no longer apply. Instead, starting 1 January 2021, the 1968 bilateral Swiss/U.K. social security agreement is applicable. Under the bilateral Swiss/U.K. social security agreement, posted workers can remain in their home social security system for a period of 24 months, but there the case of multi-state workers is not covered. For multi-state scenarios, the work-place principle applies.
Further, to safeguard rights granted under Ord. 883/2004, Switzerland has concluded an agreement on citizens’ rights with the United Kingdom8. This agreement is applicable as per 1 January 2021 and maintains the rights established for Swiss and U.K. nationals under Ord. 883/2004 before 1 January 2021. (For related coverage, see GMS Flash Alert 2020-494, 14 December 2020 and GMS Flash Alert 2021-038, 25 January 2021).
Despite the issuance of the new bilateral agreement between the U.K. and Switzerland, as well as the new trade and cooperation agreement in place between the U.K. and the EU, certain set-ups should be reviewed thoroughly from a social security perspective in order to help avoid any incorrect application of social security legislation and the attendant risks of non-compliance.
1 See (in German) “Schweiz – UK: Bundesrat genehmigt neues Sozialversicherungsabkommen” at: https://www.bsv.admin.ch/bsv/de/home/publikationen-und-service/medieninformationen/nsb-anzeigeseite.msg-id-84662.html .
2 See full text on the EU’s Europa website: “Trade and Cooperation Agreement between the European Union and the United Kingdom.” For related coverage, see GMS Flash Alert 2021-133, 4 May 2021.
3 Art. 14 of the Swiss /U.K. agreement, available at: https://www.bsv.admin.ch/bsv/de/home/sozialversicherungen/int/brexit.html .
4 Art. 15 of the Swiss /U.K. agreement.
5 Corresponding with criteria of Art. 14 para 8 EG 987/2009.
6 Art. 18 of the Swiss /U.K. agreement.
7 See “UK and Switzerland strike deal to secure healthcare access and other benefits for citizens living and travelling abroad” published by the U.K. government at: https://www.gov.uk/government/news/uk-and-switzerland-strike-deal-to-secure-healthcare-access-and-other-benefits-for-citizens-living-and-travelling-abroad .
8 See “Swiss Citizens’ Rights Agreement” published by the U.K. government at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/854220/WAB_Fact_Sheet_-_SWISS.pdf .
The information contained in this newsletter was submitted by the KPMG International member firm in Switzerland.
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